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https://www.investopedia.com/how-to-buy-alternative-investments-7369694

How to Buy Alternative Investments

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> For those striving for added diversification, potentially strong returns, and less correlation with traditional stocks and bonds, alternative investing might be for you. These types of assets include commodities, real estate, crypto, art, wine, and more. Formerly the purview of wealthy, accredited investors, today anyone can access alternative investing opportunities through crowdfunding platforms and funds. Keep in mind that in exchange for the promise of added diversification and high returns, you’ll need to accept limited liquidity in many cases. Read on for an alternative investing how-to guide.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <span class="heading-toc" id="toc-what-is-alternative-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> What Is Alternative Investing? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Interest and opportunities for alternative investing have exploded since the 2008 recession, stock market decline, and mortgage market meltdown. As traditional markets tumbled, investors were hungry for investments with a negative <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correlation.asp">correlation</a> to traditional stocks and bonds. Alternative investments typically gain popularity during periods of heightened equity market volatility and economic weakness. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Alternative investment vehicles encompass assets outside of typical stock and bond markets. Previously available only to the ultra-wealthy, today opportunities are accessible for smaller investors as well. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Examples of alternative investment vehicles include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>Gold and silver</li><li>Art</li><li>Wine</li><li>Real estate</li><li>Hedge funds</li><li>Private equity</li><li>Cryptocurrency</li><li>Private and distressed debt</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Millennials and newer investors have embraced alternatives as popular celebrities like Matt Damon and Reese Witherspoon tout their benefits. You can easily access alternative investments through crowdfunding apps such as <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fundrise.sjv.io/c/2104074/1032334/7376" rel="sponsored nofollow">Fundrise</a> and <a class="pseudoStyle" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://crowdstreet.4cl7.net/c/2104074/977365/9753" rel="sponsored nofollow">Crowdstreet</a>. Private funds, publicly traded real estate investment trusts or REITs, and managed ETFs also open the door to alternative investing opportunities.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-alternative-investments-vs-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Alternative Investments vs Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Most investors are aware of the return potential of investing in individual stocks or stock market ETFs and mutual funds. Over the past hundred years or so, the U.S. stock market delivered a 9+% average annual return. But that return also included occasional years of double digit declines, like the -18.01% drop in 2022 and the -36.55% crash in 2008.<span class="ql-inline-citation" data-cite="3"></span> Along with the potential for strong performance, easy access, and liquidity, investing in the stock market is a core asset class for long term investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Investors continue to seek out alternatives to investing in stocks, as well as assets that are less<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-advisors/022516/4-reasons-why-market-correlation-matters.asp">correlated with the stock market</a>. This adds to the demand for alternative investing. Depending upon the alternative investment vehicle, average returns will vary from a low of 5.0% for a debt fund to a double digit return for some real estate partnerships and other niche alternative investment products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Alternative investments and stocks have some major differences: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_21-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Key Differences Between Stocks and Alternative Investments </th> </tr> <tr> <th></th> <th> <b>Stocks</b></th> <th> <b>Alternatives</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><b>Liquidity</b></td> <td>Extremely liquid; can trade throughout the day.</td> <td>Many have lock-up periods which tie up your money for periods from several months to several years</td> </tr> <tr> <td><b>Fees</b></td> <td>Fee-free trading with most brokerages; most ETFs and mutual funds charge less than a 1.0% expense ratio </td> <td>Fee structures range from simple to quite complex; a few platforms provide low-fee alternative investments, while others have complex fee structures including performance-based add-on fees </td> </tr> <tr> <td><b>Minimum investment</b> </td> <td>Fractional stock and ETF shares can be bought on multiple investment platforms for as little as $10 </td> <td>Platforms are available for both accredited and non-accredited investors; minimum investment amounts range from a low of $10  to four to five figures. </td> </tr> <tr> <td><b>Correlation</b> </td> <td>Stocks exhibit distinct correlations among specific sectors and geographic regions. Lower correlations between assets lead to more price stability within your investments.</td> <td>Alternatives will also have correlations within themselves and won’t always move in lockstep. The correlation between stocks and alternatives will depend upon the time period and specific alternative investment vehicle.</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Adding alternatives to a diversified stock and bond portfolio has the possibility of minimizing volatility and potentially bolstering returns. Remember that there are no guarantees in investing.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-how-to-buy-alternative-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> How to Buy Alternative Investments  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> How to buy alternative investments will vary based upon the platform and type of assets. If you buy an alternative ETF or mutual fund, you’ll need to<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-an-online-brokerage-account-4588908"> open an investment brokerage account</a>. If you’re buying alternatives via a stand alone firm like Cadre, Peer Street, Realty Mogul, or Arrived, you’ll follow the “set up an account” guidelines.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Sample process to buy alternative investments: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li><strong>Sign up for an account: </strong>Sign up for a reputable alternative investing platform, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://www.fundrise.com" rel="nofollow">Fundrise</a>, Yieldstreet, and <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://crowdstreet.4cl7.net/c/2104074/977365/9753" rel="sponsored nofollow">Crowdstreet</a>, and create an account. During this step, you’ll be required to verify your identity via a government-issued ID. </li> <li><strong>Link a bank account for fund transfers and confirm payment details: </strong>The next step is to link a payment method to your account. This allows you to add funds in order to purchase alternative investments. Different exchanges may accept different payment methods; it's important that you check what is accepted by the exchange in your jurisdiction. </li> <li><strong>Select investment and transfer funds: </strong>From the available investment choices, choose the asset or assets that you want to invest in. Indicate the number of shares and type of investment. Next, there will be a prompt to transfer the funds, from your previously linked bank account. If the investment doesn’t use all of your transferred money, the excess will remain as a cash balance in your account for further investment opportunities.<strong> </strong></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Some alternative investment offers are for specially qualified or accredited investors, while others are available for all. If the platform is exclusively for accredited investors, you’ll need to provide proof that you meet the accreditation standard.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Accreditation criteria: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> <li>Net worth over $1 million, excluding primary residence (individually or with spouse or partner)</li><li>Income over $200,000 for individuals or $300,000 jointly in each of the prior two years, and reasonably expects the same for the current year</li><li>Knowledgeable investment professional</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> If you’re wondering how to invest in art or how to invest in wine, there are various options. The simplest way to invest in art, wine and specific high-end collectibles is through a crowdfunding app like Yieldstreet or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.masterworks.com/" rel="nofollow">Masterworks</a>. Otherwise, you can buy and sell through specialty dealers or at auctions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_40-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:29.7%;"> <img alt="Source: Masterworks" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/yirHBZmo2B13tg9N4_qDUJL3ndU=/1215x0/filters:no_upscale():max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/_eeLaDnB1K6IZX1uhWfL_pOyfEE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg" data-srcset="https://www.investopedia.com/thmb/TYUtJBemGXUfjPRuoeXiyuchrRo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg 750w" data-tracking-container="true" height="361" id="mntl-sc-block-image_1-0" width="1215"/> <noscript> <img alt="Source: Masterworks" class="img--noscript universal-image__image" height="361" sizes="750px" src="https://www.investopedia.com/thmb/_eeLaDnB1K6IZX1uhWfL_pOyfEE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg" srcset="https://www.investopedia.com/thmb/TYUtJBemGXUfjPRuoeXiyuchrRo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg 750w" width="1215"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-text">Source: Masterworks.</span> </figcaption></figure> <span class="heading-toc" id="toc-what-you-need-to-open-an-alternative-investing-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> What You Need to Open an Alternative Investing Account  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> You’ll need information to verify your personal data and financial status, if you’re investing on an “accredited investors only” platform.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-subheading__text"> Personal Information </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> All platforms require investors to open an account and provide basic personal information such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li>Full name</li><li>Email address</li><li>Phone number</li><li>Home address</li><li>Proof of address</li><li>Social Security number</li><li>Government-issued ID</li><li>Banking information</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Accredited investors might need to provide additional bank or tax statements to verify eligibility. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-subheading__text"> Minimum Deposits </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Minimum deposits range from as low as $10 to $20,000 or more. Some platforms have a distinct minimum for each specific project. For example, FarmTogether, limited to accredited investors only, has crowdfunding offers starting at $15,000 and a Sustainable Farmland Fund that requires a $100,000 minimum.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> If you’re investing in an alternative ETF or mutual fund, you’ll typically find reasonable minimums. Fractional shares of a REIT or commodity ETF can be purchased at Fidelity and other investment firms for as little as a few dollars.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <span class="heading-toc" id="toc-best-alternative-investing-platforms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> Best Alternative Investing Platforms </span> </h2> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_57-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Company</b></th> <th><b>Focus</b></th> <th><b>Minimum Investment</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fundrise.sjv.io/c/2104074/1032334/7376" rel="noopener noreferrer sponsored nofollow">Fundrise</a></td> <td>Real Estate Investments</td> <td>$10</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.masterworks.com/" rel="nofollow">Masterworks</a></td> <td>Art Investments</td> <td>$15,000</td> </tr> <tr> <td>Yieldstreet</td> <td>Asset Variety</td> <td>$5,000</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://itrustcapital.com/?utm_source=partner&amp;utm_medium=youtube&amp;utm_campaign=partner42&amp;oid=15&amp;affid=42" rel="sponsored nofollow">iTrustCapital</a></td> <td>Gold and Cryptocurrency</td> <td>$1,000</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <span class="heading-toc" id="toc-how-to-gain-exposure-to-alternative-investments-through-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-heading__text"> How to Gain Exposure to Alternative Investments Through ETFs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> ETFs or exchangetraded funds are available to all investors, accredited and non-accredited. Alternative ETFs come in a multitude of varieties including merger, arbitrage, risk parity, crypto, metals, real estate, multi-asset, and commodity. You can purchase ETFs at traditional investment brokerage firms like Fidelity, Schwab, Vanguard, and E*TRADE. Many of the investing apps, like M1 Finance, Robinhood, Webull, and Public, also provide access to ETFs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Sample alternative ETFs include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> <li>Return Stacked Bonds and Managed Futures ETF (RSBT)</li><li>Timothy Plan Market Neutral ETF (TPMN)</li><li>Noble Absolute Return ETF (NOPE)</li><li>RPAR Risk Parity ETF (RPAR)</li><li>ProShares Merger ETF (MRGR)</li><li>Bitcoin Strategy ETf (BITO)</li><li>iShares S&amp;P GSCI Commodity-Indexed Trust (GSG)</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_66-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.1%;"> <img alt="Source: Crowdstreet" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/HEsJj2umAVG6B-KZiBHxVH7-Ya4=/1186x0/filters:no_upscale():max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/a2agEH2DEOt34IzS3bNpIVlWYRo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg" data-srcset="https://www.investopedia.com/thmb/VIV8RI0Mmc4Kyr0feH7uD4rksoY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg 750w" data-tracking-container="true" height="785" id="mntl-sc-block-image_2-0" width="1186"/> <noscript> <img alt="Source: Crowdstreet" class="img--noscript universal-image__image" height="785" sizes="750px" src="https://www.investopedia.com/thmb/a2agEH2DEOt34IzS3bNpIVlWYRo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg" srcset="https://www.investopedia.com/thmb/VIV8RI0Mmc4Kyr0feH7uD4rksoY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg 750w" width="1186"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-text">Source: Crowdstreet.</span> </figcaption></figure> <span class="heading-toc" id="toc-what-are-the-advantages-of-alternative-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> What Are the Advantages of Alternative Investments? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> The promise of lower correlations with stocks and bonds is a major draw of alternative investing. Pension funds and institutional investors have included alternatives in their arsenal for years. Yet, lumping all alternatives into one group might be cavalier. Keep in mind that within the broad category, there are a range of investment types. Some alternatives, like commodities, can provide a hedge against price inflation and protect your capital as prices soar. Investments that are negatively correlated with stocks and bonds can bolster your financial assets when traditional investment values tumble. Certain alternative investments, like hedge funds and private real estate deals, provide the possibility of higher returns and lower correlations with traditional assets.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> If you are seeking diversification beyond traditional stocks and bonds, then alternatives open up an avenue with a possibility of higher overall returns and lower volatility. Today, all investors have access to alternatives, although some would argue that the best deals are reserved for high-net-worth accredited investors.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <span class="heading-toc" id="toc-what-are-the-disadvantages-of-alternative-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_72-0"> <span class="mntl-sc-block-heading__text"> What Are the Disadvantages of Alternative Investments? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> The promise of higher returns and reduced investment portfolio volatility is a possibility, not a certainty. Some private alternative investment vehicles are not SEC regulated, adding to their risk. Higher risk of loss accompanies the promise of higher returns. Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-advisors/092515/alternative-investments-look-pros-cons.asp">alternative investment</a> founders lack the expertise and training that you’ll find in the managers of most highly regulated mutual and exchange traded funds. With alternative investing, you might encounter uncommon tax reporting, causing additional tax preparation headaches.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Many alternative investments have long lock-up periods and are illiquid. That means you may not recoup your initial investment for a period of months or years. Some of the best deals are only open to accredited investors. Fees for alternative investments can also be excessive. While ETFs and mutual funds typically charge less than a 1% expense ratio, some private alternative offers levy high expense ratios and additional performance-based fees. Another disadvantage of alternative investments is lack of income. Unlike bonds and many stocks, commodities, precious metals, art, wine and other alts don’t offer any cash flow.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-what-you-need-to-know-about-secondary-markets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> What You Need to Know About Secondary Markets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> To counteract lack of liquidity, many alternative investments offer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/secondarymarket.asp">secondary markets</a>. Secondary markets are avenues to buy or resell an asset that was bought or sold during the original offer. Conversely, a primary market is the platform where you can buy a new offer. It might be a stock initial public offering (IPO) or a crowdfunding real estate platform where you buy a share of real property from the original owner.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Most stocks and bonds are liquid and readily bought and sold through public exchanges, which are secondary markets. Several alternative investment platforms offer their own marketplaces or secondary markets, where sellers can locate interested buyers for less liquid investments. Before investing in any alternative asset, it's useful to understand the liquidity of the product.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <span class="heading-toc" id="toc-what-to-consider-when-investing-in-alternative-assets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_82-0"> <span class="mntl-sc-block-heading__text"> What to Consider When Investing in Alternative Assets   </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_83-0"> <span class="mntl-sc-block-subheading__text"> Objectives </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> Many advisors suggest giving your money a job. When investing, begin with a plan that includes: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> <li>Goal for the money</li><li>When you will need it</li><li>How much risk you can accept</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> After defining your goals, timeline, and risk level, you’re ready to create an investment portfolio and decide whether to add alternative investments to your stock and bond holdings. If you seek the added diversification and return potential of alternatives, and can accept the risk and liquidity parameters, then you might add this asset class to your stock and bond investments. Typically, diversification principals suggest maintaining a smaller proportion of alternative investments within a diversified portfolio.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-square figure-high-res" id="mntl-sc-block_90-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:92.5%;"> <img alt="Source: Yieldstreet" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/P3yy_A-LWGFgEHDHmK-hyOg2zkQ=/1120x0/filters:no_upscale():max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/U88CBCMIH0d-9ejL6jmOJpmqbZs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg" data-srcset="https://www.investopedia.com/thmb/qBCvCM_IEhIUZBG0iv5m93FSkVc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg 750w" data-tracking-container="true" height="1036" id="mntl-sc-block-image_3-0" width="1120"/> <noscript> <img alt="Source: Yieldstreet" class="img--noscript universal-image__image" height="1036" sizes="750px" src="https://www.investopedia.com/thmb/U88CBCMIH0d-9ejL6jmOJpmqbZs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg" srcset="https://www.investopedia.com/thmb/qBCvCM_IEhIUZBG0iv5m93FSkVc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg 750w" width="1120"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_3-0"> <span class="figure-article-caption-text">Source: Yieldstreet.</span> </figcaption></figure> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_91-0"> <span class="mntl-sc-block-subheading__text"> Liquidity  </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> Only invest money in the financial markets that you don’t need within the next three to five years. This goes for alternatives, stocks and bonds. While stocks and bonds are liquid and can be rapidly sold, many alternative investments require a few months to many years before redemption. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_94-0"> When investing in alternatives, understand the liquidity options for the investment. Private investments for accredited, wealthier investors might require five- to six-figure minimums and lock-up periods up to 10 years. Before purchase, determine if there is a secondary market for the investment and whether you can accept the expected <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lockup-period.asp">lock-up period</a>.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_96-0"> <span class="mntl-sc-block-subheading__text"> Setting Your Time Horizon </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_97-0"> Understand your money’s job. Is it capital appreciation for the long term, cash flow and appreciation, or stable value and liquidity for short term goals? Any money that you will need for an upcoming vacation, down payment on a home next year, or for emergency cash probably shouldn’t be in an alternative asset. These types of investments are usually difficult to liquidate.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> After you’re clear on your financial goals and when you’ll need the money, you can decide if a particular alternative investment is right for you. Read the investment’s fine print and match your time horizon for the money with estimated lock-up periods for your alternative investments. In general, plan to own alternatives for the long term. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_100-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_101-0"> <span class="mntl-sc-block-subheading__text"> Building a Diversified Portfolio  </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_102-0"> Building a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/03/072303.asp">diversified portfolio</a> begins with determining your goals, timeline, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/risk_tolerance.asp">risk tolerance</a>. Your assessment of those factors will determine whether to create a conservative portfolio, if you’re less risk tolerant and have a shorter timeline, or a more aggressive investment mix, if you’re younger and can tolerate more price volatility within your investments. In general, conservative investment portfolios contain greater percentages of fixed income bonds and cash, and less allotment to riskier stocks. The opposite applies to more aggressive portfolios.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_103-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_104-0"> Any investment portfolio might include a small allocation to alternatives, which will be included within the riskier portion. Generally, it’s recommended to maintain less than 10% of your liquid assets in the riskiest assets, like alternatives. Returns and portfolio volatility are inversely correlated with the level of risk within the portfolio. Higher risk portfolios might achieve higher returns, with greater volatility. Conversely, expect lower returns and volatility from more conservative portfolios. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <span class="heading-toc" id="toc-faqs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_106-0"> <span class="mntl-sc-block-heading__text"> FAQs </span> </h2> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_107-0"><span class="heading-toc" id="toc-what-are-alternative-investments"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Alternative Investments?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Alternative investments span a wide variety of assets beyond traditional stocks and bonds.</p><p>Alternative investment choices include any investment apart from individual stocks and bonds, stock and bond funds, and cash assets like CDs or money market funds.<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/alternative-investments-stock-market/"> Examples of alternative investments</a> include real estate investments, commodities, currencies, hedge funds, and various other unique assets.  </p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_108-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_109-0"><span class="heading-toc" id="toc-what-are-the-most-popular-forms-of-alternative-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Most Popular Forms of Alternative Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>With the recent launching of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-crowdfunding.asp">crowdfunding</a> alternative investing apps, there are multiple choices for alternative asset enthusiasts. </p><p>If you’re wondering how to invest outside of stocks, here is a sample of alternative investment ideas:</p><ul><li>Commodities</li><li>Real estate: REITs, private, crowdfunding</li><li>Metals - including gold and silver</li><li>Art </li><li>Wine</li><li>Private debt</li><li>Hedge funds</li><li>Cryptocurrency</li><li>Farmland</li><li>Currencies</li><li>Private equity</li><li>Startups</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_110-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_111-0"><span class="heading-toc" id="toc-should-i-buy-alternative-investments"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should I Buy Alternative investments?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can have a sufficiently <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/03/072303.asp">diversified investment portfolio</a> without alternatives. Whether you should buy alternative investments depends upon your financial goals, risk tolerance, and timeline. There are several reasons why you might buy alternatives:</p><ul><li>You want an opportunity to invest like the institutions and the wealthy.</li><li>You can tolerate a certain degree of risk.</li><li>You don’t need the money soon.</li><li>You’re seeking the opportunity for greater returns.</li><li>You desire additional diversification in your investments.</li></ul><p>Ultimately, only you can decide whether you should buy alternative investments or not.</p></div> </div></div>

For those striving for added diversification, potentially strong returns, and less correlation with traditional stocks and bonds, alternative investing might be for you. These types of assets include commodities, real estate, crypto, art, wine, and more. Formerly the purview of wealthy, accredited investors, today anyone can access alternative investing opportunities through crowdfunding platforms and funds. Keep in mind that in exchange for the promise of added diversification and high returns, you’ll need to accept limited liquidity in many cases. Read on for an alternative investing how-to guide.  ## What Is Alternative Investing? Interest and opportunities for alternative investing have exploded since the 2008 recession, stock market decline, and mortgage market meltdown. As traditional markets tumbled, investors were hungry for investments with a negative [correlation](https://www.investopedia.com/terms/c/correlation.asp) to traditional stocks and bonds. Alternative investments typically gain popularity during periods of heightened equity market volatility and economic weakness. Alternative investment vehicles encompass assets outside of typical stock and bond markets. Previously available only to the ultra-wealthy, today opportunities are accessible for smaller investors as well. Examples of alternative investment vehicles include: * Gold and silver * Art * Wine * Real estate * Hedge funds * Private equity * Cryptocurrency * Private and distressed debt Millennials and newer investors have embraced alternatives as popular celebrities like Matt Damon and Reese Witherspoon tout their benefits. You can easily access alternative investments through crowdfunding apps such as [Fundrise](https://fundrise.sjv.io/c/2104074/1032334/7376) and [Crowdstreet](https://crowdstreet.4cl7.net/c/2104074/977365/9753). Private funds, publicly traded real estate investment trusts or REITs, and managed ETFs also open the door to alternative investing opportunities.  ## Alternative Investments vs Stocks Most investors are aware of the return potential of investing in individual stocks or stock market ETFs and mutual funds. Over the past hundred years or so, the U.S. stock market delivered a 9+% average annual return. But that return also included occasional years of double digit declines, like the -18.01% drop in 2022 and the -36.55% crash in 2008. Along with the potential for strong performance, easy access, and liquidity, investing in the stock market is a core asset class for long term investors. Investors continue to seek out alternatives to investing in stocks, as well as assets that are less[correlated with the stock market](https://www.investopedia.com/articles/financial-advisors/022516/4-reasons-why-market-correlation-matters.asp). This adds to the demand for alternative investing. Depending upon the alternative investment vehicle, average returns will vary from a low of 5.0% for a debt fund to a double digit return for some real estate partnerships and other niche alternative investment products. Alternative investments and stocks have some major differences: | Key Differences Between Stocks and Alternative Investments | | | | --- | --- | --- | | | **Stocks** | **Alternatives** | | **Liquidity** | Extremely liquid; can trade throughout the day. | Many have lock-up periods which tie up your money for periods from several months to several years | | **Fees** | Fee-free trading with most brokerages; most ETFs and mutual funds charge less than a 1.0% expense ratio | Fee structures range from simple to quite complex; a few platforms provide low-fee alternative investments, while others have complex fee structures including performance-based add-on fees | | **Minimum investment** | Fractional stock and ETF shares can be bought on multiple investment platforms for as little as $10 | Platforms are available for both accredited and non-accredited investors; minimum investment amounts range from a low of $10  to four to five figures. | | **Correlation** | Stocks exhibit distinct correlations among specific sectors and geographic regions. Lower correlations between assets lead to more price stability within your investments. | Alternatives will also have correlations within themselves and won’t always move in lockstep. The correlation between stocks and alternatives will depend upon the time period and specific alternative investment vehicle. | Adding alternatives to a diversified stock and bond portfolio has the possibility of minimizing volatility and potentially bolstering returns. Remember that there are no guarantees in investing.  ## How to Buy Alternative Investments How to buy alternative investments will vary based upon the platform and type of assets. If you buy an alternative ETF or mutual fund, you’ll need to [open an investment brokerage account](https://www.investopedia.com/how-to-open-an-online-brokerage-account-4588908). If you’re buying alternatives via a stand alone firm like Cadre, Peer Street, Realty Mogul, or Arrived, you’ll follow the “set up an account” guidelines.  Sample process to buy alternative investments: 1. **Sign up for an account:** Sign up for a reputable alternative investing platform, such as [Fundrise](http://www.fundrise.com), Yieldstreet, and [Crowdstreet](https://crowdstreet.4cl7.net/c/2104074/977365/9753), and create an account. During this step, you’ll be required to verify your identity via a government-issued ID. 2. **Link a bank account for fund transfers and confirm payment details:** The next step is to link a payment method to your account. This allows you to add funds in order to purchase alternative investments. Different exchanges may accept different payment methods; it's important that you check what is accepted by the exchange in your jurisdiction. 3. **Select investment and transfer funds:** From the available investment choices, choose the asset or assets that you want to invest in. Indicate the number of shares and type of investment. Next, there will be a prompt to transfer the funds, from your previously linked bank account. If the investment doesn’t use all of your transferred money, the excess will remain as a cash balance in your account for further investment opportunities. Some alternative investment offers are for specially qualified or accredited investors, while others are available for all. If the platform is exclusively for accredited investors, you’ll need to provide proof that you meet the accreditation standard. Accreditation criteria: * Net worth over $1 million, excluding primary residence (individually or with spouse or partner) * Income over $200,000 for individuals or $300,000 jointly in each of the prior two years, and reasonably expects the same for the current year * Knowledgeable investment professional If you’re wondering how to invest in art or how to invest in wine, there are various options. The simplest way to invest in art, wine and specific high-end collectibles is through a crowdfunding app like Yieldstreet or [Masterworks](https://www.masterworks.com/). Otherwise, you can buy and sell through specialty dealers or at auctions. ![Source: Masterworks]() :max_bytes(150000):strip_icc()/our-mission.cfb5a5b0-9dd6827c058b4502b33df8cc0794b37d.jpg) Source: Masterworks. ## What You Need to Open an Alternative Investing Account You’ll need information to verify your personal data and financial status, if you’re investing on an “accredited investors only” platform.  ### Personal Information All platforms require investors to open an account and provide basic personal information such as: * Full name * Email address * Phone number * Home address * Proof of address * Social Security number * Government-issued ID * Banking information Accredited investors might need to provide additional bank or tax statements to verify eligibility. ### Minimum Deposits Minimum deposits range from as low as $10 to $20,000 or more. Some platforms have a distinct minimum for each specific project. For example, FarmTogether, limited to accredited investors only, has crowdfunding offers starting at $15,000 and a Sustainable Farmland Fund that requires a $100,000 minimum. If you’re investing in an alternative ETF or mutual fund, you’ll typically find reasonable minimums. Fractional shares of a REIT or commodity ETF can be purchased at Fidelity and other investment firms for as little as a few dollars.  ## Best Alternative Investing Platforms | **Company** | **Focus** | **Minimum Investment** | | --- | --- | --- | | [Fundrise](https://fundrise.sjv.io/c/2104074/1032334/7376) | Real Estate Investments | $10 | | [Masterworks](https://www.masterworks.com/) | Art Investments | $15,000 | | Yieldstreet | Asset Variety | $5,000 | | [iTrustCapital](https://itrustcapital.com/?utm_source=partner&utm_medium=youtube&utm_campaign=partner42&oid=15&affid=42) | Gold and Cryptocurrency | $1,000 | ## How to Gain Exposure to Alternative Investments Through ETFs ETFs or exchangetraded funds are available to all investors, accredited and non-accredited. Alternative ETFs come in a multitude of varieties including merger, arbitrage, risk parity, crypto, metals, real estate, multi-asset, and commodity. You can purchase ETFs at traditional investment brokerage firms like Fidelity, Schwab, Vanguard, and E\*TRADE. Many of the investing apps, like M1 Finance, Robinhood, Webull, and Public, also provide access to ETFs. Sample alternative ETFs include: * Return Stacked Bonds and Managed Futures ETF (RSBT) * Timothy Plan Market Neutral ETF (TPMN) * Noble Absolute Return ETF (NOPE) * RPAR Risk Parity ETF (RPAR) * ProShares Merger ETF (MRGR) * Bitcoin Strategy ETf (BITO) * iShares S&P GSCI Commodity-Indexed Trust (GSG) ![Source: Crowdstreet]() :max_bytes(150000):strip_icc()/_UPDATED_DisneyTileCard_Hero-747f0a95bc654e058c37717f62d19382.jpg) Source: Crowdstreet. ## What Are the Advantages of Alternative Investments? The promise of lower correlations with stocks and bonds is a major draw of alternative investing. Pension funds and institutional investors have included alternatives in their arsenal for years. Yet, lumping all alternatives into one group might be cavalier. Keep in mind that within the broad category, there are a range of investment types. Some alternatives, like commodities, can provide a hedge against price inflation and protect your capital as prices soar. Investments that are negatively correlated with stocks and bonds can bolster your financial assets when traditional investment values tumble. Certain alternative investments, like hedge funds and private real estate deals, provide the possibility of higher returns and lower correlations with traditional assets.  If you are seeking diversification beyond traditional stocks and bonds, then alternatives open up an avenue with a possibility of higher overall returns and lower volatility. Today, all investors have access to alternatives, although some would argue that the best deals are reserved for high-net-worth accredited investors.   ## What Are the Disadvantages of Alternative Investments? The promise of higher returns and reduced investment portfolio volatility is a possibility, not a certainty. Some private alternative investment vehicles are not SEC regulated, adding to their risk. Higher risk of loss accompanies the promise of higher returns. Some [alternative investment](https://www.investopedia.com/articles/financial-advisors/092515/alternative-investments-look-pros-cons.asp) founders lack the expertise and training that you’ll find in the managers of most highly regulated mutual and exchange traded funds. With alternative investing, you might encounter uncommon tax reporting, causing additional tax preparation headaches.  Many alternative investments have long lock-up periods and are illiquid. That means you may not recoup your initial investment for a period of months or years. Some of the best deals are only open to accredited investors. Fees for alternative investments can also be excessive. While ETFs and mutual funds typically charge less than a 1% expense ratio, some private alternative offers levy high expense ratios and additional performance-based fees. Another disadvantage of alternative investments is lack of income. Unlike bonds and many stocks, commodities, precious metals, art, wine and other alts don’t offer any cash flow.  ## What You Need to Know About Secondary Markets To counteract lack of liquidity, many alternative investments offer [secondary markets](https://www.investopedia.com/terms/s/secondarymarket.asp). Secondary markets are avenues to buy or resell an asset that was bought or sold during the original offer. Conversely, a primary market is the platform where you can buy a new offer. It might be a stock initial public offering (IPO) or a crowdfunding real estate platform where you buy a share of real property from the original owner.  Most stocks and bonds are liquid and readily bought and sold through public exchanges, which are secondary markets. Several alternative investment platforms offer their own marketplaces or secondary markets, where sellers can locate interested buyers for less liquid investments. Before investing in any alternative asset, it's useful to understand the liquidity of the product.   ## What to Consider When Investing in Alternative Assets ### Objectives Many advisors suggest giving your money a job. When investing, begin with a plan that includes: * Goal for the money * When you will need it * How much risk you can accept After defining your goals, timeline, and risk level, you’re ready to create an investment portfolio and decide whether to add alternative investments to your stock and bond holdings. If you seek the added diversification and return potential of alternatives, and can accept the risk and liquidity parameters, then you might add this asset class to your stock and bond investments. Typically, diversification principals suggest maintaining a smaller proportion of alternative investments within a diversified portfolio.  ![Source: Yieldstreet]() :max_bytes(150000):strip_icc()/download-624ebd354a84498683a7dc432dc77bcf.jpg) Source: Yieldstreet. ### Liquidity Only invest money in the financial markets that you don’t need within the next three to five years. This goes for alternatives, stocks and bonds. While stocks and bonds are liquid and can be rapidly sold, many alternative investments require a few months to many years before redemption. When investing in alternatives, understand the liquidity options for the investment. Private investments for accredited, wealthier investors might require five- to six-figure minimums and lock-up periods up to 10 years. Before purchase, determine if there is a secondary market for the investment and whether you can accept the expected [lock-up period](https://www.investopedia.com/terms/l/lockup-period.asp).  ### Setting Your Time Horizon Understand your money’s job. Is it capital appreciation for the long term, cash flow and appreciation, or stable value and liquidity for short term goals? Any money that you will need for an upcoming vacation, down payment on a home next year, or for emergency cash probably shouldn’t be in an alternative asset. These types of investments are usually difficult to liquidate.  After you’re clear on your financial goals and when you’ll need the money, you can decide if a particular alternative investment is right for you. Read the investment’s fine print and match your time horizon for the money with estimated lock-up periods for your alternative investments. In general, plan to own alternatives for the long term. ### Building a Diversified Portfolio Building a [diversified portfolio](https://www.investopedia.com/articles/03/072303.asp) begins with determining your goals, timeline, and [risk tolerance](https://www.investopedia.com/articles/pf/07/risk_tolerance.asp). Your assessment of those factors will determine whether to create a conservative portfolio, if you’re less risk tolerant and have a shorter timeline, or a more aggressive investment mix, if you’re younger and can tolerate more price volatility within your investments. In general, conservative investment portfolios contain greater percentages of fixed income bonds and cash, and less allotment to riskier stocks. The opposite applies to more aggressive portfolios.  Any investment portfolio might include a small allocation to alternatives, which will be included within the riskier portion. Generally, it’s recommended to maintain less than 10% of your liquid assets in the riskiest assets, like alternatives. Returns and portfolio volatility are inversely correlated with the level of risk within the portfolio. Higher risk portfolios might achieve higher returns, with greater volatility. Conversely, expect lower returns and volatility from more conservative portfolios. ## FAQs ## What Are Alternative Investments? Alternative investments span a wide variety of assets beyond traditional stocks and bonds. Alternative investment choices include any investment apart from individual stocks and bonds, stock and bond funds, and cash assets like CDs or money market funds. [Examples of alternative investments](https://www.investopedia.com/investing/alternative-investments-stock-market/) include real estate investments, commodities, currencies, hedge funds, and various other unique assets.   ## What Are the Most Popular Forms of Alternative Investment? With the recent launching of [crowdfunding](https://www.investopedia.com/terms/i/investment-crowdfunding.asp) alternative investing apps, there are multiple choices for alternative asset enthusiasts.  If you’re wondering how to invest outside of stocks, here is a sample of alternative investment ideas: * Commodities * Real estate: REITs, private, crowdfunding * Metals - including gold and silver * Art * Wine * Private debt * Hedge funds * Cryptocurrency * Farmland * Currencies * Private equity * Startups ## Should I Buy Alternative investments? You can have a sufficiently [diversified investment portfolio](https://www.investopedia.com/articles/03/072303.asp) without alternatives. Whether you should buy alternative investments depends upon your financial goals, risk tolerance, and timeline. There are several reasons why you might buy alternatives: * You want an opportunity to invest like the institutions and the wealthy. * You can tolerate a certain degree of risk. * You don’t need the money soon. * You’re seeking the opportunity for greater returns. * You desire additional diversification in your investments. Ultimately, only you can decide whether you should buy alternative investments or not.

For those striving for added diversification, potentially strong returns, and less correlation with traditional stocks and bonds, alternative investing might be for you. These types of assets include commodities, real estate, crypto, art, wine, and more. Formerly the purview of wealthy, accredited investors, today anyone can access alternative investing opportunities through crowdfunding platforms and funds. Keep in mind that in exchange for the promise of added diversification and high returns, you’ll need to accept limited liquidity in many cases. Read on for an alternative investing how-to guide.  What Is Alternative Investing? Interest and opportunities for alternative investing have exploded since the 2008 recession, stock market decline, and mortgage market meltdown. As traditional markets tumbled, investors were hungry for investments with a negative correlation to traditional stocks and bonds. Alternative investments typically gain popularity during periods of heightened equity market volatility and economic weakness. Alternative investment vehicles encompass assets outside of typical stock and bond markets. Previously available only to the ultra-wealthy, today opportunities are accessible for smaller investors as well. Examples of alternative investment vehicles include: Gold and silverArtWineReal estateHedge fundsPrivate equityCryptocurrencyPrivate and distressed debt Millennials and newer investors have embraced alternatives as popular celebrities like Matt Damon and Reese Witherspoon tout their benefits. You can easily access alternative investments through crowdfunding apps such as Fundrise and Crowdstreet. Private funds, publicly traded real estate investment trusts or REITs, and managed ETFs also open the door to alternative investing opportunities.  Alternative Investments vs Stocks Most investors are aware of the return potential of investing in individual stocks or stock market ETFs and mutual funds. Over the past hundred years or so, the U.S. stock market delivered a 9+% average annual return. But that return also included occasional years of double digit declines, like the -18.01% drop in 2022 and the -36.55% crash in 2008. Along with the potential for strong performance, easy access, and liquidity, investing in the stock market is a core asset class for long term investors. Investors continue to seek out alternatives to investing in stocks, as well as assets that are lesscorrelated with the stock market. This adds to the demand for alternative investing. Depending upon the alternative investment vehicle, average returns will vary from a low of 5.0% for a debt fund to a double digit return for some real estate partnerships and other niche alternative investment products. Alternative investments and stocks have some major differences: Key Differences Between Stocks and Alternative Investments  Stocks  Alternatives Liquidity Extremely liquid; can trade throughout the day. Many have lock-up periods which tie up your money for periods from several months to several years Fees Fee-free trading with most brokerages; most ETFs and mutual funds charge less than a 1.0% expense ratio  Fee structures range from simple to quite complex; a few platforms provide low-fee alternative investments, while others have complex fee structures including performance-based add-on fees  Minimum investment  Fractional stock and ETF shares can be bought on multiple investment platforms for as little as $10  Platforms are available for both accredited and non-accredited investors; minimum investment amounts range from a low of $10  to four to five figures.  Correlation  Stocks exhibit distinct correlations among specific sectors and geographic regions. Lower correlations between assets lead to more price stability within your investments. Alternatives will also have correlations within themselves and won’t always move in lockstep. The correlation between stocks and alternatives will depend upon the time period and specific alternative investment vehicle. Adding alternatives to a diversified stock and bond portfolio has the possibility of minimizing volatility and potentially bolstering returns. Remember that there are no guarantees in investing.  How to Buy Alternative Investments  How to buy alternative investments will vary based upon the platform and type of assets. If you buy an alternative ETF or mutual fund, you’ll need to open an investment brokerage account. If you’re buying alternatives via a stand alone firm like Cadre, Peer Street, Realty Mogul, or Arrived, you’ll follow the “set up an account” guidelines.  Sample process to buy alternative investments: Sign up for an account: Sign up for a reputable alternative investing platform, such as Fundrise, Yieldstreet, and Crowdstreet, and create an account. During this step, you’ll be required to verify your identity via a government-issued ID.  Link a bank account for fund transfers and confirm payment details: The next step is to link a payment method to your account. This allows you to add funds in order to purchase alternative investments. Different exchanges may accept different payment methods; it's important that you check what is accepted by the exchange in your jurisdiction.  Select investment and transfer funds: From the available investment choices, choose the asset or assets that you want to invest in. Indicate the number of shares and type of investment. Next, there will be a prompt to transfer the funds, from your previously linked bank account. If the investment doesn’t use all of your transferred money, the excess will remain as a cash balance in your account for further investment opportunities.  Some alternative investment offers are for specially qualified or accredited investors, while others are available for all. If the platform is exclusively for accredited investors, you’ll need to provide proof that you meet the accreditation standard. Accreditation criteria: Net worth over $1 million, excluding primary residence (individually or with spouse or partner)Income over $200,000 for individuals or $300,000 jointly in each of the prior two years, and reasonably expects the same for the current yearKnowledgeable investment professional If you’re wondering how to invest in art or how to invest in wine, there are various options. The simplest way to invest in art, wine and specific high-end collectibles is through a crowdfunding app like Yieldstreet or Masterworks. Otherwise, you can buy and sell through specialty dealers or at auctions. Source: Masterworks. What You Need to Open an Alternative Investing Account  You’ll need information to verify your personal data and financial status, if you’re investing on an “accredited investors only” platform.  Personal Information All platforms require investors to open an account and provide basic personal information such as: Full nameEmail addressPhone numberHome addressProof of addressSocial Security numberGovernment-issued IDBanking information Accredited investors might need to provide additional bank or tax statements to verify eligibility. Minimum Deposits Minimum deposits range from as low as $10 to $20,000 or more. Some platforms have a distinct minimum for each specific project. For example, FarmTogether, limited to accredited investors only, has crowdfunding offers starting at $15,000 and a Sustainable Farmland Fund that requires a $100,000 minimum. If you’re investing in an alternative ETF or mutual fund, you’ll typically find reasonable minimums. Fractional shares of a REIT or commodity ETF can be purchased at Fidelity and other investment firms for as little as a few dollars.  Best Alternative Investing Platforms Company Focus Minimum Investment Fundrise Real Estate Investments $10 Masterworks Art Investments $15,000 Yieldstreet Asset Variety $5,000 iTrustCapital Gold and Cryptocurrency $1,000 How to Gain Exposure to Alternative Investments Through ETFs ETFs or exchangetraded funds are available to all investors, accredited and non-accredited. Alternative ETFs come in a multitude of varieties including merger, arbitrage, risk parity, crypto, metals, real estate, multi-asset, and commodity. You can purchase ETFs at traditional investment brokerage firms like Fidelity, Schwab, Vanguard, and E*TRADE. Many of the investing apps, like M1 Finance, Robinhood, Webull, and Public, also provide access to ETFs. Sample alternative ETFs include: Return Stacked Bonds and Managed Futures ETF (RSBT)Timothy Plan Market Neutral ETF (TPMN)Noble Absolute Return ETF (NOPE)RPAR Risk Parity ETF (RPAR)ProShares Merger ETF (MRGR)Bitcoin Strategy ETf (BITO)iShares S&P GSCI Commodity-Indexed Trust (GSG) Source: Crowdstreet. What Are the Advantages of Alternative Investments? The promise of lower correlations with stocks and bonds is a major draw of alternative investing. Pension funds and institutional investors have included alternatives in their arsenal for years. Yet, lumping all alternatives into one group might be cavalier. Keep in mind that within the broad category, there are a range of investment types. Some alternatives, like commodities, can provide a hedge against price inflation and protect your capital as prices soar. Investments that are negatively correlated with stocks and bonds can bolster your financial assets when traditional investment values tumble. Certain alternative investments, like hedge funds and private real estate deals, provide the possibility of higher returns and lower correlations with traditional assets.  If you are seeking diversification beyond traditional stocks and bonds, then alternatives open up an avenue with a possibility of higher overall returns and lower volatility. Today, all investors have access to alternatives, although some would argue that the best deals are reserved for high-net-worth accredited investors.   What Are the Disadvantages of Alternative Investments? The promise of higher returns and reduced investment portfolio volatility is a possibility, not a certainty. Some private alternative investment vehicles are not SEC regulated, adding to their risk. Higher risk of loss accompanies the promise of higher returns. Some alternative investment founders lack the expertise and training that you’ll find in the managers of most highly regulated mutual and exchange traded funds. With alternative investing, you might encounter uncommon tax reporting, causing additional tax preparation headaches.  Many alternative investments have long lock-up periods and are illiquid. That means you may not recoup your initial investment for a period of months or years. Some of the best deals are only open to accredited investors. Fees for alternative investments can also be excessive. While ETFs and mutual funds typically charge less than a 1% expense ratio, some private alternative offers levy high expense ratios and additional performance-based fees. Another disadvantage of alternative investments is lack of income. Unlike bonds and many stocks, commodities, precious metals, art, wine and other alts don’t offer any cash flow.  What You Need to Know About Secondary Markets To counteract lack of liquidity, many alternative investments offer secondary markets. Secondary markets are avenues to buy or resell an asset that was bought or sold during the original offer. Conversely, a primary market is the platform where you can buy a new offer. It might be a stock initial public offering (IPO) or a crowdfunding real estate platform where you buy a share of real property from the original owner.  Most stocks and bonds are liquid and readily bought and sold through public exchanges, which are secondary markets. Several alternative investment platforms offer their own marketplaces or secondary markets, where sellers can locate interested buyers for less liquid investments. Before investing in any alternative asset, it's useful to understand the liquidity of the product.   What to Consider When Investing in Alternative Assets   Objectives Many advisors suggest giving your money a job. When investing, begin with a plan that includes: Goal for the moneyWhen you will need itHow much risk you can accept After defining your goals, timeline, and risk level, you’re ready to create an investment portfolio and decide whether to add alternative investments to your stock and bond holdings. If you seek the added diversification and return potential of alternatives, and can accept the risk and liquidity parameters, then you might add this asset class to your stock and bond investments. Typically, diversification principals suggest maintaining a smaller proportion of alternative investments within a diversified portfolio.  Source: Yieldstreet. Liquidity  Only invest money in the financial markets that you don’t need within the next three to five years. This goes for alternatives, stocks and bonds. While stocks and bonds are liquid and can be rapidly sold, many alternative investments require a few months to many years before redemption. When investing in alternatives, understand the liquidity options for the investment. Private investments for accredited, wealthier investors might require five- to six-figure minimums and lock-up periods up to 10 years. Before purchase, determine if there is a secondary market for the investment and whether you can accept the expected lock-up period.  Setting Your Time Horizon Understand your money’s job. Is it capital appreciation for the long term, cash flow and appreciation, or stable value and liquidity for short term goals? Any money that you will need for an upcoming vacation, down payment on a home next year, or for emergency cash probably shouldn’t be in an alternative asset. These types of investments are usually difficult to liquidate.  After you’re clear on your financial goals and when you’ll need the money, you can decide if a particular alternative investment is right for you. Read the investment’s fine print and match your time horizon for the money with estimated lock-up periods for your alternative investments. In general, plan to own alternatives for the long term. Building a Diversified Portfolio  Building a diversified portfolio begins with determining your goals, timeline, and risk tolerance. Your assessment of those factors will determine whether to create a conservative portfolio, if you’re less risk tolerant and have a shorter timeline, or a more aggressive investment mix, if you’re younger and can tolerate more price volatility within your investments. In general, conservative investment portfolios contain greater percentages of fixed income bonds and cash, and less allotment to riskier stocks. The opposite applies to more aggressive portfolios.  Any investment portfolio might include a small allocation to alternatives, which will be included within the riskier portion. Generally, it’s recommended to maintain less than 10% of your liquid assets in the riskiest assets, like alternatives. Returns and portfolio volatility are inversely correlated with the level of risk within the portfolio. Higher risk portfolios might achieve higher returns, with greater volatility. Conversely, expect lower returns and volatility from more conservative portfolios. FAQs What Are Alternative Investments? Alternative investments span a wide variety of assets beyond traditional stocks and bonds.Alternative investment choices include any investment apart from individual stocks and bonds, stock and bond funds, and cash assets like CDs or money market funds. Examples of alternative investments include real estate investments, commodities, currencies, hedge funds, and various other unique assets.   What Are the Most Popular Forms of Alternative Investment? With the recent launching of crowdfunding alternative investing apps, there are multiple choices for alternative asset enthusiasts. If you’re wondering how to invest outside of stocks, here is a sample of alternative investment ideas:CommoditiesReal estate: REITs, private, crowdfundingMetals - including gold and silverArt WinePrivate debtHedge fundsCryptocurrencyFarmlandCurrenciesPrivate equityStartups Should I Buy Alternative investments? You can have a sufficiently diversified investment portfolio without alternatives. Whether you should buy alternative investments depends upon your financial goals, risk tolerance, and timeline. There are several reasons why you might buy alternatives:You want an opportunity to invest like the institutions and the wealthy.You can tolerate a certain degree of risk.You don’t need the money soon.You’re seeking the opportunity for greater returns.You desire additional diversification in your investments.Ultimately, only you can decide whether you should buy alternative investments or not.

https://www.investopedia.com/articles/02/121002.asp

When Insiders Buy Should Investors Join Them?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Tips for beating the market tend to come and go quickly, but one has held up extremely well: if executives, directors, or others with inside knowledge of a public company are buying or selling shares, investors should consider doing the same thing. Research shows that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insidertrading.asp">insider trading</a> activity is a valuable barometer of broad shifts in market and sector sentiment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> But before chasing each insider move, outsiders need to consider the factors that dictate the timing of trades and the factors that conceal the motivations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>When company insiders start buying shares of the company, it may be a signal for outside investors to follow suit, but looking at which insiders are acting matters.</li><li>One of the greatest investors of all time, Peter Lynch, was noted as saying that "insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."</li><li>Information of insider activity can be found for free on several financial websites.</li></ul></div></div></div> <span class="heading-toc" id="toc-reasons-to-follow-insider-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Reasons to Follow Insider Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical trends, order flow, supply and production bottlenecks, costs, and other key ingredients of business success, these insiders are way ahead of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/analyst.asp">analysts</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfoliomanager.asp">portfolio managers</a>, not to mention individual investors. Insiders' decisions (legal or not) to trade in their own companies' stocks are certainly worth examining. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Research supports the view that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insiderinformation.asp">insider information</a> works best in the aggregate. Independent research firm Market Profile Theorem (MPT) showed that insider trading trends signal an up-and-coming shift in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketsentiment.asp">market sentiment</a>. To identify trends, MPT analysts employ the Brooks ratio, which divides total insider sales of a company by total insider trades (purchases and sales) and then averages this ratio for thousands of stocks. If the average Brooks ratio is less than 40%, the market outlook is bullish; above 60% signals a bearish outlook. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> University of Michigan finance professor Nejat Seyhun, author of "Investment Intelligence from Insider Trading" (2000), offers a similar story. Stock prices rise more after insiders' net purchases than after <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netsales.asp">net sales</a>. On the whole, insiders do earn profits from their legal trading activities, and their returns are greater than those of the overall market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-the-stories-behind-the-signals"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> The Stories Behind the Signals </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Surges in insider trading appear to predict an upcoming switch in the market's direction. But outside investors have to be awfully careful about reading positive messages into every insider buy they see. Investors must also avoid treating individual sales as signals to unload their own <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/holdings.asp">holdings</a>. Admittedly, one big insider buy or sell order might offer investors a hint of things to come, but it hardly translates into a sure-fire pointer for outperforming the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> More companies require newly appointed executives and directors to own shares. As <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market_indicators.asp">market indicators</a>, these required purchases are irrelevant to outside investors. Other companies encourage ownership by providing stock loans to executives for half the purchase price. These are examples of the company taking steps to align the interests of management and shareholders. While certainly commendable, these transactions do not provide reason for outsiders to buy stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Sometimes an insider will announce a stock buy just to get Wall Street's attention, but announcing is not the same as doing. Many years ago, Jim Clark, founder of dot-com startup Healtheon once proclaimed that he intended to buy as much as $100 million worth of the company stock. Healtheon shares surged the day of the announcement, but Clark didn't buy anywhere near as much as he had suggested. The stock quickly declined, and those who followed his lead got burned. Healtheon later merged with WebMD, and the combined entity was eventually acquired by private equity firm KKR &amp; Co. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Although they may buy their company's stock because they expect good things to come, insiders do not sell simply because they think their company shares are about to sink in value. Insiders sell for all kinds of reasons. They might want to diversify their holdings, distribute stock to investors, pay for a divorce or take a well-earned trip. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Another big problem with using insider data on specific companies is that executives sometimes misread company prospects. Some insiders may buy even as share prices collapse. When insiders do correctly assess their companies' shares, it can be a matter of luck as much as anything else. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eso.asp">Employee stock options</a>, which compose an ever-larger portion of executives' compensation, can make analysis tricky. Remember this: if the insider is exercising stock options by buying the stock, it is not very meaningful if the options were granted at rock-bottom prices. At the same time, when buying through the exercise of their options, executives do not have to disclose this. Outsiders can really only guess how much "real" buying is taking place. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <span class="heading-toc" id="toc-tips-for-using-insider-data"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Tips for Using Insider Data </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Investors should consider the following guidelines when analyzing specific insider trading situations: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> 1. Some insiders are better than others. </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Directors know less about a company's outlook than executives. Key executives are the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/ceo.asp">CEO</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfo.asp">CFO</a>. People running the company know the most about where it is heading. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> 2. A lot of trading is better than a little. </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> One or two insiders at a big corporation do not make a trend. Three or more provide a better indication that something is happening. Generally speaking, solitary trades are unreliable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> 3. People at small companies know more  </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> At small and mid-sized companies, virtually all insiders are privy to company financials. At big corporations, information is more dispersed and typically only the core management team has the big picture. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-subheading__text"> 4. Stay the course. </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Evidence suggests that insiders tend to act far in advance of expected news. They do this in part to avoid the appearance of illegal insider trading. A study by academics at Pennsylvania State and Michigan State contends that insider activity precedes specific company news by as long as two years before the eventual disclosure of the news. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Here is the upshot – insider tracking is not easy, and it is hardly a guarantee of big returns. A pattern of trades might offer a signal for upcoming market shifts, and it is certainly reassuring to buy or sell a stock knowing that an insider is doing the same thing. Following the lead of insiders, however, will never replace diligent research. </p></div>

Tips for beating the market tend to come and go quickly, but one has held up extremely well: if executives, directors, or others with inside knowledge of a public company are buying or selling shares, investors should consider doing the same thing. Research shows that [insider trading](https://www.investopedia.com/terms/i/insidertrading.asp) activity is a valuable barometer of broad shifts in market and sector sentiment. But before chasing each insider move, outsiders need to consider the factors that dictate the timing of trades and the factors that conceal the motivations. ### Key Takeaways * When company insiders start buying shares of the company, it may be a signal for outside investors to follow suit, but looking at which insiders are acting matters. * One of the greatest investors of all time, Peter Lynch, was noted as saying that "insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise." * Information of insider activity can be found for free on several financial websites. ## Reasons to Follow Insider Trading The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical trends, order flow, supply and production bottlenecks, costs, and other key ingredients of business success, these insiders are way ahead of [analysts](https://www.investopedia.com/terms/a/analyst.asp) and [portfolio managers](https://www.investopedia.com/terms/p/portfoliomanager.asp), not to mention individual investors. Insiders' decisions (legal or not) to trade in their own companies' stocks are certainly worth examining. Research supports the view that [insider information](https://www.investopedia.com/terms/i/insiderinformation.asp) works best in the aggregate. Independent research firm Market Profile Theorem (MPT) showed that insider trading trends signal an up-and-coming shift in [market sentiment](https://www.investopedia.com/terms/m/marketsentiment.asp). To identify trends, MPT analysts employ the Brooks ratio, which divides total insider sales of a company by total insider trades (purchases and sales) and then averages this ratio for thousands of stocks. If the average Brooks ratio is less than 40%, the market outlook is bullish; above 60% signals a bearish outlook. University of Michigan finance professor Nejat Seyhun, author of "Investment Intelligence from Insider Trading" (2000), offers a similar story. Stock prices rise more after insiders' net purchases than after [net sales](https://www.investopedia.com/terms/n/netsales.asp). On the whole, insiders do earn profits from their legal trading activities, and their returns are greater than those of the overall market. ## The Stories Behind the Signals Surges in insider trading appear to predict an upcoming switch in the market's direction. But outside investors have to be awfully careful about reading positive messages into every insider buy they see. Investors must also avoid treating individual sales as signals to unload their own [holdings](https://www.investopedia.com/terms/h/holdings.asp). Admittedly, one big insider buy or sell order might offer investors a hint of things to come, but it hardly translates into a sure-fire pointer for outperforming the market. More companies require newly appointed executives and directors to own shares. As [market indicators](https://www.investopedia.com/terms/m/market_indicators.asp), these required purchases are irrelevant to outside investors. Other companies encourage ownership by providing stock loans to executives for half the purchase price. These are examples of the company taking steps to align the interests of management and shareholders. While certainly commendable, these transactions do not provide reason for outsiders to buy stock. Sometimes an insider will announce a stock buy just to get Wall Street's attention, but announcing is not the same as doing. Many years ago, Jim Clark, founder of dot-com startup Healtheon once proclaimed that he intended to buy as much as $100 million worth of the company stock. Healtheon shares surged the day of the announcement, but Clark didn't buy anywhere near as much as he had suggested. The stock quickly declined, and those who followed his lead got burned. Healtheon later merged with WebMD, and the combined entity was eventually acquired by private equity firm KKR & Co. Although they may buy their company's stock because they expect good things to come, insiders do not sell simply because they think their company shares are about to sink in value. Insiders sell for all kinds of reasons. They might want to diversify their holdings, distribute stock to investors, pay for a divorce or take a well-earned trip. Another big problem with using insider data on specific companies is that executives sometimes misread company prospects. Some insiders may buy even as share prices collapse. When insiders do correctly assess their companies' shares, it can be a matter of luck as much as anything else. [Employee stock options](https://www.investopedia.com/terms/e/eso.asp), which compose an ever-larger portion of executives' compensation, can make analysis tricky. Remember this: if the insider is exercising stock options by buying the stock, it is not very meaningful if the options were granted at rock-bottom prices. At the same time, when buying through the exercise of their options, executives do not have to disclose this. Outsiders can really only guess how much "real" buying is taking place. ## Tips for Using Insider Data Investors should consider the following guidelines when analyzing specific insider trading situations: ### 1. Some insiders are better than others. Directors know less about a company's outlook than executives. Key executives are the [CEO](https://www.investopedia.com/terms/c/ceo.asp) and [CFO](https://www.investopedia.com/terms/c/cfo.asp). People running the company know the most about where it is heading. ### 2. A lot of trading is better than a little. One or two insiders at a big corporation do not make a trend. Three or more provide a better indication that something is happening. Generally speaking, solitary trades are unreliable. ### 3. People at small companies know more At small and mid-sized companies, virtually all insiders are privy to company financials. At big corporations, information is more dispersed and typically only the core management team has the big picture. ### 4. Stay the course. Evidence suggests that insiders tend to act far in advance of expected news. They do this in part to avoid the appearance of illegal insider trading. A study by academics at Pennsylvania State and Michigan State contends that insider activity precedes specific company news by as long as two years before the eventual disclosure of the news. ## The Bottom Line Here is the upshot – insider tracking is not easy, and it is hardly a guarantee of big returns. A pattern of trades might offer a signal for upcoming market shifts, and it is certainly reassuring to buy or sell a stock knowing that an insider is doing the same thing. Following the lead of insiders, however, will never replace diligent research.

Tips for beating the market tend to come and go quickly, but one has held up extremely well: if executives, directors, or others with inside knowledge of a public company are buying or selling shares, investors should consider doing the same thing. Research shows that insider trading activity is a valuable barometer of broad shifts in market and sector sentiment. But before chasing each insider move, outsiders need to consider the factors that dictate the timing of trades and the factors that conceal the motivations. Key Takeaways When company insiders start buying shares of the company, it may be a signal for outside investors to follow suit, but looking at which insiders are acting matters.One of the greatest investors of all time, Peter Lynch, was noted as saying that "insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."Information of insider activity can be found for free on several financial websites. Reasons to Follow Insider Trading The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical trends, order flow, supply and production bottlenecks, costs, and other key ingredients of business success, these insiders are way ahead of analysts and portfolio managers, not to mention individual investors. Insiders' decisions (legal or not) to trade in their own companies' stocks are certainly worth examining. Research supports the view that insider information works best in the aggregate. Independent research firm Market Profile Theorem (MPT) showed that insider trading trends signal an up-and-coming shift in market sentiment. To identify trends, MPT analysts employ the Brooks ratio, which divides total insider sales of a company by total insider trades (purchases and sales) and then averages this ratio for thousands of stocks. If the average Brooks ratio is less than 40%, the market outlook is bullish; above 60% signals a bearish outlook. University of Michigan finance professor Nejat Seyhun, author of "Investment Intelligence from Insider Trading" (2000), offers a similar story. Stock prices rise more after insiders' net purchases than after net sales. On the whole, insiders do earn profits from their legal trading activities, and their returns are greater than those of the overall market. The Stories Behind the Signals Surges in insider trading appear to predict an upcoming switch in the market's direction. But outside investors have to be awfully careful about reading positive messages into every insider buy they see. Investors must also avoid treating individual sales as signals to unload their own holdings. Admittedly, one big insider buy or sell order might offer investors a hint of things to come, but it hardly translates into a sure-fire pointer for outperforming the market. More companies require newly appointed executives and directors to own shares. As market indicators, these required purchases are irrelevant to outside investors. Other companies encourage ownership by providing stock loans to executives for half the purchase price. These are examples of the company taking steps to align the interests of management and shareholders. While certainly commendable, these transactions do not provide reason for outsiders to buy stock. Sometimes an insider will announce a stock buy just to get Wall Street's attention, but announcing is not the same as doing. Many years ago, Jim Clark, founder of dot-com startup Healtheon once proclaimed that he intended to buy as much as $100 million worth of the company stock. Healtheon shares surged the day of the announcement, but Clark didn't buy anywhere near as much as he had suggested. The stock quickly declined, and those who followed his lead got burned. Healtheon later merged with WebMD, and the combined entity was eventually acquired by private equity firm KKR & Co. Although they may buy their company's stock because they expect good things to come, insiders do not sell simply because they think their company shares are about to sink in value. Insiders sell for all kinds of reasons. They might want to diversify their holdings, distribute stock to investors, pay for a divorce or take a well-earned trip. Another big problem with using insider data on specific companies is that executives sometimes misread company prospects. Some insiders may buy even as share prices collapse. When insiders do correctly assess their companies' shares, it can be a matter of luck as much as anything else. Employee stock options, which compose an ever-larger portion of executives' compensation, can make analysis tricky. Remember this: if the insider is exercising stock options by buying the stock, it is not very meaningful if the options were granted at rock-bottom prices. At the same time, when buying through the exercise of their options, executives do not have to disclose this. Outsiders can really only guess how much "real" buying is taking place. Tips for Using Insider Data Investors should consider the following guidelines when analyzing specific insider trading situations: 1. Some insiders are better than others. Directors know less about a company's outlook than executives. Key executives are the CEO and CFO. People running the company know the most about where it is heading. 2. A lot of trading is better than a little. One or two insiders at a big corporation do not make a trend. Three or more provide a better indication that something is happening. Generally speaking, solitary trades are unreliable. 3. People at small companies know more  At small and mid-sized companies, virtually all insiders are privy to company financials. At big corporations, information is more dispersed and typically only the core management team has the big picture. 4. Stay the course. Evidence suggests that insiders tend to act far in advance of expected news. They do this in part to avoid the appearance of illegal insider trading. A study by academics at Pennsylvania State and Michigan State contends that insider activity precedes specific company news by as long as two years before the eventual disclosure of the news. The Bottom Line Here is the upshot – insider tracking is not easy, and it is hardly a guarantee of big returns. A pattern of trades might offer a signal for upcoming market shifts, and it is certainly reassuring to buy or sell a stock knowing that an insider is doing the same thing. Following the lead of insiders, however, will never replace diligent research.

https://www.investopedia.com/what-does-the-new-fed-rate-hold-mean-for-2024-mortgage-rates-8642481

What Does the New Fed Rate Hold Mean for 2024 Mortgage Rates?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Federal Reserve yesterday announced its sixth consecutive hold for the federal funds rate. </li><li>Fed rate moves are not directly linked to mortgage rate movement. But they often create a domino effect that ultimately impacts the rates lenders are willing to offer.</li><li>One of the biggest drivers of mortgage rates is inflation, which persists above the Fed's 2% target level.<br/></li><li>After mortgage rates notched a 20-year high in October, they later fell more than a percentage point. But lately, the 30-year rate has been rising, sparked largely by higher inflation readings.</li><li>The Fed's rate hold is likely to have less impact on 2024 mortgage rates than the direction of inflation readings for the rest of this year.</li></ul></div></div></div> <div class="comp mntl-sc-block mntl-sc-block-tool mntl-block mntl-sc-block--credible-rate-table--mortgage" id="mntl-sc-block_3-0"><span class="comp prm-external-component-tools mntl-external-component" id="prm-external-component-tools_1-0"><div id="credible-block"></div> </span></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <span class="heading-toc" id="toc-the-web-of-factors-that-drives-mortgage-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> The Web of Factors That Drives Mortgage Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> It's popularly believed that when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalreservebank.asp">Federal Reserve</a> raises the federal funds rate—as it did aggressively during 2022 and 2023—mortgage rates are pushed higher. Conversely, when the Fed lowers the fed funds rate, it's commonly expected that mortgage rates will fall. So does the Fed rate hold announced yesterday mean mortgage rates will also remain steady? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Unfortunately, the relationship between the central bank's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalfundsrate.asp">federal funds rate</a> and what lenders are offering is not quite so clear. Instead, moves by the central bank more directly impact short-term rates, like bank deposit rates and credit card and personal loan APRs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Since fixed mortgages offer a long-term rate, the linkage to Fed rate changes is a bit more tenuous. Beyond the federal funds rate, the mortgage lending market is affected by a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/mortgage-rates/factors-affect-mortgage-rates/">complex mix of many economic factors</a>. These include inflation, consumer demand, housing supply, the strength of the current economy, and the status of the bond market, especially <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100814/why-10-year-us-treasury-rates-matter.asp">10-year Treasury yields</a>. Given all these other influences, mortgage rates and the fed funds rate can—and sometimes do—move in opposite directions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> However, that's not the case in the last two years. Between 2022 and 2023, the Fed increased rates at a historic pace and magnitude—raising the benchmark rate 5.25 percentage points over 16 months. Even the indirect influence from the fed funds rate resulted in an equally historic upward surge of mortgage rates over the last two years.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_14-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/gyrSj/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="30y mortgage average since Jun 2021"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-the-fed-is-on-hold-but-mortgage-rates-have-lately-climbed"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> The Fed Is on Hold, But Mortgage Rates Have Lately Climbed </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> 2023 will go down in the mortgage history books as an especially painful year for American home buyers. Granted, 2022 saw 30-year mortgage rates rise faster: After sinking to historic lows in the upper 2% range in 2021, the next year saw 30-year rates shoot above 7%. The rise of 2022 increases was startling. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> But 2023 showed that mortgage rates still had more room to run. Though the 30-year average wavered in 6% territory for most of the first half of 2023, by October it had catapulted to an astonishing 8.01%—its highest mark in almost 23 years. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Post-October, mortgage rates dropped more than a percentage point, residing in 6% territory for most of the period from early December 2023 to early April 2024. But over the past month, mortgage rates have been back on the upswing. The current average is 7.33%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_23-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/VwoWe/1/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="30y mortgage average since Oct 2023"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> So why is this happening if the Fed rate hasn't moved since last July? A primary reason centers on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a>. In June 2022, inflation hit a 40-year high of 9.1%.<span class="ql-inline-citation" data-cite="3"></span> With the Fed's rate-hike campaign squarely focused on reducing inflation, it succeeded in lowering the inflation rate to 3.0% by the June 2023 reading (which came out in July).<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> But if you look at the graph below, you can see that instead of continuing the hoped-for downward trajectory, inflation has instead increased since that low point—with the latest reading showing a March inflation rate of 3.5%.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Unfortunately for home buyers, this had an immediate effect on mortgage rates. When the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">March inflation report</a> was released on April 10, the 30-year mortgage rate average shot up about a quarter percentage point in a single day. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_31-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/W86Fc/2/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="Inflation has cooled but remains above the Fed's 2% target"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-what-2024-fed-decisions-could-mean-for-home-buyers"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> What 2024 Fed Decisions Could Mean for Home Buyers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Yesterday's post-meeting statement from the Fed signaled once again that until the committee feels confident inflation is falling sufficiently and sustainably, it will not be ready to cut the federal funds rate. New this time was the Fed's acknowledgment that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-may-1-8641676">recent progress against inflation had stalled</a> and that the timeline for potential rate cuts has therefore been pushed further down the road. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Speaking in his customary press conference after the announcement, Fed Chair <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/jerome-powell-5210572">Jerome Powell</a> said: “My colleagues and I today said that we didn’t see progress in the first quarter. And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> In other words, the current Fed rate hold that has already continued for six Fed meetings is likely to extend further still. Right now, a majority of fed funds futures traders are betting the first rate cut won't come until the September meeting, according to the CME Group's FedWatch Tool.<span class="ql-inline-citation" data-cite="8"></span> That's three meetings away, </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Even though the Fed is no longer hiking rates, inflation will hopefully still come down. If the next release of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumerpriceindex.asp">Consumer Price Index</a> on May 15 shows it doing that, mortgage rates could experience some welcome downward pressure.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Yet it also looks possible that taming inflation from the 3% range to the Fed's target of 2% could take some time—and is far from assured. That means expectations for <em>significant</em> reductions in mortgage rates are probably overly optimistic. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Sam Khater, chief economist at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/freddiemac.asp">Freddie Mac</a>, puts it this way: “Mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time.”<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Once we do arrive at a stage where the Fed appears ready to make rate cuts, that will be a sign not only that inflation has come down further, but also that the Fed believes the inflation rate has stabilized. This decreased inflationary pressure, plus the added impact of a falling federal funds rate, is likely to push mortgage rates lower. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> But while the Fed raised its benchmark rate fast and furiously in 2022–2023, it's expected to lower rates at a much slower pace. As a result, any mortgage rate improvements are also expected to be more gradual than dramatic. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_51-0"><a class="mntl-sc-block-featuredlink__link mntl-text-link" data-tracking-container="true" data-tracking-id="featured-link" href="https://www.investopedia.com/mortgage-rates-5094943" id="mntl-sc-block-featuredlink__link_1-0" rel="nocaes"><span class="link__wrapper">Compare the Best Mortgage Rates Today - May 21, 2024</span></a></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <span class="heading-toc" id="toc-how-we-track-the-best-mortgage-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> How We Track the Best Mortgage Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> The national averages cited above were calculated based on rates offered through Zillow Group Marketplace by approximately 40 lenders, assuming a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loantovalue.asp">loan-to-value ratio (LTV)</a> of 80% (i.e., a down payment of at least 20%) and an applicant with a credit score in the 680-739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.<br/> </p></div>

### Key Takeaways * The Federal Reserve yesterday announced its sixth consecutive hold for the federal funds rate. * Fed rate moves are not directly linked to mortgage rate movement. But they often create a domino effect that ultimately impacts the rates lenders are willing to offer. * One of the biggest drivers of mortgage rates is inflation, which persists above the Fed's 2% target level. * After mortgage rates notched a 20-year high in October, they later fell more than a percentage point. But lately, the 30-year rate has been rising, sparked largely by higher inflation readings. * The Fed's rate hold is likely to have less impact on 2024 mortgage rates than the direction of inflation readings for the rest of this year. ## The Web of Factors That Drives Mortgage Rates It's popularly believed that when the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) raises the federal funds rate—as it did aggressively during 2022 and 2023—mortgage rates are pushed higher. Conversely, when the Fed lowers the fed funds rate, it's commonly expected that mortgage rates will fall. So does the Fed rate hold announced yesterday mean mortgage rates will also remain steady? Unfortunately, the relationship between the central bank's [federal funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp) and what lenders are offering is not quite so clear. Instead, moves by the central bank more directly impact short-term rates, like bank deposit rates and credit card and personal loan APRs. Since fixed mortgages offer a long-term rate, the linkage to Fed rate changes is a bit more tenuous. Beyond the federal funds rate, the mortgage lending market is affected by a [complex mix of many economic factors](https://www.investopedia.com/mortgage/mortgage-rates/factors-affect-mortgage-rates/). These include inflation, consumer demand, housing supply, the strength of the current economy, and the status of the bond market, especially [10-year Treasury yields](https://www.investopedia.com/articles/investing/100814/why-10-year-us-treasury-rates-matter.asp). Given all these other influences, mortgage rates and the fed funds rate can—and sometimes do—move in opposite directions. However, that's not the case in the last two years. Between 2022 and 2023, the Fed increased rates at a historic pace and magnitude—raising the benchmark rate 5.25 percentage points over 16 months. Even the indirect influence from the fed funds rate resulted in an equally historic upward surge of mortgage rates over the last two years. ## The Fed Is on Hold, But Mortgage Rates Have Lately Climbed 2023 will go down in the mortgage history books as an especially painful year for American home buyers. Granted, 2022 saw 30-year mortgage rates rise faster: After sinking to historic lows in the upper 2% range in 2021, the next year saw 30-year rates shoot above 7%. The rise of 2022 increases was startling. But 2023 showed that mortgage rates still had more room to run. Though the 30-year average wavered in 6% territory for most of the first half of 2023, by October it had catapulted to an astonishing 8.01%—its highest mark in almost 23 years. Post-October, mortgage rates dropped more than a percentage point, residing in 6% territory for most of the period from early December 2023 to early April 2024. But over the past month, mortgage rates have been back on the upswing. The current average is 7.33%. So why is this happening if the Fed rate hasn't moved since last July? A primary reason centers on [inflation](https://www.investopedia.com/terms/i/inflation.asp). In June 2022, inflation hit a 40-year high of 9.1%. With the Fed's rate-hike campaign squarely focused on reducing inflation, it succeeded in lowering the inflation rate to 3.0% by the June 2023 reading (which came out in July). But if you look at the graph below, you can see that instead of continuing the hoped-for downward trajectory, inflation has instead increased since that low point—with the latest reading showing a March inflation rate of 3.5%. Unfortunately for home buyers, this had an immediate effect on mortgage rates. When the [March inflation report](https://www.investopedia.com/inflation-heated-up-in-march-8629363) was released on April 10, the 30-year mortgage rate average shot up about a quarter percentage point in a single day. ## What 2024 Fed Decisions Could Mean for Home Buyers Yesterday's post-meeting statement from the Fed signaled once again that until the committee feels confident inflation is falling sufficiently and sustainably, it will not be ready to cut the federal funds rate. New this time was the Fed's acknowledgment that [recent progress against inflation had stalled](https://www.investopedia.com/us-economy-news-today-may-1-8641676) and that the timeline for potential rate cuts has therefore been pushed further down the road. Speaking in his customary press conference after the announcement, Fed Chair [Jerome Powell](https://www.investopedia.com/jerome-powell-5210572) said: “My colleagues and I today said that we didn’t see progress in the first quarter. And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” In other words, the current Fed rate hold that has already continued for six Fed meetings is likely to extend further still. Right now, a majority of fed funds futures traders are betting the first rate cut won't come until the September meeting, according to the CME Group's FedWatch Tool. That's three meetings away, Even though the Fed is no longer hiking rates, inflation will hopefully still come down. If the next release of the [Consumer Price Index](https://www.investopedia.com/terms/c/consumerpriceindex.asp) on May 15 shows it doing that, mortgage rates could experience some welcome downward pressure. Yet it also looks possible that taming inflation from the 3% range to the Fed's target of 2% could take some time—and is far from assured. That means expectations for *significant* reductions in mortgage rates are probably overly optimistic. Sam Khater, chief economist at [Freddie Mac](https://www.investopedia.com/terms/f/freddiemac.asp), puts it this way: “Mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time.” Once we do arrive at a stage where the Fed appears ready to make rate cuts, that will be a sign not only that inflation has come down further, but also that the Fed believes the inflation rate has stabilized. This decreased inflationary pressure, plus the added impact of a falling federal funds rate, is likely to push mortgage rates lower. But while the Fed raised its benchmark rate fast and furiously in 2022–2023, it's expected to lower rates at a much slower pace. As a result, any mortgage rate improvements are also expected to be more gradual than dramatic. [Compare the Best Mortgage Rates Today - May 21, 2024](https://www.investopedia.com/mortgage-rates-5094943) ## How We Track the Best Mortgage Rates The national averages cited above were calculated based on rates offered through Zillow Group Marketplace by approximately 40 lenders, assuming a [loan-to-value ratio (LTV)](https://www.investopedia.com/terms/l/loantovalue.asp) of 80% (i.e., a down payment of at least 20%) and an applicant with a credit score in the 680-739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

Key Takeaways The Federal Reserve yesterday announced its sixth consecutive hold for the federal funds rate. Fed rate moves are not directly linked to mortgage rate movement. But they often create a domino effect that ultimately impacts the rates lenders are willing to offer.One of the biggest drivers of mortgage rates is inflation, which persists above the Fed's 2% target level.After mortgage rates notched a 20-year high in October, they later fell more than a percentage point. But lately, the 30-year rate has been rising, sparked largely by higher inflation readings.The Fed's rate hold is likely to have less impact on 2024 mortgage rates than the direction of inflation readings for the rest of this year. The Web of Factors That Drives Mortgage Rates It's popularly believed that when the Federal Reserve raises the federal funds rate—as it did aggressively during 2022 and 2023—mortgage rates are pushed higher. Conversely, when the Fed lowers the fed funds rate, it's commonly expected that mortgage rates will fall. So does the Fed rate hold announced yesterday mean mortgage rates will also remain steady? Unfortunately, the relationship between the central bank's federal funds rate and what lenders are offering is not quite so clear. Instead, moves by the central bank more directly impact short-term rates, like bank deposit rates and credit card and personal loan APRs. Since fixed mortgages offer a long-term rate, the linkage to Fed rate changes is a bit more tenuous. Beyond the federal funds rate, the mortgage lending market is affected by a complex mix of many economic factors. These include inflation, consumer demand, housing supply, the strength of the current economy, and the status of the bond market, especially 10-year Treasury yields. Given all these other influences, mortgage rates and the fed funds rate can—and sometimes do—move in opposite directions. However, that's not the case in the last two years. Between 2022 and 2023, the Fed increased rates at a historic pace and magnitude—raising the benchmark rate 5.25 percentage points over 16 months. Even the indirect influence from the fed funds rate resulted in an equally historic upward surge of mortgage rates over the last two years. The Fed Is on Hold, But Mortgage Rates Have Lately Climbed 2023 will go down in the mortgage history books as an especially painful year for American home buyers. Granted, 2022 saw 30-year mortgage rates rise faster: After sinking to historic lows in the upper 2% range in 2021, the next year saw 30-year rates shoot above 7%. The rise of 2022 increases was startling. But 2023 showed that mortgage rates still had more room to run. Though the 30-year average wavered in 6% territory for most of the first half of 2023, by October it had catapulted to an astonishing 8.01%—its highest mark in almost 23 years. Post-October, mortgage rates dropped more than a percentage point, residing in 6% territory for most of the period from early December 2023 to early April 2024. But over the past month, mortgage rates have been back on the upswing. The current average is 7.33%. So why is this happening if the Fed rate hasn't moved since last July? A primary reason centers on inflation. In June 2022, inflation hit a 40-year high of 9.1%. With the Fed's rate-hike campaign squarely focused on reducing inflation, it succeeded in lowering the inflation rate to 3.0% by the June 2023 reading (which came out in July). But if you look at the graph below, you can see that instead of continuing the hoped-for downward trajectory, inflation has instead increased since that low point—with the latest reading showing a March inflation rate of 3.5%. Unfortunately for home buyers, this had an immediate effect on mortgage rates. When the March inflation report was released on April 10, the 30-year mortgage rate average shot up about a quarter percentage point in a single day. What 2024 Fed Decisions Could Mean for Home Buyers Yesterday's post-meeting statement from the Fed signaled once again that until the committee feels confident inflation is falling sufficiently and sustainably, it will not be ready to cut the federal funds rate. New this time was the Fed's acknowledgment that recent progress against inflation had stalled and that the timeline for potential rate cuts has therefore been pushed further down the road. Speaking in his customary press conference after the announcement, Fed Chair Jerome Powell said: “My colleagues and I today said that we didn’t see progress in the first quarter. And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” In other words, the current Fed rate hold that has already continued for six Fed meetings is likely to extend further still. Right now, a majority of fed funds futures traders are betting the first rate cut won't come until the September meeting, according to the CME Group's FedWatch Tool. That's three meetings away, Even though the Fed is no longer hiking rates, inflation will hopefully still come down. If the next release of the Consumer Price Index on May 15 shows it doing that, mortgage rates could experience some welcome downward pressure. Yet it also looks possible that taming inflation from the 3% range to the Fed's target of 2% could take some time—and is far from assured. That means expectations for significant reductions in mortgage rates are probably overly optimistic. Sam Khater, chief economist at Freddie Mac, puts it this way: “Mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time.” Once we do arrive at a stage where the Fed appears ready to make rate cuts, that will be a sign not only that inflation has come down further, but also that the Fed believes the inflation rate has stabilized. This decreased inflationary pressure, plus the added impact of a falling federal funds rate, is likely to push mortgage rates lower. But while the Fed raised its benchmark rate fast and furiously in 2022–2023, it's expected to lower rates at a much slower pace. As a result, any mortgage rate improvements are also expected to be more gradual than dramatic. Compare the Best Mortgage Rates Today - May 21, 2024 How We Track the Best Mortgage Rates The national averages cited above were calculated based on rates offered through Zillow Group Marketplace by approximately 40 lenders, assuming a loan-to-value ratio (LTV) of 80% (i.e., a down payment of at least 20%) and an applicant with a credit score in the 680-739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates.

https://www.investopedia.com/principal-investing-7975296

Principal Investing: What It Is, How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Principal investing is when financial institutions, private equity firms, or other such enterprises put their own <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/balancesheet.asp">balance sheet</a> at risk in anticipation of future profit. This differs from when they act as intermediaries or brokers investing on behalf of their clients. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>In principal investing, firms use their capital for transactions or asset acquisitions and have direct control over their investments.</li><li>By directly investing, firms can potentially reap more significant returns than when acting as intermediaries.</li><li>Risk is higher in principal investing since the firm’s capital is at stake. If an investment underperforms, the loss is borne directly.</li><li>Successful principal investing requires careful risk assessment, due diligence, and good strategic decision making.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-principal-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> What Is Principal Investing? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Principal investing is when firms or individuals invest their capital directly into businesses, projects, or ventures rather than investing on behalf of their clients. The principal investor owns the securities or assets and stands to gain all potential profits from their stake while taking on all the risk and potential losses.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> This type of investing is common among <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/privateequity.asp">private equity</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capital</a> firms. They typically acquire significant stakes in businesses to influence the direction of those companies and increase their value. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Principal investing can target various industries and asset classes, from real estate to technology startups. The investments can include buying stocks, bonds, commodities, and real estate properties or funding startups. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Principal investors often target the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/infrastructure.asp">infrastructure</a> sector because of its potential for stable, long-term returns. Projects may include utilities, transportation systems, or renewable energy initiatives. Another popular choice for principal investments is the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/realestate.asp">real estate</a> industry. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Commercial real estate, in particular, can offer attractive investment opportunities with the potential for significant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a> from rental income and property appreciation. Successful principal investing can also be seen in the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetmanagement.asp">asset management</a> industry. Here, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> is key, with portfolios often containing a varied mixture of stocks, bonds, and other assets to balance risk and reward. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The main goal of principal investing is to achieve a significant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/returnoninvestment.asp">return on investment</a> through capital appreciation, an increase in the value of the investment, or income generation from dividends and interest.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-benefits-and-risks-of-principal-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Benefits and Risks of Principal Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Principal investing offers potential benefits but also is a significant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risk</a> for any firm. It’s an approach best suited for those willing to take on higher risk for the potential of higher returns, who have the resources to take on this risk, and who have the expertise to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">actively manage</a> the investments involved. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> Potential Benefits </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li><strong>Potential for high returns</strong>: The opportunity to earn strong returns is the main attraction of principal investing, especially when investing in firms with high growth potential.</li> <li><strong>Control and influence</strong>: Principal investors frequently set out to influence the management of any acquired businesses, which can be instrumental in steering the company’s direction.</li> <li><strong>Diversification</strong>: Principal investing allows for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/030116/portfolio-diversification-done-right.asp">portfolio diversification</a> since it may involve different types of assets or businesses across various sectors.</li> <li><strong>Income generation</strong>: Certain investments, like real estate or dividend-paying stocks, can provide a steady income stream and the possibility of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalappreciation.asp">capital appreciation</a>.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-subheading__text"> Potential Risks </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <li><strong>Capital loss</strong>: The central risk in principal investing is the potential for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalloss.asp">capital loss</a>. If an investment fails, the principal investor could lose part or all the capital that was committed.</li> <li><strong>Liquidity risk</strong>: Some principal investments, such as real estate or private companies, are not as easily sold or liquidated, posing a risk if the investor needs quick access to capital.</li> <li><strong>Market risk</strong>: Economic shifts, industry trends, or regulatory changes can all negatively impact the value of the investment.</li> <li><strong>Management risk</strong>: When the principal investor takes an active management role, they may lack the necessary expertise to effectively and efficiently manage the enterprise, which could lead to losses.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Thus, while principal investing can offer high rewards and greater control over investments, it also carries strong risks. Therefore, it requires careful planning, thorough research, and often a long-term commitment.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-strategies-used-in-principal-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Strategies Used in Principal Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Principal investing involves strategies that optimize the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskreturntradeoff.asp">balance between risk and reward</a>. Diversification across various asset classes is a common approach, helping to shield the principal while potentially yielding returns. This can involve a mix of growth investments and income-producing assets. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetallocation.asp">Asset allocation</a> strategies may be used to adjust the proportion of different types of investments in response to changes in market conditions and investment goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Some investors may opt for principal-protected instruments like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/z/zero-couponbond.asp">zero-coupon bonds</a> or use strategies like <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bondswap.asp">bond swapping</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eventdriven.asp">event-driven investing</a>. Each strategy carries potential risks and rewards and should be chosen based on the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investor</a>’s financial goals and risk tolerance.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <span class="heading-toc" id="toc-real-life-examples-of-successful-principal-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Real-Life Examples of Successful Principal Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Real-life examples of successful principal investing have involved strategic asset allocation, insight into a changing market, and careful risk management. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Here are some well-known examples of principal investing: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li><strong>Berkshire Hathaway</strong>: Warren Buffett’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets/041714/how-warren-buffett-made-berkshire-hathaway-worldbeater.asp">Berkshire Hathaway</a> is among the most prominent principal investors, with long-term investments in companies like Coca-Cola and Apple among its successes.</li> <li><strong>Kohlberg Kravis Roberts (KKR)</strong>: This global investment firm has a long history of buyouts and principal investments, including deals in healthcare, industrial sectors, and technology. Among KKR’s best-known deals are those involving the Safeway grocery store chain and RJR Nabisco in the 1980s, Shoppers Drug Mart in 2000, and Toys R Us in 2004.<span class="ql-inline-citation" data-cite="3"></span></li> <li><strong>Sequoia Capital</strong>: Known for its venture capital investments, Sequoia Capital has financed and helped develop prominent tech companies, including Apple, Google, and LinkedIn. In 2023, it moved into defense technology with an investment in Mach Industries.<span class="ql-inline-citation" data-cite="4"></span></li> <li><strong>SoftBank’s Vision Fund</strong>: The Vision Fund had notable successes, such as its investment in DoorDash, which greatly increased its valuation during the COVID-19 pandemic. But it has also had devastating losses that led it to cut back significantly in new investments in 2022–2023.<span class="ql-inline-citation" data-cite="2"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-can-an-individual-be-a-principal-investor"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can an Individual Be a Principal Investor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A principal investor can be an individual, but most often, it’s firms that choose to invest their capital in businesses for a potentially significant financial return. A well-known example is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-theory/08/carl-icahn-lift.asp">Carl Icahn</a>, who has taken significant stakes in companies to influence their strategic direction, including TWA, Herbalife, and Netflix—the last being a counter to his long-held claim to invest in stock “no one wants.”</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-what-does-principal-mean-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does Principal Mean in Finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In finance, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/principal.asp#:~:text=Principal%20refers%20to%20the%20baseline,the%20major%20parties%20in%20contracts.">principal</a> generally refers to the original capital lent or invested before income or returns are considered. The principal amount also often serves as the basis for calculating returns or interest.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-what-is-the-difference-between-principal-investing-and-private-equity"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between Principal Investing and Private Equity?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Principal investing generally involves using a firm’s capital for direct investments. Private equity often uses <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pooledfunds.asp#:~:text=What%20Are%20Pooled%20Funds%3F,of%20professionally%20managed%20pooled%20funds.">pooled funds</a> from various investors to acquire company stakes.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-is-principal-investing-only-for-large-firms-and-wealthy-individuals"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Principal Investing Only for Large Firms and Wealthy Individuals?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Though principal investing is more commonly associated with institutional investors and individuals with a high net worth, the core idea of investing your own money directly into assets can technically be applied at any scale. Thus, even small-scale investors are involved in principal investing when buying company shares, real estate, or other assets. That said, it takes a significant amount of capital to invest in larger firms to influence their strategic direction.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Principal investing involves an individual or firm using its own funds to finance transactions or acquire assets rather than raising capital from investors. This strategy allows the firm to control transactions directly and with the potential of earning higher returns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> However, principal investing does come with increased risk, as the firm’s capital is directly at stake. It requires astute risk assessment and strategic decision making—otherwise, the risk to the firm multiplies. </p></div>

Principal investing is when financial institutions, private equity firms, or other such enterprises put their own [capital](https://www.investopedia.com/terms/c/capital.asp) or [balance sheet](https://www.investopedia.com/terms/b/balancesheet.asp) at risk in anticipation of future profit. This differs from when they act as intermediaries or brokers investing on behalf of their clients. ### Key Takeaways * In principal investing, firms use their capital for transactions or asset acquisitions and have direct control over their investments. * By directly investing, firms can potentially reap more significant returns than when acting as intermediaries. * Risk is higher in principal investing since the firm’s capital is at stake. If an investment underperforms, the loss is borne directly. * Successful principal investing requires careful risk assessment, due diligence, and good strategic decision making. ## What Is Principal Investing? Principal investing is when firms or individuals invest their capital directly into businesses, projects, or ventures rather than investing on behalf of their clients. The principal investor owns the securities or assets and stands to gain all potential profits from their stake while taking on all the risk and potential losses. This type of investing is common among [private equity](https://www.investopedia.com/terms/p/privateequity.asp) and [venture capital](https://www.investopedia.com/terms/v/venturecapital.asp) firms. They typically acquire significant stakes in businesses to influence the direction of those companies and increase their value. Principal investing can target various industries and asset classes, from real estate to technology startups. The investments can include buying stocks, bonds, commodities, and real estate properties or funding startups. Principal investors often target the [infrastructure](https://www.investopedia.com/terms/i/infrastructure.asp) sector because of its potential for stable, long-term returns. Projects may include utilities, transportation systems, or renewable energy initiatives. Another popular choice for principal investments is the [real estate](https://www.investopedia.com/terms/r/realestate.asp) industry. Commercial real estate, in particular, can offer attractive investment opportunities with the potential for significant [returns](https://www.investopedia.com/terms/r/return.asp) from rental income and property appreciation. Successful principal investing can also be seen in the [asset management](https://www.investopedia.com/terms/a/assetmanagement.asp) industry. Here, [diversification](https://www.investopedia.com/terms/d/diversification.asp) is key, with portfolios often containing a varied mixture of stocks, bonds, and other assets to balance risk and reward. The main goal of principal investing is to achieve a significant [return on investment](https://www.investopedia.com/terms/r/returnoninvestment.asp) through capital appreciation, an increase in the value of the investment, or income generation from dividends and interest. ## Benefits and Risks of Principal Investing Principal investing offers potential benefits but also is a significant [risk](https://www.investopedia.com/terms/r/risk.asp) for any firm. It’s an approach best suited for those willing to take on higher risk for the potential of higher returns, who have the resources to take on this risk, and who have the expertise to [actively manage](https://www.investopedia.com/terms/a/activemanagement.asp) the investments involved. ### Potential Benefits * **Potential for high returns**: The opportunity to earn strong returns is the main attraction of principal investing, especially when investing in firms with high growth potential. * **Control and influence**: Principal investors frequently set out to influence the management of any acquired businesses, which can be instrumental in steering the company’s direction. * **Diversification**: Principal investing allows for [portfolio diversification](https://www.investopedia.com/articles/investing/030116/portfolio-diversification-done-right.asp) since it may involve different types of assets or businesses across various sectors. * **Income generation**: Certain investments, like real estate or dividend-paying stocks, can provide a steady income stream and the possibility of [capital appreciation](https://www.investopedia.com/terms/c/capitalappreciation.asp). ### Potential Risks * **Capital loss**: The central risk in principal investing is the potential for [capital loss](https://www.investopedia.com/terms/c/capitalloss.asp). If an investment fails, the principal investor could lose part or all the capital that was committed. * **Liquidity risk**: Some principal investments, such as real estate or private companies, are not as easily sold or liquidated, posing a risk if the investor needs quick access to capital. * **Market risk**: Economic shifts, industry trends, or regulatory changes can all negatively impact the value of the investment. * **Management risk**: When the principal investor takes an active management role, they may lack the necessary expertise to effectively and efficiently manage the enterprise, which could lead to losses. Thus, while principal investing can offer high rewards and greater control over investments, it also carries strong risks. Therefore, it requires careful planning, thorough research, and often a long-term commitment. ## Strategies Used in Principal Investing Principal investing involves strategies that optimize the [balance between risk and reward](https://www.investopedia.com/terms/r/riskreturntradeoff.asp). Diversification across various asset classes is a common approach, helping to shield the principal while potentially yielding returns. This can involve a mix of growth investments and income-producing assets. [Asset allocation](https://www.investopedia.com/terms/a/assetallocation.asp) strategies may be used to adjust the proportion of different types of investments in response to changes in market conditions and investment goals. Some investors may opt for principal-protected instruments like [zero-coupon bonds](https://www.investopedia.com/terms/z/zero-couponbond.asp) or use strategies like [bond swapping](https://www.investopedia.com/terms/b/bondswap.asp) and [event-driven investing](https://www.investopedia.com/terms/e/eventdriven.asp). Each strategy carries potential risks and rewards and should be chosen based on the [investor](https://www.investopedia.com/terms/i/investor.asp)’s financial goals and risk tolerance. ## Real-Life Examples of Successful Principal Investing Real-life examples of successful principal investing have involved strategic asset allocation, insight into a changing market, and careful risk management. Here are some well-known examples of principal investing: * **Berkshire Hathaway**: Warren Buffett’s [Berkshire Hathaway](https://www.investopedia.com/articles/markets/041714/how-warren-buffett-made-berkshire-hathaway-worldbeater.asp) is among the most prominent principal investors, with long-term investments in companies like Coca-Cola and Apple among its successes. * **Kohlberg Kravis Roberts (KKR)**: This global investment firm has a long history of buyouts and principal investments, including deals in healthcare, industrial sectors, and technology. Among KKR’s best-known deals are those involving the Safeway grocery store chain and RJR Nabisco in the 1980s, Shoppers Drug Mart in 2000, and Toys R Us in 2004. * **Sequoia Capital**: Known for its venture capital investments, Sequoia Capital has financed and helped develop prominent tech companies, including Apple, Google, and LinkedIn. In 2023, it moved into defense technology with an investment in Mach Industries. * **SoftBank’s Vision Fund**: The Vision Fund had notable successes, such as its investment in DoorDash, which greatly increased its valuation during the COVID-19 pandemic. But it has also had devastating losses that led it to cut back significantly in new investments in 2022–2023. ## Can an Individual Be a Principal Investor? A principal investor can be an individual, but most often, it’s firms that choose to invest their capital in businesses for a potentially significant financial return. A well-known example is [Carl Icahn](https://www.investopedia.com/articles/financial-theory/08/carl-icahn-lift.asp), who has taken significant stakes in companies to influence their strategic direction, including TWA, Herbalife, and Netflix—the last being a counter to his long-held claim to invest in stock “no one wants.” ## What Does Principal Mean in Finance? In finance, [principal](https://www.investopedia.com/terms/p/principal.asp#:~:text=Principal%20refers%20to%20the%20baseline,the%20major%20parties%20in%20contracts.) generally refers to the original capital lent or invested before income or returns are considered. The principal amount also often serves as the basis for calculating returns or interest. ## What Is the Difference Between Principal Investing and Private Equity? Principal investing generally involves using a firm’s capital for direct investments. Private equity often uses [pooled funds](https://www.investopedia.com/terms/p/pooledfunds.asp#:~:text=What%20Are%20Pooled%20Funds%3F,of%20professionally%20managed%20pooled%20funds.) from various investors to acquire company stakes. ## Is Principal Investing Only for Large Firms and Wealthy Individuals? Though principal investing is more commonly associated with institutional investors and individuals with a high net worth, the core idea of investing your own money directly into assets can technically be applied at any scale. Thus, even small-scale investors are involved in principal investing when buying company shares, real estate, or other assets. That said, it takes a significant amount of capital to invest in larger firms to influence their strategic direction. ## The Bottom Line Principal investing involves an individual or firm using its own funds to finance transactions or acquire assets rather than raising capital from investors. This strategy allows the firm to control transactions directly and with the potential of earning higher returns. However, principal investing does come with increased risk, as the firm’s capital is directly at stake. It requires astute risk assessment and strategic decision making—otherwise, the risk to the firm multiplies.

Principal investing is when financial institutions, private equity firms, or other such enterprises put their own capital or balance sheet at risk in anticipation of future profit. This differs from when they act as intermediaries or brokers investing on behalf of their clients. Key Takeaways In principal investing, firms use their capital for transactions or asset acquisitions and have direct control over their investments.By directly investing, firms can potentially reap more significant returns than when acting as intermediaries.Risk is higher in principal investing since the firm’s capital is at stake. If an investment underperforms, the loss is borne directly.Successful principal investing requires careful risk assessment, due diligence, and good strategic decision making. What Is Principal Investing? Principal investing is when firms or individuals invest their capital directly into businesses, projects, or ventures rather than investing on behalf of their clients. The principal investor owns the securities or assets and stands to gain all potential profits from their stake while taking on all the risk and potential losses. This type of investing is common among private equity and venture capital firms. They typically acquire significant stakes in businesses to influence the direction of those companies and increase their value. Principal investing can target various industries and asset classes, from real estate to technology startups. The investments can include buying stocks, bonds, commodities, and real estate properties or funding startups. Principal investors often target the infrastructure sector because of its potential for stable, long-term returns. Projects may include utilities, transportation systems, or renewable energy initiatives. Another popular choice for principal investments is the real estate industry. Commercial real estate, in particular, can offer attractive investment opportunities with the potential for significant returns from rental income and property appreciation. Successful principal investing can also be seen in the asset management industry. Here, diversification is key, with portfolios often containing a varied mixture of stocks, bonds, and other assets to balance risk and reward. The main goal of principal investing is to achieve a significant return on investment through capital appreciation, an increase in the value of the investment, or income generation from dividends and interest. Benefits and Risks of Principal Investing Principal investing offers potential benefits but also is a significant risk for any firm. It’s an approach best suited for those willing to take on higher risk for the potential of higher returns, who have the resources to take on this risk, and who have the expertise to actively manage the investments involved. Potential Benefits Potential for high returns: The opportunity to earn strong returns is the main attraction of principal investing, especially when investing in firms with high growth potential. Control and influence: Principal investors frequently set out to influence the management of any acquired businesses, which can be instrumental in steering the company’s direction. Diversification: Principal investing allows for portfolio diversification since it may involve different types of assets or businesses across various sectors. Income generation: Certain investments, like real estate or dividend-paying stocks, can provide a steady income stream and the possibility of capital appreciation. Potential Risks Capital loss: The central risk in principal investing is the potential for capital loss. If an investment fails, the principal investor could lose part or all the capital that was committed. Liquidity risk: Some principal investments, such as real estate or private companies, are not as easily sold or liquidated, posing a risk if the investor needs quick access to capital. Market risk: Economic shifts, industry trends, or regulatory changes can all negatively impact the value of the investment. Management risk: When the principal investor takes an active management role, they may lack the necessary expertise to effectively and efficiently manage the enterprise, which could lead to losses. Thus, while principal investing can offer high rewards and greater control over investments, it also carries strong risks. Therefore, it requires careful planning, thorough research, and often a long-term commitment. Strategies Used in Principal Investing Principal investing involves strategies that optimize the balance between risk and reward. Diversification across various asset classes is a common approach, helping to shield the principal while potentially yielding returns. This can involve a mix of growth investments and income-producing assets. Asset allocation strategies may be used to adjust the proportion of different types of investments in response to changes in market conditions and investment goals. Some investors may opt for principal-protected instruments like zero-coupon bonds or use strategies like bond swapping and event-driven investing. Each strategy carries potential risks and rewards and should be chosen based on the investor’s financial goals and risk tolerance. Real-Life Examples of Successful Principal Investing Real-life examples of successful principal investing have involved strategic asset allocation, insight into a changing market, and careful risk management. Here are some well-known examples of principal investing: Berkshire Hathaway: Warren Buffett’s Berkshire Hathaway is among the most prominent principal investors, with long-term investments in companies like Coca-Cola and Apple among its successes. Kohlberg Kravis Roberts (KKR): This global investment firm has a long history of buyouts and principal investments, including deals in healthcare, industrial sectors, and technology. Among KKR’s best-known deals are those involving the Safeway grocery store chain and RJR Nabisco in the 1980s, Shoppers Drug Mart in 2000, and Toys R Us in 2004. Sequoia Capital: Known for its venture capital investments, Sequoia Capital has financed and helped develop prominent tech companies, including Apple, Google, and LinkedIn. In 2023, it moved into defense technology with an investment in Mach Industries. SoftBank’s Vision Fund: The Vision Fund had notable successes, such as its investment in DoorDash, which greatly increased its valuation during the COVID-19 pandemic. But it has also had devastating losses that led it to cut back significantly in new investments in 2022–2023. Can an Individual Be a Principal Investor? A principal investor can be an individual, but most often, it’s firms that choose to invest their capital in businesses for a potentially significant financial return. A well-known example is Carl Icahn, who has taken significant stakes in companies to influence their strategic direction, including TWA, Herbalife, and Netflix—the last being a counter to his long-held claim to invest in stock “no one wants.” What Does Principal Mean in Finance? In finance, principal generally refers to the original capital lent or invested before income or returns are considered. The principal amount also often serves as the basis for calculating returns or interest. What Is the Difference Between Principal Investing and Private Equity? Principal investing generally involves using a firm’s capital for direct investments. Private equity often uses pooled funds from various investors to acquire company stakes. Is Principal Investing Only for Large Firms and Wealthy Individuals? Though principal investing is more commonly associated with institutional investors and individuals with a high net worth, the core idea of investing your own money directly into assets can technically be applied at any scale. Thus, even small-scale investors are involved in principal investing when buying company shares, real estate, or other assets. That said, it takes a significant amount of capital to invest in larger firms to influence their strategic direction. The Bottom Line Principal investing involves an individual or firm using its own funds to finance transactions or acquire assets rather than raising capital from investors. This strategy allows the firm to control transactions directly and with the potential of earning higher returns. However, principal investing does come with increased risk, as the firm’s capital is directly at stake. It requires astute risk assessment and strategic decision making—otherwise, the risk to the firm multiplies.

https://www.investopedia.com/terms/c/cfr.asp

What Is Cost and Freight (CFR) in Foreign Trade Contracts?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-cost-and-freight-cfr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Cost and Freight (CFR)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Cost and freight (CFR) is a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seller.asp">seller</a> is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Cost and freight used to be abbreviated as C&amp;F. Then, in 1990, it was changed to CFR by <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incoterms.asp">Incoterms</a>, a set of commercial trade rules established by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/international-chamber-of-commerce-icc.asp">International Chamber of Commerce (ICC)</a>, after users complained of difficulties adding the ampersand symbol in telex messages and other technology used in the 1970s and 1980s.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Cost and freight is a legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination.</li><li>If a buyer and a seller agree to include cost and freight in their transaction, this provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation.</li><li>Cost and freight is a commonly used International Commercial Term (Incoterm), a set of globally recognized terms that help to create a standard for foreign trade contracts and are published and regularly updated by the International Chamber of Commerce (ICC).</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_10-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Cost and Freight (CFR): A legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/Kr9iwBV18lyBWhoPOB2NzGLio7g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/Kr9iwBV18lyBWhoPOB2NzGLio7g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png" data-srcset="https://www.investopedia.com/thmb/VDYAhvtIhLx5j-lDK1fU-qXFgtQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Cost and Freight (CFR): A legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination." class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/Kr9iwBV18lyBWhoPOB2NzGLio7g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png" srcset="https://www.investopedia.com/thmb/VDYAhvtIhLx5j-lDK1fU-qXFgtQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Hilary Allison</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-cost-and-freight-cfr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Understanding Cost and Freight (CFR) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery; payment; the conditions under which the risk of loss shifts from the seller to the buyer; and specifying the party responsible for the costs of freight and insurance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> If a buyer and a seller agree to include cost and freight in their transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller must deliver the goods, clear them for export, and load them onto the transport ship. The risk of loss or damage transfers to the buyer once the seller loads the items onto the vessel, but before the main transportation occurs. This provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Cost and freight is an International Commercial Term, also called an Incoterm. To facilitate foreign trade, the ICC publishes and regularly updates this set of globally recognized terms that help to create a standard for the terms of foreign trade contracts.<span class="ql-inline-citation" data-cite="1"></span> Incoterms are intended to prevent confusion by clarifying the obligations of buyers and sellers, such as transport and export clearance obligations and the physical point where risk transfers from the seller to the buyer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>When an Incoterm such as cost and freight appears in a contract of sale, it creates a legal obligation, meaning that it must be respected.<span class="ql-inline-citation" data-cite="8"></span></p></div></div></div> <span class="heading-toc" id="toc-similar-incoterms-to-cost-and-freight-cfr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Similar Incoterms to Cost and Freight (CFR) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> For goods transported internationally by sea or inland waterways, there are three other Incoterms that are closely related to CFR and are frequently used in trade contracts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fas.asp">Free alongside ship (FAS)</a> means that the seller only has to deliver the cargo to the port next to the vessel, and responsibility for the goods shifts to the buyer at that point.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fob.asp">Free on board (FOB)</a> requires the seller to also load the goods onto the ship.</li> <li>Like CFR, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cif.asp">cost insurance and freight (CIF)</a> requires that the seller arranges for the carriage of goods by sea to a port of destination, but the seller has the additional obligation of insuring the goods until they reach the destination port. In CFR, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/072815/what-difference-between-cost-and-freight-cfr-and-cost-insurance-and-freight-cif.asp">the seller is not responsible for insuring the goods until they reach the destination port</a>.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="5"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_25-0"><span class="heading-toc" id="toc-what-does-cost-and-freight-cfr-entail"></span> <h2 class="mntl-sc-block-questionandanswer__question">What does cost and freight (CFR) entail?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Cost and freight (CFR) is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller is also responsible for delivering the goods, clearing them for export, and loading them onto the transport ship. However, once the shipment is loaded into the vessel, the risk of loss or damage falls to the buyer. This means that the seller is not responsible for insuring the cargo during transportation.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_27-0"><span class="heading-toc" id="toc-what-is-an-incoterm"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is an Incoterm?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>“Incoterm” is short for International Commercial Term, a set of terms and definitions published by the International Chamber of Commerce (ICC). These terms are standardized to prevent confusion and clarify the obligations of buyers and sellers, such as transport and export clearance obligations.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-whats-the-difference-between-cif-and-cfr"></span> <h2 class="mntl-sc-block-questionandanswer__question">What’s the difference between CIF and CFR?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Cost and freight (CFR) and cost insurance and freight (CIF) are similar. They both relate to transporting goods by sea and divide the responsibilities of transit between the buyer and the seller. Where they differ is that CIF requires marine insurance to be included, at the expense of the seller. With CFR, the seller is not responsible for insuring the goods until they reach the destination port.<span class="ql-inline-citation" data-cite="6"></span><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Cost and freight (CFR), an Incoterms rule that’s applicable only to<strong> </strong>cargo transported by sea or inland waterways, puts a fair bit of responsibility on the shoulders of both the buyer and the seller. Under these agreements, which are fairly common in international trade, the seller is responsible for all the planning and costs associated with exporting goods by sea to the destination port specified by the recipient. However, as soon as the goods are loaded on the vessel, the buyer is responsible for providing marine insurance on them—and for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transloading.asp">transporting the goods</a> via truck to their final destination, import fees, and so on.<span class="ql-inline-citation" data-cite="9"></span><br/> </p></div>

## What Is Cost and Freight (CFR)? Cost and freight (CFR) is a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the [seller](https://www.investopedia.com/terms/s/seller.asp) is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways. Cost and freight used to be abbreviated as C&F. Then, in 1990, it was changed to CFR by [Incoterms](https://www.investopedia.com/terms/i/incoterms.asp), a set of commercial trade rules established by the [International Chamber of Commerce (ICC)](https://www.investopedia.com/terms/i/international-chamber-of-commerce-icc.asp), after users complained of difficulties adding the ampersand symbol in telex messages and other technology used in the 1970s and 1980s. ### Key Takeaways * Cost and freight is a legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination. * If a buyer and a seller agree to include cost and freight in their transaction, this provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation. * Cost and freight is a commonly used International Commercial Term (Incoterm), a set of globally recognized terms that help to create a standard for foreign trade contracts and are published and regularly updated by the International Chamber of Commerce (ICC). ![Cost and Freight (CFR): A legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination.]() :max_bytes(150000):strip_icc()/cfr.asp-FINAL-87dd6360137445829adfe359702b434b.png) Investopedia / Hilary Allison ## Understanding Cost and Freight (CFR) Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery; payment; the conditions under which the risk of loss shifts from the seller to the buyer; and specifying the party responsible for the costs of freight and insurance. If a buyer and a seller agree to include cost and freight in their transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller must deliver the goods, clear them for export, and load them onto the transport ship. The risk of loss or damage transfers to the buyer once the seller loads the items onto the vessel, but before the main transportation occurs. This provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation. Cost and freight is an International Commercial Term, also called an Incoterm. To facilitate foreign trade, the ICC publishes and regularly updates this set of globally recognized terms that help to create a standard for the terms of foreign trade contracts. Incoterms are intended to prevent confusion by clarifying the obligations of buyers and sellers, such as transport and export clearance obligations and the physical point where risk transfers from the seller to the buyer. ### When an Incoterm such as cost and freight appears in a contract of sale, it creates a legal obligation, meaning that it must be respected. ## Similar Incoterms to Cost and Freight (CFR) For goods transported internationally by sea or inland waterways, there are three other Incoterms that are closely related to CFR and are frequently used in trade contracts. * [Free alongside ship (FAS)](https://www.investopedia.com/terms/f/fas.asp) means that the seller only has to deliver the cargo to the port next to the vessel, and responsibility for the goods shifts to the buyer at that point. * [Free on board (FOB)](https://www.investopedia.com/terms/f/fob.asp) requires the seller to also load the goods onto the ship. * Like CFR, [cost insurance and freight (CIF)](https://www.investopedia.com/terms/c/cif.asp) requires that the seller arranges for the carriage of goods by sea to a port of destination, but the seller has the additional obligation of insuring the goods until they reach the destination port. In CFR, [the seller is not responsible for insuring the goods until they reach the destination port](https://www.investopedia.com/ask/answers/072815/what-difference-between-cost-and-freight-cfr-and-cost-insurance-and-freight-cif.asp). ## What does cost and freight (CFR) entail? Cost and freight (CFR) is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller is also responsible for delivering the goods, clearing them for export, and loading them onto the transport ship. However, once the shipment is loaded into the vessel, the risk of loss or damage falls to the buyer. This means that the seller is not responsible for insuring the cargo during transportation. ## What is an Incoterm? “Incoterm” is short for International Commercial Term, a set of terms and definitions published by the International Chamber of Commerce (ICC). These terms are standardized to prevent confusion and clarify the obligations of buyers and sellers, such as transport and export clearance obligations. ## What’s the difference between CIF and CFR? Cost and freight (CFR) and cost insurance and freight (CIF) are similar. They both relate to transporting goods by sea and divide the responsibilities of transit between the buyer and the seller. Where they differ is that CIF requires marine insurance to be included, at the expense of the seller. With CFR, the seller is not responsible for insuring the goods until they reach the destination port. ## The Bottom Line Cost and freight (CFR), an Incoterms rule that’s applicable only tocargo transported by sea or inland waterways, puts a fair bit of responsibility on the shoulders of both the buyer and the seller. Under these agreements, which are fairly common in international trade, the seller is responsible for all the planning and costs associated with exporting goods by sea to the destination port specified by the recipient. However, as soon as the goods are loaded on the vessel, the buyer is responsible for providing marine insurance on them—and for [transporting the goods](https://www.investopedia.com/terms/t/transloading.asp) via truck to their final destination, import fees, and so on.

What Is Cost and Freight (CFR)? Cost and freight (CFR) is a legal term used in foreign trade contracts. In a contract specifying that a sale is cost and freight, the seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways. Cost and freight used to be abbreviated as C&F. Then, in 1990, it was changed to CFR by Incoterms, a set of commercial trade rules established by the International Chamber of Commerce (ICC), after users complained of difficulties adding the ampersand symbol in telex messages and other technology used in the 1970s and 1980s. Key Takeaways Cost and freight is a legal term specifying that sellers are required to transport goods by sea to a port of destination and provide the buyer with the documents necessary to pick up the goods at the destination.If a buyer and a seller agree to include cost and freight in their transaction, this provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation.Cost and freight is a commonly used International Commercial Term (Incoterm), a set of globally recognized terms that help to create a standard for foreign trade contracts and are published and regularly updated by the International Chamber of Commerce (ICC). Investopedia / Hilary Allison Understanding Cost and Freight (CFR) Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery; payment; the conditions under which the risk of loss shifts from the seller to the buyer; and specifying the party responsible for the costs of freight and insurance. If a buyer and a seller agree to include cost and freight in their transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller must deliver the goods, clear them for export, and load them onto the transport ship. The risk of loss or damage transfers to the buyer once the seller loads the items onto the vessel, but before the main transportation occurs. This provision means that the seller is not responsible for securing insurance for the cargo for loss or damage during transportation. Cost and freight is an International Commercial Term, also called an Incoterm. To facilitate foreign trade, the ICC publishes and regularly updates this set of globally recognized terms that help to create a standard for the terms of foreign trade contracts. Incoterms are intended to prevent confusion by clarifying the obligations of buyers and sellers, such as transport and export clearance obligations and the physical point where risk transfers from the seller to the buyer. When an Incoterm such as cost and freight appears in a contract of sale, it creates a legal obligation, meaning that it must be respected. Similar Incoterms to Cost and Freight (CFR) For goods transported internationally by sea or inland waterways, there are three other Incoterms that are closely related to CFR and are frequently used in trade contracts. Free alongside ship (FAS) means that the seller only has to deliver the cargo to the port next to the vessel, and responsibility for the goods shifts to the buyer at that point. Free on board (FOB) requires the seller to also load the goods onto the ship. Like CFR, cost insurance and freight (CIF) requires that the seller arranges for the carriage of goods by sea to a port of destination, but the seller has the additional obligation of insuring the goods until they reach the destination port. In CFR, the seller is not responsible for insuring the goods until they reach the destination port. What does cost and freight (CFR) entail? Cost and freight (CFR) is an expense associated with cargo transported by sea or inland waterways. If CFR is included in a transaction, the seller must arrange and pay for transporting the cargo to a specified port. The seller is also responsible for delivering the goods, clearing them for export, and loading them onto the transport ship. However, once the shipment is loaded into the vessel, the risk of loss or damage falls to the buyer. This means that the seller is not responsible for insuring the cargo during transportation. What is an Incoterm? “Incoterm” is short for International Commercial Term, a set of terms and definitions published by the International Chamber of Commerce (ICC). These terms are standardized to prevent confusion and clarify the obligations of buyers and sellers, such as transport and export clearance obligations. What’s the difference between CIF and CFR? Cost and freight (CFR) and cost insurance and freight (CIF) are similar. They both relate to transporting goods by sea and divide the responsibilities of transit between the buyer and the seller. Where they differ is that CIF requires marine insurance to be included, at the expense of the seller. With CFR, the seller is not responsible for insuring the goods until they reach the destination port. The Bottom Line Cost and freight (CFR), an Incoterms rule that’s applicable only to cargo transported by sea or inland waterways, puts a fair bit of responsibility on the shoulders of both the buyer and the seller. Under these agreements, which are fairly common in international trade, the seller is responsible for all the planning and costs associated with exporting goods by sea to the destination port specified by the recipient. However, as soon as the goods are loaded on the vessel, the buyer is responsible for providing marine insurance on them—and for transporting the goods via truck to their final destination, import fees, and so on.

https://www.investopedia.com/first-he-hates-it-then-he-s-ok-with-it-now-he-hates-it-again-where-does-jamie-dimon-stand-on-crypto-8411584

Where Does Jamie Dimon Stand on Crypto?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>JPMorgan Chase CEO Jamie Dimon said he would close down crypto if he was the government during a Senate hearing on Wednesday.</li><li>While Dimon has made negative comments about Bitcoin since at least 2014, JPMorgan Chase uses blockchain technology in their JPM Coin offering.</li><li>Despite concerns regarding crypto regulation, the bitcoin price has been booming as anticipation for a spot bitcoin exchange-traded fund (ETF) approval builds.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> This week JPMorgan Chase (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM">JPM</a>) CEO Jamie Dimon expressed his opposition for cryptocurrencies and bitcoin at a Senate hearing, albeit not for the first time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Dimon's been making public comments about crypto since at least 2014. While he has made seemingly contrasting statements over the years, his general thesis has been unwavering. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Here's what he has said over the years and some context around JPMorgan's blockchain foray to help understand where Dimon actually stands on crypto.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <span class="heading-toc" id="toc-2014-terrible-store-of-value"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> 2014: Terrible Store Of Value </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Dimon has been sharing his thoughts on bitcoin (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BTCUSD">BTCUSD</a>) and other related technologies since at least 2014. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> "It’s a terrible store of value, it can be replicated over and over. It doesn’t have the standing of a government," he told<em> CNBC</em> in an interview.<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-2017-fraud-worse-than-tulip-bulbs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> 2017: "Fraud", "Worse Than Tulip Bulbs" </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> In September 2017, Dimon called bitcoin a fraud, going as far as labeling it worse than tulip bulbs—a reference to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dutch_tulip_bulb_market_bubble.asp">Tulipmania</a> or the Tulip Bulb market bubble. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> "I’d fire them in a second," <em>Bloomberg</em> reported Dimon saying of any JPMorgan trader trading bitcoin "For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-2017-god-bless-the-blockchain"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> 2017: "God Bless The Blockchain" </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Just a month later in October, JPMorgan launched its blockchain initiative to help make interbank payments.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Three days prior to that launch, Dimon talked up the potential for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blockchain.asp">blockchain</a> technology—the underlying technology for cryptocurrencies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> "I could care less about bitcoin. I don’t know why I said anything about it. The blockchain is a technology which is a good technology. We actually use it. It will be useful in a lot of different things. God bless the blockchain. Cryptocurrencies, digital currencies, I think are also fine. JPMorgan moves $6 trillion around the world every day, and we don’t do it in cash, it’s done digitally. If it can be done digitally with the blockchain, so be it,"<em> CNBC</em> reported Dimon saying.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Dimon did issue a warning to investors putting money into bitcoin, however, calling them "stupid." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-2018-regret"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> 2018: "Regret" </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> At the beginning of 2018, just a few months after JPMorgan's blockchain was launched, Dimon expressed regret over his bitcoin fraud remark from the year before in an interview with <em>Fox Business.</em><span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-2019-jpm-coin-appears"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> 2019: JPM Coin Appears </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> JPMorgan as an institution was taking big strides in incorporating blockchain technology into the realm of traditional finance. It experimented with its own dollar-backed digital coin akin to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tech/stablecoin-answer-all-cryptocurrency-problems/">stablecoin</a> called <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/jpmorgan-to-launch-jpm-coin-4587182">JPM Coin</a> for payments between clients, CNBC reported in February 2019.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> The bank also made <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/jpmorgan-hires-crypto-head-6753463">key hires</a> and worked has grown JPM Coin, which is now said to account for a billion dollars worth of daily transactions.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-2023-close-it-down"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> 2023: "Close It Down" </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> "I've always been deeply opposed to crypto, bitcoin, etc," said Dimon in response to a question from Massachusetts Senator Elizabeth Warren at a Senate hearing on Wednesday. "You pointed out the only true use case for it is criminals, drug traffickers, money launderers, [and] tax avoidance . . . If I was the government, I'd close it down," he added.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> During the hearing, both Dimon and Warren made the point that a problem with crypto is that it lives outside the traditional financial system, which has several safeguards in place to prevent the proliferation of illicit finance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> While lack of regulation remains a contentious issue, many traditional finance firms are beginning to put their weight behind bitcoin. Blackrock (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLK">BLK</a>) and Fidelity have filed their applications for a spot bitcoin exchange-traded fund, that is currently awaiting regulatory approvals. The optimism around the ETF has fueled a resurgence in bitcoin prices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Blackrock has come around after <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/buy-cryptos-only-if-ready-complete-loss-blackrock/">harboring views similar to Dimon</a> on bitcoin investing in 2019. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * JPMorgan Chase CEO Jamie Dimon said he would close down crypto if he was the government during a Senate hearing on Wednesday. * While Dimon has made negative comments about Bitcoin since at least 2014, JPMorgan Chase uses blockchain technology in their JPM Coin offering. * Despite concerns regarding crypto regulation, the bitcoin price has been booming as anticipation for a spot bitcoin exchange-traded fund (ETF) approval builds. This week JPMorgan Chase ([JPM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM)) CEO Jamie Dimon expressed his opposition for cryptocurrencies and bitcoin at a Senate hearing, albeit not for the first time. Dimon's been making public comments about crypto since at least 2014. While he has made seemingly contrasting statements over the years, his general thesis has been unwavering. Here's what he has said over the years and some context around JPMorgan's blockchain foray to help understand where Dimon actually stands on crypto. ## 2014: Terrible Store Of Value Dimon has been sharing his thoughts on bitcoin ([BTCUSD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BTCUSD)) and other related technologies since at least 2014. "It’s a terrible store of value, it can be replicated over and over. It doesn’t have the standing of a government," he told *CNBC* in an interview. ## 2017: "Fraud", "Worse Than Tulip Bulbs" In September 2017, Dimon called bitcoin a fraud, going as far as labeling it worse than tulip bulbs—a reference to [Tulipmania](https://www.investopedia.com/terms/d/dutch_tulip_bulb_market_bubble.asp) or the Tulip Bulb market bubble. "I’d fire them in a second," *Bloomberg* reported Dimon saying of any JPMorgan trader trading bitcoin "For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.” ## 2017: "God Bless The Blockchain" Just a month later in October, JPMorgan launched its blockchain initiative to help make interbank payments. Three days prior to that launch, Dimon talked up the potential for [blockchain](https://www.investopedia.com/terms/b/blockchain.asp) technology—the underlying technology for cryptocurrencies. "I could care less about bitcoin. I don’t know why I said anything about it. The blockchain is a technology which is a good technology. We actually use it. It will be useful in a lot of different things. God bless the blockchain. Cryptocurrencies, digital currencies, I think are also fine. JPMorgan moves $6 trillion around the world every day, and we don’t do it in cash, it’s done digitally. If it can be done digitally with the blockchain, so be it," *CNBC* reported Dimon saying. Dimon did issue a warning to investors putting money into bitcoin, however, calling them "stupid." ## 2018: "Regret" At the beginning of 2018, just a few months after JPMorgan's blockchain was launched, Dimon expressed regret over his bitcoin fraud remark from the year before in an interview with *Fox Business.* ## 2019: JPM Coin Appears JPMorgan as an institution was taking big strides in incorporating blockchain technology into the realm of traditional finance. It experimented with its own dollar-backed digital coin akin to a [stablecoin](https://www.investopedia.com/tech/stablecoin-answer-all-cryptocurrency-problems/) called [JPM Coin](https://www.investopedia.com/jpmorgan-to-launch-jpm-coin-4587182) for payments between clients, CNBC reported in February 2019. The bank also made [key hires](https://www.investopedia.com/jpmorgan-hires-crypto-head-6753463) and worked has grown JPM Coin, which is now said to account for a billion dollars worth of daily transactions. ## 2023: "Close It Down" "I've always been deeply opposed to crypto, bitcoin, etc," said Dimon in response to a question from Massachusetts Senator Elizabeth Warren at a Senate hearing on Wednesday. "You pointed out the only true use case for it is criminals, drug traffickers, money launderers, [and] tax avoidance . . . If I was the government, I'd close it down," he added. During the hearing, both Dimon and Warren made the point that a problem with crypto is that it lives outside the traditional financial system, which has several safeguards in place to prevent the proliferation of illicit finance. While lack of regulation remains a contentious issue, many traditional finance firms are beginning to put their weight behind bitcoin. Blackrock ([BLK](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLK)) and Fidelity have filed their applications for a spot bitcoin exchange-traded fund, that is currently awaiting regulatory approvals. The optimism around the ETF has fueled a resurgence in bitcoin prices. Blackrock has come around after [harboring views similar to Dimon](https://www.investopedia.com/news/buy-cryptos-only-if-ready-complete-loss-blackrock/) on bitcoin investing in 2019. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways JPMorgan Chase CEO Jamie Dimon said he would close down crypto if he was the government during a Senate hearing on Wednesday.While Dimon has made negative comments about Bitcoin since at least 2014, JPMorgan Chase uses blockchain technology in their JPM Coin offering.Despite concerns regarding crypto regulation, the bitcoin price has been booming as anticipation for a spot bitcoin exchange-traded fund (ETF) approval builds. This week JPMorgan Chase (JPM) CEO Jamie Dimon expressed his opposition for cryptocurrencies and bitcoin at a Senate hearing, albeit not for the first time. Dimon's been making public comments about crypto since at least 2014. While he has made seemingly contrasting statements over the years, his general thesis has been unwavering. Here's what he has said over the years and some context around JPMorgan's blockchain foray to help understand where Dimon actually stands on crypto. 2014: Terrible Store Of Value Dimon has been sharing his thoughts on bitcoin (BTCUSD) and other related technologies since at least 2014. "It’s a terrible store of value, it can be replicated over and over. It doesn’t have the standing of a government," he told CNBC in an interview. 2017: "Fraud", "Worse Than Tulip Bulbs" In September 2017, Dimon called bitcoin a fraud, going as far as labeling it worse than tulip bulbs—a reference to Tulipmania or the Tulip Bulb market bubble. "I’d fire them in a second," Bloomberg reported Dimon saying of any JPMorgan trader trading bitcoin "For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.” 2017: "God Bless The Blockchain" Just a month later in October, JPMorgan launched its blockchain initiative to help make interbank payments. Three days prior to that launch, Dimon talked up the potential for blockchain technology—the underlying technology for cryptocurrencies. "I could care less about bitcoin. I don’t know why I said anything about it. The blockchain is a technology which is a good technology. We actually use it. It will be useful in a lot of different things. God bless the blockchain. Cryptocurrencies, digital currencies, I think are also fine. JPMorgan moves $6 trillion around the world every day, and we don’t do it in cash, it’s done digitally. If it can be done digitally with the blockchain, so be it," CNBC reported Dimon saying. Dimon did issue a warning to investors putting money into bitcoin, however, calling them "stupid." 2018: "Regret" At the beginning of 2018, just a few months after JPMorgan's blockchain was launched, Dimon expressed regret over his bitcoin fraud remark from the year before in an interview with Fox Business. 2019: JPM Coin Appears JPMorgan as an institution was taking big strides in incorporating blockchain technology into the realm of traditional finance. It experimented with its own dollar-backed digital coin akin to a stablecoin called JPM Coin for payments between clients, CNBC reported in February 2019. The bank also made key hires and worked has grown JPM Coin, which is now said to account for a billion dollars worth of daily transactions. 2023: "Close It Down" "I've always been deeply opposed to crypto, bitcoin, etc," said Dimon in response to a question from Massachusetts Senator Elizabeth Warren at a Senate hearing on Wednesday. "You pointed out the only true use case for it is criminals, drug traffickers, money launderers, [and] tax avoidance . . . If I was the government, I'd close it down," he added. During the hearing, both Dimon and Warren made the point that a problem with crypto is that it lives outside the traditional financial system, which has several safeguards in place to prevent the proliferation of illicit finance. While lack of regulation remains a contentious issue, many traditional finance firms are beginning to put their weight behind bitcoin. Blackrock (BLK) and Fidelity have filed their applications for a spot bitcoin exchange-traded fund, that is currently awaiting regulatory approvals. The optimism around the ETF has fueled a resurgence in bitcoin prices. Blackrock has come around after harboring views similar to Dimon on bitcoin investing in 2019. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/single-stock-etf-5667162

Single-Stock ETF Definition

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-single-stock-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are Single-Stock ETFs? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Single-stock exchange-traded funds (ETFs) are a new <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchange-traded-products-etp.asp">exchange-traded product</a> allowing for leveraged or inverse trading of a single stock. They are intended to give ordinary investors a wider range of tools for navigating <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatile</a> markets by making it easy to go short on single stocks without having to <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100913/basics-short-selling.asp">sell them short</a>.<span class="ql-inline-citation" data-cite="8"></span> However, because of the way in which they are constructed and their use of leverage, regulators are warning that single-stock ETFs carry greater risk than ordinary ETFs and may be unsuitable for long-term investors.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Single-stock ETFs featuring leverage first appeared on European markets in 2018. Financial firm AXS Investments <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/first-leveraged-single-stock-etfs-launch-5649193">launched eight such products</a> for the first time in the United States in 2022, allowing investors there to trade them.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>Single-stock exchange-traded funds (ETFs) allow ordinary investors to take leveraged or short positions in single stocks using an exchange-traded product.</li> <li>Leveraged single-stock ETFs provide new opportunities for investors in a volatile market, but at greater risk. These complex products are not for new investors and should be treated as high risk.</li> <li>People with a strong base of investing knowledge and a high <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a> should not treat these as buy-and-hold opportunities.</li> <li>Single-stock ETFs are meant to be used for short-term bets and trading.</li> <li>The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have both warned about their use among ordinary investors.<br/></li> </ul></div></div></div> <span class="heading-toc" id="toc-how-single-stock-etfs-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How Single-Stock ETFs Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">Exchange-traded funds (ETFs)</a> are single securities that can hold a portfolio of stocks. Indeed, the first ETFs were created to track broad-based indexes such as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/090414/sp-500-index-you-need-know.asp">S&amp;P 500</a> or the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/russell2000.asp">Russell 2000</a>. ETFs can also hold <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> such as futures and options contracts in addition to, or instead of, shares of stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> This allowed for the advent of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leveraged-etf.asp">leveraged ETFs</a>, which provide a multiple of the return of the underlying index or benchmark. For example, a leveraged ETF could provide two or three times the daily returns of the S&amp;P 500 index. It also allowed for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inverse-etf.asp">inverse ETFs</a> (and inverse-leveraged ETFs), which provide negative returns (for example, -1 time or -2 times the return of the index). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Single-stock ETFs do not hold a portfolio of stocks; rather, they track just a single stock but employ derivatives contracts to provide leveraged and/or inverse returns. Leverage is a double-edged sword, meaning that it can lead to significant gains but also lead to significant losses. Investors should be aware of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risks</a> of leveraged ETFs because the risk of losses is far higher than with traditional investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> For example, a 1.5× leveraged bull single-stock ETF would likely own short-dated <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/calloption.asp">call options</a> that provide a net <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/delta.asp">delta</a> of +150. A 2× bear single-stock ETF would instead hold <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/putoption.asp">put options</a> in an amount resulting in a delta of -200. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-risks-of-single-stock-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Risks of Single-Stock ETFs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Because of how leveraged and inverse ETFs (including single-stock ETFs) are constructed, they tend to have a negative roll to maintain the proper derivatives position geared at returning a multiple of daily performance. This means that they naturally exhibit time decay and will <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp">tend to lose value</a> over medium and long holding periods, regardless of the performance of the underlying assets. As a result, these products are intended only for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/05/011705.asp">day trading</a> or very short-term holding periods.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Single-stock ETFs also may be prone to quickly lose value in volatile markets. An interview posted July 15, 2022, on Yahoo! Finance illustrates this point. Yahoo! Finance anchor Jared Blikre said, “If we take a hypothetical stock and it’s three times leveraged ETF, and we just kind of chop around with some volatile action. Let’s say they both begin at $100. And then let’s say we have a 20% up day followed by two 10% down days, a 20% up, a negative 20%, a negative 10%, another [negative] 20%. At the end of the day, guess what, the stock is worth $100.78, basically flat. Guess what, the ETF lost 40% of its value.”<span class="ql-inline-citation" data-cite="3"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority (FINRA)</a>, as well as the U.S. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">Securities and Exchange Commission (SEC)</a>, which oversees securities markets and dealers, have both warned that current regulations may not be adequate to oversee single-stock ETFs, and that these may be inappropriate for most individual investors, presenting unusually high risk.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-single-stock-etfs-in-the-us"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Single-Stock ETFs in the U.S. </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Single-stock ETFs first appeared on European markets in 2018, and entered the U.S. market in the summer of 2022. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <br/>In July 2022, AXS Investments, a New York-based asset manager, listed eight such products giving leveraged investments on Telsa, Nvidia, PayPal, Nike, and Pfizer:<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="5"></span> However, these investments struggled to gain interest, and six of them were removed from the market within a year of their launch.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> In mid-2023, Direxion launched 12 single-stock ETFs, offering leveraged bets on tech companies like Google, Amazon, Tesla, and Nvidia. Rex Shares followed suit with single-stock ETFs for Tesla and Nvidia.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-example-of-a-single-stock-etf"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Example of a Single-Stock ETF </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> TSLQ is the ticker symbol for the AXS TSLA Bear Daily ETF. It seeks to return -1× the daily performance of Tesla (TSLA) shares. In other words, if TSLA drops 5% over the course of a trading day, the TSLQ Bear ETF should gain 5% on the same day. However, due to management expenses and other costs, the fund will return slightly lower profits over time.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Let’s see how the two securities performed on Nov. 27, 2023. As shown in the chart below, comparing the two, TSLQ provides a close mirror image to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intraday.asp">intraday</a> returns of TSLA. Note, however, that the daily returns were not identically inverse: TSLA gained 1.08% at the close of that day, while the single-stock ETF TSLQ lost 1.03%. While this difference may be small for a single day, the tracking error between the two could compound over time, especially if the price swings up and down repeatedly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_36-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:62.5%;"> <img alt="TSLA and TSLQ daily performance compared." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/IM350JbScY5c3_SE8oKhUZXG27g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/IM350JbScY5c3_SE8oKhUZXG27g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png" data-srcset="https://www.investopedia.com/thmb/9Q5pcUZLgoU_4USPcw6xC38m91s=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png 750w" data-tracking-container="true" height="1338" id="mntl-sc-block-image_1-0" width="2140"/> <noscript> <img alt="TSLA and TSLQ daily performance compared." class="img--noscript universal-image__image" height="1338" sizes="750px" src="https://www.investopedia.com/thmb/IM350JbScY5c3_SE8oKhUZXG27g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png" srcset="https://www.investopedia.com/thmb/9Q5pcUZLgoU_4USPcw6xC38m91s=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png 750w" width="2140"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-text">TSLA and TSLQ trading performance on 11/27/23. Via TradingView.</span> </figcaption></figure> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-how-are-single-stock-exchange-traded-funds-etfs-allowed-to-trade"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Are Single-Stock Exchange-Traded Funds (ETFs) Allowed to Trade?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Single-stock exchange-traded funds (ETFs) have been labeled as extremely risky by regulators and market commentators. Nonetheless, in 2022, the United States listed them for the first time. However, single-stock ETFs appear to fall under Rule 6c-11 under the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentcompanyact.asp">Investment Company Act of 1940</a>. In combination with recent changes to the listing standards at stock exchanges, that rule created a framework that allows ETFs meeting certain criteria to come directly to market without first obtaining explicit permission, through what is called an exemptive order from the U.S. Securities and Exchange Commission (SEC).<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-are-single-stock-etfs-and-single-stock-futures-the-same-thing"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Single-Stock ETFs and Single-Stock Futures the Same Thing?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No. Single-stock ETFs are exchange-traded securities that use derivatives contracts (options) on individual stocks to provide leveraged returns. The ETF itself is a security. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/singlestockfuture.asp">Single-stock futures (SSFs)</a> are not securities but instead are <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurescontract.asp">futures contracts</a>, with an individual stock as the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underlying-security.asp">underlying security</a>. Each contract typically controls 100 shares of stock. While the reception for single-stock futures was positive when they launched in the U.S., <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/optioninvestor/06/singlestockfutures.asp">activity has faded</a> over time.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-are-single-stock-etfs-good-investments"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Single-Stock ETFs Good Investments?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Single-stock ETFs are intended for very short holding periods, such as intraday, and are not meant to be held as longer-term investments. The SEC states that, “[b]ecause of the features of these products and their associated risks, it would likely be challenging for an investment professional to recommend such a product to a retail investor while also honoring his or her <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/042915/what-are-some-examples-fiduciary-duty.asp">fiduciary obligations</a> or obligations under <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-the-sec-s-regulation-bi-best-interest-rule-4689542">Regulation Best Interest</a>. However, retail investors can and do access leveraged and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/3-inverse-sector-etfs-market-bears-4570836">inverse exchange-traded products</a> through self-directed trading.”<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> A single-stock ETF is an investment fund that uses derivatives to bet on or against a single stock. These instruments can deliver high returns, but they are also considered extremely risky for retail investors.<br/> </p></div>

## What Are Single-Stock ETFs? Single-stock exchange-traded funds (ETFs) are a new [exchange-traded product](https://www.investopedia.com/terms/e/exchange-traded-products-etp.asp) allowing for leveraged or inverse trading of a single stock. They are intended to give ordinary investors a wider range of tools for navigating [volatile](https://www.investopedia.com/terms/v/volatility.asp) markets by making it easy to go short on single stocks without having to [sell them short](https://www.investopedia.com/articles/investing/100913/basics-short-selling.asp). However, because of the way in which they are constructed and their use of leverage, regulators are warning that single-stock ETFs carry greater risk than ordinary ETFs and may be unsuitable for long-term investors. Single-stock ETFs featuring leverage first appeared on European markets in 2018. Financial firm AXS Investments [launched eight such products](https://www.investopedia.com/first-leveraged-single-stock-etfs-launch-5649193) for the first time in the United States in 2022, allowing investors there to trade them. ### Key Takeaways * Single-stock exchange-traded funds (ETFs) allow ordinary investors to take leveraged or short positions in single stocks using an exchange-traded product. * Leveraged single-stock ETFs provide new opportunities for investors in a volatile market, but at greater risk. These complex products are not for new investors and should be treated as high risk. * People with a strong base of investing knowledge and a high [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp) should not treat these as buy-and-hold opportunities. * Single-stock ETFs are meant to be used for short-term bets and trading. * The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have both warned about their use among ordinary investors. ## How Single-Stock ETFs Work [Exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp) are single securities that can hold a portfolio of stocks. Indeed, the first ETFs were created to track broad-based indexes such as the [S&P 500](https://www.investopedia.com/articles/investing/090414/sp-500-index-you-need-know.asp) or the [Russell 2000](https://www.investopedia.com/terms/r/russell2000.asp). ETFs can also hold [derivatives](https://www.investopedia.com/terms/d/derivative.asp) such as futures and options contracts in addition to, or instead of, shares of stock. This allowed for the advent of [leveraged ETFs](https://www.investopedia.com/terms/l/leveraged-etf.asp), which provide a multiple of the return of the underlying index or benchmark. For example, a leveraged ETF could provide two or three times the daily returns of the S&P 500 index. It also allowed for [inverse ETFs](https://www.investopedia.com/terms/i/inverse-etf.asp) (and inverse-leveraged ETFs), which provide negative returns (for example, -1 time or -2 times the return of the index). Single-stock ETFs do not hold a portfolio of stocks; rather, they track just a single stock but employ derivatives contracts to provide leveraged and/or inverse returns. Leverage is a double-edged sword, meaning that it can lead to significant gains but also lead to significant losses. Investors should be aware of the [risks](https://www.investopedia.com/terms/r/risk.asp) of leveraged ETFs because the risk of losses is far higher than with traditional investments. For example, a 1.5× leveraged bull single-stock ETF would likely own short-dated [call options](https://www.investopedia.com/terms/c/calloption.asp) that provide a net [delta](https://www.investopedia.com/terms/d/delta.asp) of +150. A 2× bear single-stock ETF would instead hold [put options](https://www.investopedia.com/terms/p/putoption.asp) in an amount resulting in a delta of -200. ## Risks of Single-Stock ETFs Because of how leveraged and inverse ETFs (including single-stock ETFs) are constructed, they tend to have a negative roll to maintain the proper derivatives position geared at returning a multiple of daily performance. This means that they naturally exhibit time decay and will [tend to lose value](https://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp) over medium and long holding periods, regardless of the performance of the underlying assets. As a result, these products are intended only for [day trading](https://www.investopedia.com/articles/trading/05/011705.asp) or very short-term holding periods. Single-stock ETFs also may be prone to quickly lose value in volatile markets. An interview posted July 15, 2022, on Yahoo! Finance illustrates this point. Yahoo! Finance anchor Jared Blikre said, “If we take a hypothetical stock and it’s three times leveraged ETF, and we just kind of chop around with some volatile action. Let’s say they both begin at $100. And then let’s say we have a 20% up day followed by two 10% down days, a 20% up, a negative 20%, a negative 10%, another [negative] 20%. At the end of the day, guess what, the stock is worth $100.78, basically flat. Guess what, the ETF lost 40% of its value.” ### The [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp), as well as the U.S. [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp), which oversees securities markets and dealers, have both warned that current regulations may not be adequate to oversee single-stock ETFs, and that these may be inappropriate for most individual investors, presenting unusually high risk. ## Single-Stock ETFs in the U.S. Single-stock ETFs first appeared on European markets in 2018, and entered the U.S. market in the summer of 2022. In July 2022, AXS Investments, a New York-based asset manager, listed eight such products giving leveraged investments on Telsa, Nvidia, PayPal, Nike, and Pfizer: However, these investments struggled to gain interest, and six of them were removed from the market within a year of their launch. In mid-2023, Direxion launched 12 single-stock ETFs, offering leveraged bets on tech companies like Google, Amazon, Tesla, and Nvidia. Rex Shares followed suit with single-stock ETFs for Tesla and Nvidia. ## Example of a Single-Stock ETF TSLQ is the ticker symbol for the AXS TSLA Bear Daily ETF. It seeks to return -1× the daily performance of Tesla (TSLA) shares. In other words, if TSLA drops 5% over the course of a trading day, the TSLQ Bear ETF should gain 5% on the same day. However, due to management expenses and other costs, the fund will return slightly lower profits over time. Let’s see how the two securities performed on Nov. 27, 2023. As shown in the chart below, comparing the two, TSLQ provides a close mirror image to the [intraday](https://www.investopedia.com/terms/i/intraday.asp) returns of TSLA. Note, however, that the daily returns were not identically inverse: TSLA gained 1.08% at the close of that day, while the single-stock ETF TSLQ lost 1.03%. While this difference may be small for a single day, the tracking error between the two could compound over time, especially if the price swings up and down repeatedly. ![TSLA and TSLQ daily performance compared.]() :max_bytes(150000):strip_icc()/ScreenShot2023-11-26at5.54.53PM-aec4a7e646b04799bc295c26210d3d0d.png) TSLA and TSLQ trading performance on 11/27/23. Via TradingView. ## How Are Single-Stock Exchange-Traded Funds (ETFs) Allowed to Trade? Single-stock exchange-traded funds (ETFs) have been labeled as extremely risky by regulators and market commentators. Nonetheless, in 2022, the United States listed them for the first time. However, single-stock ETFs appear to fall under Rule 6c-11 under the [Investment Company Act of 1940](https://www.investopedia.com/terms/i/investmentcompanyact.asp). In combination with recent changes to the listing standards at stock exchanges, that rule created a framework that allows ETFs meeting certain criteria to come directly to market without first obtaining explicit permission, through what is called an exemptive order from the U.S. Securities and Exchange Commission (SEC). ## Are Single-Stock ETFs and Single-Stock Futures the Same Thing? No. Single-stock ETFs are exchange-traded securities that use derivatives contracts (options) on individual stocks to provide leveraged returns. The ETF itself is a security. [Single-stock futures (SSFs)](https://www.investopedia.com/terms/s/singlestockfuture.asp) are not securities but instead are [futures contracts](https://www.investopedia.com/terms/f/futurescontract.asp), with an individual stock as the [underlying security](https://www.investopedia.com/terms/u/underlying-security.asp). Each contract typically controls 100 shares of stock. While the reception for single-stock futures was positive when they launched in the U.S., [activity has faded](https://www.investopedia.com/articles/optioninvestor/06/singlestockfutures.asp) over time. ## Are Single-Stock ETFs Good Investments? Single-stock ETFs are intended for very short holding periods, such as intraday, and are not meant to be held as longer-term investments. The SEC states that, “[b]ecause of the features of these products and their associated risks, it would likely be challenging for an investment professional to recommend such a product to a retail investor while also honoring his or her [fiduciary obligations](https://www.investopedia.com/ask/answers/042915/what-are-some-examples-fiduciary-duty.asp) or obligations under [Regulation Best Interest](https://www.investopedia.com/what-is-the-sec-s-regulation-bi-best-interest-rule-4689542). However, retail investors can and do access leveraged and [inverse exchange-traded products](https://www.investopedia.com/3-inverse-sector-etfs-market-bears-4570836) through self-directed trading.” ## The Bottom Line A single-stock ETF is an investment fund that uses derivatives to bet on or against a single stock. These instruments can deliver high returns, but they are also considered extremely risky for retail investors.

What Are Single-Stock ETFs? Single-stock exchange-traded funds (ETFs) are a new exchange-traded product allowing for leveraged or inverse trading of a single stock. They are intended to give ordinary investors a wider range of tools for navigating volatile markets by making it easy to go short on single stocks without having to sell them short. However, because of the way in which they are constructed and their use of leverage, regulators are warning that single-stock ETFs carry greater risk than ordinary ETFs and may be unsuitable for long-term investors. Single-stock ETFs featuring leverage first appeared on European markets in 2018. Financial firm AXS Investments launched eight such products for the first time in the United States in 2022, allowing investors there to trade them. Key Takeaways Single-stock exchange-traded funds (ETFs) allow ordinary investors to take leveraged or short positions in single stocks using an exchange-traded product. Leveraged single-stock ETFs provide new opportunities for investors in a volatile market, but at greater risk. These complex products are not for new investors and should be treated as high risk. People with a strong base of investing knowledge and a high risk tolerance should not treat these as buy-and-hold opportunities. Single-stock ETFs are meant to be used for short-term bets and trading. The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have both warned about their use among ordinary investors. How Single-Stock ETFs Work Exchange-traded funds (ETFs) are single securities that can hold a portfolio of stocks. Indeed, the first ETFs were created to track broad-based indexes such as the S&P 500 or the Russell 2000. ETFs can also hold derivatives such as futures and options contracts in addition to, or instead of, shares of stock. This allowed for the advent of leveraged ETFs, which provide a multiple of the return of the underlying index or benchmark. For example, a leveraged ETF could provide two or three times the daily returns of the S&P 500 index. It also allowed for inverse ETFs (and inverse-leveraged ETFs), which provide negative returns (for example, -1 time or -2 times the return of the index). Single-stock ETFs do not hold a portfolio of stocks; rather, they track just a single stock but employ derivatives contracts to provide leveraged and/or inverse returns. Leverage is a double-edged sword, meaning that it can lead to significant gains but also lead to significant losses. Investors should be aware of the risks of leveraged ETFs because the risk of losses is far higher than with traditional investments. For example, a 1.5× leveraged bull single-stock ETF would likely own short-dated call options that provide a net delta of +150. A 2× bear single-stock ETF would instead hold put options in an amount resulting in a delta of -200. Risks of Single-Stock ETFs Because of how leveraged and inverse ETFs (including single-stock ETFs) are constructed, they tend to have a negative roll to maintain the proper derivatives position geared at returning a multiple of daily performance. This means that they naturally exhibit time decay and will tend to lose value over medium and long holding periods, regardless of the performance of the underlying assets. As a result, these products are intended only for day trading or very short-term holding periods. Single-stock ETFs also may be prone to quickly lose value in volatile markets. An interview posted July 15, 2022, on Yahoo! Finance illustrates this point. Yahoo! Finance anchor Jared Blikre said, “If we take a hypothetical stock and it’s three times leveraged ETF, and we just kind of chop around with some volatile action. Let’s say they both begin at $100. And then let’s say we have a 20% up day followed by two 10% down days, a 20% up, a negative 20%, a negative 10%, another [negative] 20%. At the end of the day, guess what, the stock is worth $100.78, basically flat. Guess what, the ETF lost 40% of its value.” The Financial Industry Regulatory Authority (FINRA), as well as the U.S. Securities and Exchange Commission (SEC), which oversees securities markets and dealers, have both warned that current regulations may not be adequate to oversee single-stock ETFs, and that these may be inappropriate for most individual investors, presenting unusually high risk. Single-Stock ETFs in the U.S. Single-stock ETFs first appeared on European markets in 2018, and entered the U.S. market in the summer of 2022. In July 2022, AXS Investments, a New York-based asset manager, listed eight such products giving leveraged investments on Telsa, Nvidia, PayPal, Nike, and Pfizer: However, these investments struggled to gain interest, and six of them were removed from the market within a year of their launch. In mid-2023, Direxion launched 12 single-stock ETFs, offering leveraged bets on tech companies like Google, Amazon, Tesla, and Nvidia. Rex Shares followed suit with single-stock ETFs for Tesla and Nvidia. Example of a Single-Stock ETF TSLQ is the ticker symbol for the AXS TSLA Bear Daily ETF. It seeks to return -1× the daily performance of Tesla (TSLA) shares. In other words, if TSLA drops 5% over the course of a trading day, the TSLQ Bear ETF should gain 5% on the same day. However, due to management expenses and other costs, the fund will return slightly lower profits over time. Let’s see how the two securities performed on Nov. 27, 2023. As shown in the chart below, comparing the two, TSLQ provides a close mirror image to the intraday returns of TSLA. Note, however, that the daily returns were not identically inverse: TSLA gained 1.08% at the close of that day, while the single-stock ETF TSLQ lost 1.03%. While this difference may be small for a single day, the tracking error between the two could compound over time, especially if the price swings up and down repeatedly. TSLA and TSLQ trading performance on 11/27/23. Via TradingView. How Are Single-Stock Exchange-Traded Funds (ETFs) Allowed to Trade? Single-stock exchange-traded funds (ETFs) have been labeled as extremely risky by regulators and market commentators. Nonetheless, in 2022, the United States listed them for the first time. However, single-stock ETFs appear to fall under Rule 6c-11 under the Investment Company Act of 1940. In combination with recent changes to the listing standards at stock exchanges, that rule created a framework that allows ETFs meeting certain criteria to come directly to market without first obtaining explicit permission, through what is called an exemptive order from the U.S. Securities and Exchange Commission (SEC). Are Single-Stock ETFs and Single-Stock Futures the Same Thing? No. Single-stock ETFs are exchange-traded securities that use derivatives contracts (options) on individual stocks to provide leveraged returns. The ETF itself is a security. Single-stock futures (SSFs) are not securities but instead are futures contracts, with an individual stock as the underlying security. Each contract typically controls 100 shares of stock. While the reception for single-stock futures was positive when they launched in the U.S., activity has faded over time. Are Single-Stock ETFs Good Investments? Single-stock ETFs are intended for very short holding periods, such as intraday, and are not meant to be held as longer-term investments. The SEC states that, “[b]ecause of the features of these products and their associated risks, it would likely be challenging for an investment professional to recommend such a product to a retail investor while also honoring his or her fiduciary obligations or obligations under Regulation Best Interest. However, retail investors can and do access leveraged and inverse exchange-traded products through self-directed trading.” The Bottom Line A single-stock ETF is an investment fund that uses derivatives to bet on or against a single stock. These instruments can deliver high returns, but they are also considered extremely risky for retail investors.

https://www.investopedia.com/articles/trading/07/technical-fundamental.asp

Blending Technical and Fundamental Analysis

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> People often ask if <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a> can be used as an effective substitute for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentalanalysis.asp">fundamental analysis</a>. Although there is no definitive answer whether technical analysis can be used as a whole substitution for fundamental analysis, there is little doubt that combining the strengths of both strategies can help investors better understand the markets and gauge the direction in which their investments might be headed. In this article, we'll look at the pros and cons of technical analysis and the factors that investors should consider when incorporating both strategies into one market outlook. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <span class="heading-toc" id="toc-the-best-of-both-worlds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> The Best of Both Worlds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Some technical analysis methods combine well with fundamental analysis to provide additional information to investors. These include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> <strong><em>1) Volume Trends: </em></strong>When an analyst or an investor is researching a stock, it's good to know what other investors think about it. After all, they might have some additional insight into the company or they might be creating a trend. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> One of the most popular methods for gauging market sentiment is to take a look at the recently traded volume. Large spikes suggest that the stock has garnered much attention from the trading community and that the shares are under either <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accumulation.asp">accumulation</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/distribution.asp">distribution</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Volume indicators are popular tools among traders because they can help confirm whether other investors agree with your perspective on a security. Traders generally watch for the volume to increase as an identified trend gains momentum. A sudden decrease in volume can suggest that traders are losing interest and that a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reversal.asp">reversal</a> may be on its way. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intraday.asp">Intraday</a> charting is growing in popularity because it enables traders to watch for spikes in volume, which often correspond with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blocktrade.asp">block trades</a> and can be extremely helpful in deciphering exactly when large institutions are trading. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <strong><em>2) Tracking Short-Term Movements: </em></strong>While many fundamental investors tend to focus on the long haul, the odds are that they still want to obtain a favorable <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buyin.asp">buy-in</a> price and/or a favorable selling price upon <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidate.asp">liquidating</a> a position. Technical analysis can be handy in these situations as well. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> More specifically, when a stock punches through its 15- or 21-day <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/movingaverage.asp">moving average</a> (either to the upside or the downside), it usually continues along that trend for a short period of time. In other words, it is largely an indicator of what to expect in the coming term. Incidentally, 50- and 200-day moving averages are often used by chartists and some fundamental investors to determine longer term <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/breakout.asp">breakout</a> patterns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> For those looking to time a trade or to solidify a favorable entry or exit price in a given stock, these types of charts and analyses are invaluable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <strong><em>3) Tracking Reactions Over Time: </em></strong>Many fundamental analysts will look at a chart of a specific stock, industry, index or market to determine how that entity has performed over time when certain types of news (such as positive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp">earnings</a> or economic data) has been released. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Patterns have a tendency to repeat themselves, and the investors who were lured (or put off by) the news in question tend to react in a similar manner over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> For example, if you take a look at the charts of various housing stocks, you'll often see that they react negatively when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/frb.asp">Federal Reserve</a> chooses to forgo a cut in interest rates. Or check out how home improvement stores tend to react when reports of new and existing home sales decline. The reactive move lower is pretty consistent each time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> In short, by analyzing historical trends, investors can ballpark the possible reaction to a future event. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-the-downside-to-blending"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> The Downside to Blending </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Technical analysis may also provide an inaccurate or incomplete perspective on a stock because: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <strong><em>1) It's History: </em></strong>While it is possible to decipher and anticipate certain movements based on patterns or when a particular stock crosses a major moving average, charts cannot usually predict future positive or negative fundamental data—instead they are heavily focused on the past. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> However, if news leaks out that a company is about to release a good quarter (for example), investors might be able to take advantage of it and this good news will be apparent in the chart. A simple chart cannot provide the investor with crucial long-term fundamental information such as the future direction of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashflow.asp">cash flow</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp">earnings per share</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> <strong><em>2) The Crowd is Sometimes Wrong: </em></strong>As mentioned above, it's nice to buy into a stock that has upside momentum. However, it is important to note and understand that the crowd is sometimes wrong. In other words, it is possible that a stock that's being accumulated en masse this week may be under heavy distribution the next. Conversely, stocks that are being heavily sold this week may be under accumulation in the weeks to come. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> A terrific example of the "crowd is wrong" mentality can be found in the large amount of money that went into technology shares at the turn of the millennium. In fact, money kept flowing into shares of companies such as CMGI or JDS Uniphase, as well as a number of other high-tech issues. When the bottom dropped out, the money flow into these stocks and the stock markets on which they traded dried up almost overnight. The charts did not indicate that such a harsh <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correction.asp">correction</a> was coming. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <strong><em>3) Charts Don't Typically or Consistently Forecast Macro Trends: </em></strong>Charts also are generally unable to accurately forecast <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/macroeconomics.asp">macroeconomic</a> trends. For example, it is nearly impossible to look at a major player in the oil and gas sector and decipher definitively whether <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/opec.asp">OPEC</a> intends to increase the amount of oil it pumps, or whether a fire that just started at a shipping facility in Venezuela will affect near-term supplies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> <strong><em>4) There is Subjectivity: </em></strong>When it comes to reading a chart, a certain amount of subjectivity comes into play. Some may see a chart and feel that a stock is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/basing.asp">basing</a>, while another person might see it and conclude that there is still more downside to be had. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> So who is right? Again, there's no calculation that can be done to solve the argument, as might be the case with fundamental analysis. When it comes to charting, only time will tell which way the markets will actually go. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Technical analysis can be a valuable tool, but it is important to realize the benefits as well as the limitations before diving in. There is no definite answer about whether technical analysis should be used as a substitute to fundamental analysis, but many agree that it has its merits when used as a compliment to other investing strategies. </p></div>

People often ask if [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) can be used as an effective substitute for [fundamental analysis](https://www.investopedia.com/terms/f/fundamentalanalysis.asp). Although there is no definitive answer whether technical analysis can be used as a whole substitution for fundamental analysis, there is little doubt that combining the strengths of both strategies can help investors better understand the markets and gauge the direction in which their investments might be headed. In this article, we'll look at the pros and cons of technical analysis and the factors that investors should consider when incorporating both strategies into one market outlook. ## The Best of Both Worlds Some technical analysis methods combine well with fundamental analysis to provide additional information to investors. These include: ***1) Volume Trends:***When an analyst or an investor is researching a stock, it's good to know what other investors think about it. After all, they might have some additional insight into the company or they might be creating a trend. One of the most popular methods for gauging market sentiment is to take a look at the recently traded volume. Large spikes suggest that the stock has garnered much attention from the trading community and that the shares are under either [accumulation](https://www.investopedia.com/terms/a/accumulation.asp) or [distribution](https://www.investopedia.com/terms/d/distribution.asp). Volume indicators are popular tools among traders because they can help confirm whether other investors agree with your perspective on a security. Traders generally watch for the volume to increase as an identified trend gains momentum. A sudden decrease in volume can suggest that traders are losing interest and that a [reversal](https://www.investopedia.com/terms/r/reversal.asp) may be on its way. [Intraday](https://www.investopedia.com/terms/i/intraday.asp) charting is growing in popularity because it enables traders to watch for spikes in volume, which often correspond with [block trades](https://www.investopedia.com/terms/b/blocktrade.asp) and can be extremely helpful in deciphering exactly when large institutions are trading. ***2) Tracking Short-Term Movements:***While many fundamental investors tend to focus on the long haul, the odds are that they still want to obtain a favorable [buy-in](https://www.investopedia.com/terms/b/buyin.asp) price and/or a favorable selling price upon [liquidating](https://www.investopedia.com/terms/l/liquidate.asp) a position. Technical analysis can be handy in these situations as well. More specifically, when a stock punches through its 15- or 21-day [moving average](https://www.investopedia.com/terms/m/movingaverage.asp) (either to the upside or the downside), it usually continues along that trend for a short period of time. In other words, it is largely an indicator of what to expect in the coming term. Incidentally, 50- and 200-day moving averages are often used by chartists and some fundamental investors to determine longer term [breakout](https://www.investopedia.com/terms/b/breakout.asp) patterns. For those looking to time a trade or to solidify a favorable entry or exit price in a given stock, these types of charts and analyses are invaluable. ***3) Tracking Reactions Over Time:***Many fundamental analysts will look at a chart of a specific stock, industry, index or market to determine how that entity has performed over time when certain types of news (such as positive [earnings](https://www.investopedia.com/terms/e/earnings.asp) or economic data) has been released. Patterns have a tendency to repeat themselves, and the investors who were lured (or put off by) the news in question tend to react in a similar manner over time. For example, if you take a look at the charts of various housing stocks, you'll often see that they react negatively when the [Federal Reserve](https://www.investopedia.com/terms/f/frb.asp) chooses to forgo a cut in interest rates. Or check out how home improvement stores tend to react when reports of new and existing home sales decline. The reactive move lower is pretty consistent each time. In short, by analyzing historical trends, investors can ballpark the possible reaction to a future event. ## The Downside to Blending Technical analysis may also provide an inaccurate or incomplete perspective on a stock because: ***1) It's History:***While it is possible to decipher and anticipate certain movements based on patterns or when a particular stock crosses a major moving average, charts cannot usually predict future positive or negative fundamental data—instead they are heavily focused on the past. However, if news leaks out that a company is about to release a good quarter (for example), investors might be able to take advantage of it and this good news will be apparent in the chart. A simple chart cannot provide the investor with crucial long-term fundamental information such as the future direction of [cash flow](https://www.investopedia.com/terms/c/cashflow.asp) or [earnings per share](https://www.investopedia.com/terms/e/eps.asp). ***2) The Crowd is Sometimes Wrong:***As mentioned above, it's nice to buy into a stock that has upside momentum. However, it is important to note and understand that the crowd is sometimes wrong. In other words, it is possible that a stock that's being accumulated en masse this week may be under heavy distribution the next. Conversely, stocks that are being heavily sold this week may be under accumulation in the weeks to come. A terrific example of the "crowd is wrong" mentality can be found in the large amount of money that went into technology shares at the turn of the millennium. In fact, money kept flowing into shares of companies such as CMGI or JDS Uniphase, as well as a number of other high-tech issues. When the bottom dropped out, the money flow into these stocks and the stock markets on which they traded dried up almost overnight. The charts did not indicate that such a harsh [correction](https://www.investopedia.com/terms/c/correction.asp) was coming. ***3) Charts Don't Typically or Consistently Forecast Macro Trends:***Charts also are generally unable to accurately forecast [macroeconomic](https://www.investopedia.com/terms/m/macroeconomics.asp) trends. For example, it is nearly impossible to look at a major player in the oil and gas sector and decipher definitively whether [OPEC](https://www.investopedia.com/terms/o/opec.asp) intends to increase the amount of oil it pumps, or whether a fire that just started at a shipping facility in Venezuela will affect near-term supplies. ***4) There is Subjectivity:***When it comes to reading a chart, a certain amount of subjectivity comes into play. Some may see a chart and feel that a stock is [basing](https://www.investopedia.com/terms/b/basing.asp), while another person might see it and conclude that there is still more downside to be had. So who is right? Again, there's no calculation that can be done to solve the argument, as might be the case with fundamental analysis. When it comes to charting, only time will tell which way the markets will actually go. ## Bottom Line Technical analysis can be a valuable tool, but it is important to realize the benefits as well as the limitations before diving in. There is no definite answer about whether technical analysis should be used as a substitute to fundamental analysis, but many agree that it has its merits when used as a compliment to other investing strategies.

People often ask if technical analysis can be used as an effective substitute for fundamental analysis. Although there is no definitive answer whether technical analysis can be used as a whole substitution for fundamental analysis, there is little doubt that combining the strengths of both strategies can help investors better understand the markets and gauge the direction in which their investments might be headed. In this article, we'll look at the pros and cons of technical analysis and the factors that investors should consider when incorporating both strategies into one market outlook. The Best of Both Worlds Some technical analysis methods combine well with fundamental analysis to provide additional information to investors. These include: 1) Volume Trends: When an analyst or an investor is researching a stock, it's good to know what other investors think about it. After all, they might have some additional insight into the company or they might be creating a trend. One of the most popular methods for gauging market sentiment is to take a look at the recently traded volume. Large spikes suggest that the stock has garnered much attention from the trading community and that the shares are under either accumulation or distribution. Volume indicators are popular tools among traders because they can help confirm whether other investors agree with your perspective on a security. Traders generally watch for the volume to increase as an identified trend gains momentum. A sudden decrease in volume can suggest that traders are losing interest and that a reversal may be on its way. Intraday charting is growing in popularity because it enables traders to watch for spikes in volume, which often correspond with block trades and can be extremely helpful in deciphering exactly when large institutions are trading. 2) Tracking Short-Term Movements: While many fundamental investors tend to focus on the long haul, the odds are that they still want to obtain a favorable buy-in price and/or a favorable selling price upon liquidating a position. Technical analysis can be handy in these situations as well. More specifically, when a stock punches through its 15- or 21-day moving average (either to the upside or the downside), it usually continues along that trend for a short period of time. In other words, it is largely an indicator of what to expect in the coming term. Incidentally, 50- and 200-day moving averages are often used by chartists and some fundamental investors to determine longer term breakout patterns. For those looking to time a trade or to solidify a favorable entry or exit price in a given stock, these types of charts and analyses are invaluable. 3) Tracking Reactions Over Time: Many fundamental analysts will look at a chart of a specific stock, industry, index or market to determine how that entity has performed over time when certain types of news (such as positive earnings or economic data) has been released. Patterns have a tendency to repeat themselves, and the investors who were lured (or put off by) the news in question tend to react in a similar manner over time. For example, if you take a look at the charts of various housing stocks, you'll often see that they react negatively when the Federal Reserve chooses to forgo a cut in interest rates. Or check out how home improvement stores tend to react when reports of new and existing home sales decline. The reactive move lower is pretty consistent each time. In short, by analyzing historical trends, investors can ballpark the possible reaction to a future event. The Downside to Blending Technical analysis may also provide an inaccurate or incomplete perspective on a stock because: 1) It's History: While it is possible to decipher and anticipate certain movements based on patterns or when a particular stock crosses a major moving average, charts cannot usually predict future positive or negative fundamental data—instead they are heavily focused on the past. However, if news leaks out that a company is about to release a good quarter (for example), investors might be able to take advantage of it and this good news will be apparent in the chart. A simple chart cannot provide the investor with crucial long-term fundamental information such as the future direction of cash flow or earnings per share. 2) The Crowd is Sometimes Wrong: As mentioned above, it's nice to buy into a stock that has upside momentum. However, it is important to note and understand that the crowd is sometimes wrong. In other words, it is possible that a stock that's being accumulated en masse this week may be under heavy distribution the next. Conversely, stocks that are being heavily sold this week may be under accumulation in the weeks to come. A terrific example of the "crowd is wrong" mentality can be found in the large amount of money that went into technology shares at the turn of the millennium. In fact, money kept flowing into shares of companies such as CMGI or JDS Uniphase, as well as a number of other high-tech issues. When the bottom dropped out, the money flow into these stocks and the stock markets on which they traded dried up almost overnight. The charts did not indicate that such a harsh correction was coming. 3) Charts Don't Typically or Consistently Forecast Macro Trends: Charts also are generally unable to accurately forecast macroeconomic trends. For example, it is nearly impossible to look at a major player in the oil and gas sector and decipher definitively whether OPEC intends to increase the amount of oil it pumps, or whether a fire that just started at a shipping facility in Venezuela will affect near-term supplies. 4) There is Subjectivity: When it comes to reading a chart, a certain amount of subjectivity comes into play. Some may see a chart and feel that a stock is basing, while another person might see it and conclude that there is still more downside to be had. So who is right? Again, there's no calculation that can be done to solve the argument, as might be the case with fundamental analysis. When it comes to charting, only time will tell which way the markets will actually go. Bottom Line Technical analysis can be a valuable tool, but it is important to realize the benefits as well as the limitations before diving in. There is no definite answer about whether technical analysis should be used as a substitute to fundamental analysis, but many agree that it has its merits when used as a compliment to other investing strategies.

https://www.investopedia.com/terms/p/passivemanagement.asp

Passive Management: What it is, How it Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-passive-management"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Passive Management? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Passive management is a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mutualfund/10/investment-style-indexes.asp">style of management</a> associated with mutual and exchange-traded funds (ETF), where a fund's portfolio mirrors a market index. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mutualfund/05/activepassive.asp">Passive management</a> is the opposite of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">active management</a>, in which a fund's manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio's securities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Passive management is a reference to index funds and exchange-traded funds that mirror an established index, such as the S&amp;P 500.</li><li>Passive management is the opposite of active management, in which a manager selects stocks and other securities to include in a portfolio.</li><li>Passively managed funds tend to charge lower fees to investors than funds that are actively managed.</li><li>The Efficient Market Hypothesis (EMH) demonstrates that no active manager can beat the market for long, as their success is only a matter of chance; longer-term, passive management delivers better returns.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-passive-management"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Passive Management </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Followers of passive management believe in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp">efficient market hypothesis</a>. It states that at all times, markets incorporate and reflect all information, rendering individual stock picking futile. As a result, the best investing strategy is to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketindex.asp">invest in index funds</a>, which have historically outperformed the majority of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/active-vs-passive-investing/">actively managed funds</a>. Passive management is also referred to as "<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/070715/pros-cons-passive-buy-and-hold-strategy.asp">passive strategy</a>," "passive investing," or " index investing." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Vanguard 500 Index Fund Admiral Shares, Vanguard Total International Stock Index Fund, and Vanguard Total Stock Market Index Fund Admiral Shares are the three largest index funds.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-the-research-behind-passive-management"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> The Research Behind Passive Management </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> In the 1960s, the University of Chicago's professor of economics, Eugene Fama, conducted extensive research on stock price patterns, which led to his development of the Efficient Capital Market Hypothesis (EMH). The EMH maintains that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market-price.asp">market prices</a> fully reflect all available information and expectations, so current stock prices are the best approximation of a company’s <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intrinsicvalue.asp">intrinsic value</a>. Attempts to systematically identify and exploit stocks that are mispriced based on information typically fail because stock price movements are largely random and are primarily driven by unforeseen events. Although mispricing can occur, there is no predictable pattern for their occurrence that results in consistent outperformance. The efficient markets hypothesis implies that no active investor will consistently beat the market over long periods of time, except by chance, which means active management strategies using stock selection and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/markettiming.asp">market timing</a> cannot consistently add value enough to <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outperform.asp">outperform</a> passive management strategies.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> William F. Sharpe concluded that, as a whole, active fund managers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underperform.asp">underperform</a> passive fund managers, not because there is anything inherently wrong in their financial strategies, but simply because of the laws of arithmetic. For active managers to outperform the market, they have to achieve a return that can overcome their fund expenses, which are much higher than passive funds due to higher <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/managementfee.asp">management fees</a>, higher trading costs, and higher <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/turnover.asp">turnover</a>. This is consistent with Sharpe’s research, which shows that, as a group, active managers underperform the market by an amount equivalent to their average fees and expenses.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> When a passive management strategy is employed, there is no need to expend time or resources on the stock selection or market timing. Because of the short-term randomness of returns, investors would be better served through a passive, structured portfolio based on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp">asset class</a> <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> to manage uncertainty and position the portfolios for <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/longtermgrowth.asp">long-term growth</a> in the capital markets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">$1.2 trillion</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The amount that poured into passive funds in 2021, according to the latest figures from fund tracker Morningstar.<span class="ql-inline-citation" data-cite="6"></span></p></div></div></div> <span class="heading-toc" id="toc-ongoing-rush-to-passive-management"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Ongoing Rush to Passive Management </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Due to poor returns of active management and the recommendation of influential financiers like Warren Buffett, investor cash has flooded into passive management in recent years. In 2021 alone, $1.2 trillion poured into passive U.S. equity funds, according to fund tracker Morningstar.<span class="ql-inline-citation" data-cite="6"></span> Conversely, as of April 2002, over the last five years $86.4 billion fled actively managed funds.<span class="ql-inline-citation" data-cite="7"></span> However, much of the influx to passive funds flowed to taxable and municipal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond.asp">bond</a> funds. </p></div>

## What Is Passive Management? Passive management is a [style of management](https://www.investopedia.com/articles/mutualfund/10/investment-style-indexes.asp) associated with mutual and exchange-traded funds (ETF), where a fund's portfolio mirrors a market index. [Passive management](https://www.investopedia.com/articles/mutualfund/05/activepassive.asp) is the opposite of [active management](https://www.investopedia.com/terms/a/activemanagement.asp), in which a fund's manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio's securities. ### Key Takeaways * Passive management is a reference to index funds and exchange-traded funds that mirror an established index, such as the S&P 500. * Passive management is the opposite of active management, in which a manager selects stocks and other securities to include in a portfolio. * Passively managed funds tend to charge lower fees to investors than funds that are actively managed. * The Efficient Market Hypothesis (EMH) demonstrates that no active manager can beat the market for long, as their success is only a matter of chance; longer-term, passive management delivers better returns. ## Understanding Passive Management Followers of passive management believe in the [efficient market hypothesis](https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp). It states that at all times, markets incorporate and reflect all information, rendering individual stock picking futile. As a result, the best investing strategy is to [invest in index funds](https://www.investopedia.com/terms/m/marketindex.asp), which have historically outperformed the majority of [actively managed funds](https://www.investopedia.com/news/active-vs-passive-investing/). Passive management is also referred to as "[passive strategy](https://www.investopedia.com/articles/active-trading/070715/pros-cons-passive-buy-and-hold-strategy.asp)," "passive investing," or " index investing." ### Vanguard 500 Index Fund Admiral Shares, Vanguard Total International Stock Index Fund, and Vanguard Total Stock Market Index Fund Admiral Shares are the three largest index funds. ## The Research Behind Passive Management In the 1960s, the University of Chicago's professor of economics, Eugene Fama, conducted extensive research on stock price patterns, which led to his development of the Efficient Capital Market Hypothesis (EMH). The EMH maintains that [market prices](https://www.investopedia.com/terms/m/market-price.asp) fully reflect all available information and expectations, so current stock prices are the best approximation of a company’s [intrinsic value](https://www.investopedia.com/terms/i/intrinsicvalue.asp). Attempts to systematically identify and exploit stocks that are mispriced based on information typically fail because stock price movements are largely random and are primarily driven by unforeseen events. Although mispricing can occur, there is no predictable pattern for their occurrence that results in consistent outperformance. The efficient markets hypothesis implies that no active investor will consistently beat the market over long periods of time, except by chance, which means active management strategies using stock selection and [market timing](https://www.investopedia.com/terms/m/markettiming.asp) cannot consistently add value enough to [outperform](https://www.investopedia.com/terms/o/outperform.asp) passive management strategies. William F. Sharpe concluded that, as a whole, active fund managers [underperform](https://www.investopedia.com/terms/u/underperform.asp) passive fund managers, not because there is anything inherently wrong in their financial strategies, but simply because of the laws of arithmetic. For active managers to outperform the market, they have to achieve a return that can overcome their fund expenses, which are much higher than passive funds due to higher [management fees](https://www.investopedia.com/terms/m/managementfee.asp), higher trading costs, and higher [turnover](https://www.investopedia.com/terms/t/turnover.asp). This is consistent with Sharpe’s research, which shows that, as a group, active managers underperform the market by an amount equivalent to their average fees and expenses. When a passive management strategy is employed, there is no need to expend time or resources on the stock selection or market timing. Because of the short-term randomness of returns, investors would be better served through a passive, structured portfolio based on [asset class](https://www.investopedia.com/terms/a/assetclasses.asp) [diversification](https://www.investopedia.com/terms/d/diversification.asp) to manage uncertainty and position the portfolios for [long-term growth](https://www.investopedia.com/terms/l/longtermgrowth.asp) in the capital markets. ### $1.2 trillion The amount that poured into passive funds in 2021, according to the latest figures from fund tracker Morningstar. ## Ongoing Rush to Passive Management Due to poor returns of active management and the recommendation of influential financiers like Warren Buffett, investor cash has flooded into passive management in recent years. In 2021 alone, $1.2 trillion poured into passive U.S. equity funds, according to fund tracker Morningstar. Conversely, as of April 2002, over the last five years $86.4 billion fled actively managed funds. However, much of the influx to passive funds flowed to taxable and municipal [bond](https://www.investopedia.com/terms/b/bond.asp) funds.

What Is Passive Management? Passive management is a style of management associated with mutual and exchange-traded funds (ETF), where a fund's portfolio mirrors a market index. Passive management is the opposite of active management, in which a fund's manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio's securities. Key Takeaways Passive management is a reference to index funds and exchange-traded funds that mirror an established index, such as the S&P 500.Passive management is the opposite of active management, in which a manager selects stocks and other securities to include in a portfolio.Passively managed funds tend to charge lower fees to investors than funds that are actively managed.The Efficient Market Hypothesis (EMH) demonstrates that no active manager can beat the market for long, as their success is only a matter of chance; longer-term, passive management delivers better returns. Understanding Passive Management Followers of passive management believe in the efficient market hypothesis. It states that at all times, markets incorporate and reflect all information, rendering individual stock picking futile. As a result, the best investing strategy is to invest in index funds, which have historically outperformed the majority of actively managed funds. Passive management is also referred to as "passive strategy," "passive investing," or " index investing." Vanguard 500 Index Fund Admiral Shares, Vanguard Total International Stock Index Fund, and Vanguard Total Stock Market Index Fund Admiral Shares are the three largest index funds. The Research Behind Passive Management In the 1960s, the University of Chicago's professor of economics, Eugene Fama, conducted extensive research on stock price patterns, which led to his development of the Efficient Capital Market Hypothesis (EMH). The EMH maintains that market prices fully reflect all available information and expectations, so current stock prices are the best approximation of a company’s intrinsic value. Attempts to systematically identify and exploit stocks that are mispriced based on information typically fail because stock price movements are largely random and are primarily driven by unforeseen events. Although mispricing can occur, there is no predictable pattern for their occurrence that results in consistent outperformance. The efficient markets hypothesis implies that no active investor will consistently beat the market over long periods of time, except by chance, which means active management strategies using stock selection and market timing cannot consistently add value enough to outperform passive management strategies. William F. Sharpe concluded that, as a whole, active fund managers underperform passive fund managers, not because there is anything inherently wrong in their financial strategies, but simply because of the laws of arithmetic. For active managers to outperform the market, they have to achieve a return that can overcome their fund expenses, which are much higher than passive funds due to higher management fees, higher trading costs, and higher turnover. This is consistent with Sharpe’s research, which shows that, as a group, active managers underperform the market by an amount equivalent to their average fees and expenses. When a passive management strategy is employed, there is no need to expend time or resources on the stock selection or market timing. Because of the short-term randomness of returns, investors would be better served through a passive, structured portfolio based on asset class diversification to manage uncertainty and position the portfolios for long-term growth in the capital markets. $1.2 trillion The amount that poured into passive funds in 2021, according to the latest figures from fund tracker Morningstar. Ongoing Rush to Passive Management Due to poor returns of active management and the recommendation of influential financiers like Warren Buffett, investor cash has flooded into passive management in recent years. In 2021 alone, $1.2 trillion poured into passive U.S. equity funds, according to fund tracker Morningstar. Conversely, as of April 2002, over the last five years $86.4 billion fled actively managed funds. However, much of the influx to passive funds flowed to taxable and municipal bond funds.

https://www.investopedia.com/terms/c/cashless_conversion.asp

Cashless Conversion: Overview, Example, FAQ

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-cashless-conversion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Cashless Conversion? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A cashless conversion is the direct conversion of ownership, from one type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">security</a> to another, without any initial cash outlay by the holder. For instance, the conversion of a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertiblebond.asp">convertible bond</a> from debt to equity in the form of common stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Contracts for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertible-security.asp">convertible securities</a> define all the terms of the conversion at the onset of the trade. Often, the transfer of assets will be triggered automatically on a specific date or when a specific event occurs, such as with the expiration of certain options or warrants. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A cashless conversion is when the ownership type of an asset changes without a cash outlay.</li><li>Convertible bonds and convertible preferred shares could result, if triggered, in a cashless conversion to common stock.</li><li>A cashless exercise is similar in that it does not involve a cash outlay, but the asset is exercised using a loan, or the compensation received is offset by the strike price.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-cashless-conversion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding a Cashless Conversion </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A classic example of a cashless conversion is when <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preferredstock.asp">preferred shares</a> or convertible bonds are traded in for common stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Employee stock options, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rightsoffering.asp">rights</a>, and warrants can also be cashless if the strike is zero; however, they could also be a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashlessexercise.asp">cashless exercise</a>. In the case of employee stock options, this is when a broker provides the holder with a loan to exercise the options at the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/strikeprice.asp">strike price</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> After paying fees and paying off the loan with the proceeds from selling some of the shares, the employee retains the remaining shares garnered from the options. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Preferred Shares </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commonstock.asp">common stock</a>. Preferred shares generally have a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividend</a> that must be paid out before dividends to common shareholders. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Some preferred stock is convertible, meaning it can be exchanged for a given number of common shares under certain circumstances. The board of directors might vote to convert the stock, the investor might have the option to convert, or the stock might have a specified date at which it automatically converts. The conversion from preferred to common stock is a cashless conversion. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Convertible Bonds </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> A convertible bond is a type of debt security that can be converted into a predetermined amount of the underlying company's common stock at certain times during the bond's life, usually at the discretion of the bondholder. If triggered, the bond is swapped for common stocks, so it is a cashless conversion. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Unless market conditions trigger an automatic conversion, as defined in the contract, the procedure to convert is to simply notify the issuer of the desire to convert. The converted number of shares replaces the currently held asset with no money due.</p></div></div></div> <span class="heading-toc" id="toc-cashless-exercise"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Cashless Exercise </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> A cashless exercise is a transaction in which certain securities are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exercise.asp">exercised</a> without making any cash payment. Such a transaction utilizes a broker to provide a short-term loan so that the holder exercising the options has enough money to do so. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Once the loan to exercise the options is in place, the holder then sells enough of the newly acquired shares to pay back the broker for the loan, fees, and taxes. The person exercising the conversion then possesses the remaining shares. This is a common process with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eso.asp">employee stock options</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Warrants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warrant.asp">Warrants</a> give the right, but not the obligation, to buy or sell a security—most commonly a stock—at a certain price before expiration. The price at which the underlying security is bought or sold is referred to as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exerciseprice.asp">exercise price</a> or strike price; however, in order to be cashless, the warrant itself must be defined as a cashless warrant. In this case, the holder would pay the exercise price from the value of the shares received. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> For example, if the warrant is for the purchase of 10,000 shares at $1.00 per share, and the market price of the stock at exercise is $10.00 per share, the holder would, upon exercise, receive the market value of the shares ($100,000) minus $10,000 (shares multiplied by warrant strike) for a total value of $90,000 or 9,000 shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-example-of-a-cashless-conversion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Example of a Cashless Conversion </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Convertible preferred shares have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conversionratio.asp">conversion ratio</a>, which describes how many common shares each preferred share can be converted to. For example, a $100 preferred share may have a conversion ratio of four. This means the holder can convert the $100 preferred into four common shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> It may be beneficial to convert if the price of the common stock is trading above $25 ($100 / conversion ratio). Once converted though, the preferred shareholder becomes a common shareholder and is no longer entitled to the preferred dividend or a higher claim on assets. Therefore, the preferred shareholder may wish to wait until the common stock rises significantly before giving up their preferred shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Assume the stock price rises to $40. For each $100 preferred share, the holder can get $160 worth of common stock (4 x $40). If they decide to convert the preferred shares, each preferred share will disappear from the account and be replaced by four shares of common stock. No cash changes hands, so it is a cashless conversion. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-how-does-a-cashless-warrant-work"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does a Cashless Warrant Work?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Upon exercise, a cashless warrant allows an investor to receive a certain number of shares without any outlay of cash. The "cashless" component refers to receiving a smaller amount of shares than would otherwise be received with a warrant plus cash.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-how-is-a-cashless-exercise-taxed"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Is a Cashless Exercise Taxed?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A cashless exercise is taxed as ordinary income. The amount taxed is the difference between the strike price (the price you can purchase the stock for) and the price the shares are sold for.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-what-is-the-difference-between-an-iso-and-an-nso"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between an ISO and an NSO?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The difference between a qualified incentive stock option (ISO) and a non-qualified incentive stock option (NSO) is how they are taxed, their expiration date, and when taxes are due. ISOs are subject to an alternative minimum tax (AMT) while NSOs are subject to ordinary tax plus payroll taxes. ISOs are only effective while you are employed with the company and up to 90 days after you leave. NSOs don't have such an expiration date and are effective after you leave a company. NSO taxes are due when the options are exercised whereas the AMT portion of ISOs is due during regular annual tax filings.</p></div> </div></div>

## What Is a Cashless Conversion? A cashless conversion is the direct conversion of ownership, from one type of [security](https://www.investopedia.com/terms/s/security.asp) to another, without any initial cash outlay by the holder. For instance, the conversion of a [convertible bond](https://www.investopedia.com/terms/c/convertiblebond.asp) from debt to equity in the form of common stock. Contracts for [convertible securities](https://www.investopedia.com/terms/c/convertible-security.asp) define all the terms of the conversion at the onset of the trade. Often, the transfer of assets will be triggered automatically on a specific date or when a specific event occurs, such as with the expiration of certain options or warrants. ### Key Takeaways * A cashless conversion is when the ownership type of an asset changes without a cash outlay. * Convertible bonds and convertible preferred shares could result, if triggered, in a cashless conversion to common stock. * A cashless exercise is similar in that it does not involve a cash outlay, but the asset is exercised using a loan, or the compensation received is offset by the strike price. ## Understanding a Cashless Conversion A classic example of a cashless conversion is when [preferred shares](https://www.investopedia.com/terms/p/preferredstock.asp) or convertible bonds are traded in for common stock. Employee stock options, [rights](https://www.investopedia.com/terms/r/rightsoffering.asp), and warrants can also be cashless if the strike is zero; however, they could also be a [cashless exercise](https://www.investopedia.com/terms/c/cashlessexercise.asp). In the case of employee stock options, this is when a broker provides the holder with a loan to exercise the options at the [strike price](https://www.investopedia.com/terms/s/strikeprice.asp). After paying fees and paying off the loan with the proceeds from selling some of the shares, the employee retains the remaining shares garnered from the options. ### Preferred Shares Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than [common stock](https://www.investopedia.com/terms/c/commonstock.asp). Preferred shares generally have a [dividend](https://www.investopedia.com/terms/d/dividend.asp) that must be paid out before dividends to common shareholders. Some preferred stock is convertible, meaning it can be exchanged for a given number of common shares under certain circumstances. The board of directors might vote to convert the stock, the investor might have the option to convert, or the stock might have a specified date at which it automatically converts. The conversion from preferred to common stock is a cashless conversion. ### Convertible Bonds A convertible bond is a type of debt security that can be converted into a predetermined amount of the underlying company's common stock at certain times during the bond's life, usually at the discretion of the bondholder. If triggered, the bond is swapped for common stocks, so it is a cashless conversion. ### Unless market conditions trigger an automatic conversion, as defined in the contract, the procedure to convert is to simply notify the issuer of the desire to convert. The converted number of shares replaces the currently held asset with no money due. ## Cashless Exercise A cashless exercise is a transaction in which certain securities are [exercised](https://www.investopedia.com/terms/e/exercise.asp) without making any cash payment. Such a transaction utilizes a broker to provide a short-term loan so that the holder exercising the options has enough money to do so. Once the loan to exercise the options is in place, the holder then sells enough of the newly acquired shares to pay back the broker for the loan, fees, and taxes. The person exercising the conversion then possesses the remaining shares. This is a common process with [employee stock options](https://www.investopedia.com/terms/e/eso.asp). ### Warrants [Warrants](https://www.investopedia.com/terms/w/warrant.asp) give the right, but not the obligation, to buy or sell a security—most commonly a stock—at a certain price before expiration. The price at which the underlying security is bought or sold is referred to as the [exercise price](https://www.investopedia.com/terms/e/exerciseprice.asp) or strike price; however, in order to be cashless, the warrant itself must be defined as a cashless warrant. In this case, the holder would pay the exercise price from the value of the shares received. For example, if the warrant is for the purchase of 10,000 shares at $1.00 per share, and the market price of the stock at exercise is $10.00 per share, the holder would, upon exercise, receive the market value of the shares ($100,000) minus $10,000 (shares multiplied by warrant strike) for a total value of $90,000 or 9,000 shares. ## Example of a Cashless Conversion Convertible preferred shares have a [conversion ratio](https://www.investopedia.com/terms/c/conversionratio.asp), which describes how many common shares each preferred share can be converted to. For example, a $100 preferred share may have a conversion ratio of four. This means the holder can convert the $100 preferred into four common shares. It may be beneficial to convert if the price of the common stock is trading above $25 ($100 / conversion ratio). Once converted though, the preferred shareholder becomes a common shareholder and is no longer entitled to the preferred dividend or a higher claim on assets. Therefore, the preferred shareholder may wish to wait until the common stock rises significantly before giving up their preferred shares. Assume the stock price rises to $40. For each $100 preferred share, the holder can get $160 worth of common stock (4 x $40). If they decide to convert the preferred shares, each preferred share will disappear from the account and be replaced by four shares of common stock. No cash changes hands, so it is a cashless conversion. ## How Does a Cashless Warrant Work? Upon exercise, a cashless warrant allows an investor to receive a certain number of shares without any outlay of cash. The "cashless" component refers to receiving a smaller amount of shares than would otherwise be received with a warrant plus cash. ## How Is a Cashless Exercise Taxed? A cashless exercise is taxed as ordinary income. The amount taxed is the difference between the strike price (the price you can purchase the stock for) and the price the shares are sold for. ## What Is the Difference Between an ISO and an NSO? The difference between a qualified incentive stock option (ISO) and a non-qualified incentive stock option (NSO) is how they are taxed, their expiration date, and when taxes are due. ISOs are subject to an alternative minimum tax (AMT) while NSOs are subject to ordinary tax plus payroll taxes. ISOs are only effective while you are employed with the company and up to 90 days after you leave. NSOs don't have such an expiration date and are effective after you leave a company. NSO taxes are due when the options are exercised whereas the AMT portion of ISOs is due during regular annual tax filings.

What Is a Cashless Conversion? A cashless conversion is the direct conversion of ownership, from one type of security to another, without any initial cash outlay by the holder. For instance, the conversion of a convertible bond from debt to equity in the form of common stock. Contracts for convertible securities define all the terms of the conversion at the onset of the trade. Often, the transfer of assets will be triggered automatically on a specific date or when a specific event occurs, such as with the expiration of certain options or warrants. Key Takeaways A cashless conversion is when the ownership type of an asset changes without a cash outlay.Convertible bonds and convertible preferred shares could result, if triggered, in a cashless conversion to common stock.A cashless exercise is similar in that it does not involve a cash outlay, but the asset is exercised using a loan, or the compensation received is offset by the strike price. Understanding a Cashless Conversion A classic example of a cashless conversion is when preferred shares or convertible bonds are traded in for common stock. Employee stock options, rights, and warrants can also be cashless if the strike is zero; however, they could also be a cashless exercise. In the case of employee stock options, this is when a broker provides the holder with a loan to exercise the options at the strike price. After paying fees and paying off the loan with the proceeds from selling some of the shares, the employee retains the remaining shares garnered from the options. Preferred Shares Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders. Some preferred stock is convertible, meaning it can be exchanged for a given number of common shares under certain circumstances. The board of directors might vote to convert the stock, the investor might have the option to convert, or the stock might have a specified date at which it automatically converts. The conversion from preferred to common stock is a cashless conversion. Convertible Bonds A convertible bond is a type of debt security that can be converted into a predetermined amount of the underlying company's common stock at certain times during the bond's life, usually at the discretion of the bondholder. If triggered, the bond is swapped for common stocks, so it is a cashless conversion. Unless market conditions trigger an automatic conversion, as defined in the contract, the procedure to convert is to simply notify the issuer of the desire to convert. The converted number of shares replaces the currently held asset with no money due. Cashless Exercise A cashless exercise is a transaction in which certain securities are exercised without making any cash payment. Such a transaction utilizes a broker to provide a short-term loan so that the holder exercising the options has enough money to do so. Once the loan to exercise the options is in place, the holder then sells enough of the newly acquired shares to pay back the broker for the loan, fees, and taxes. The person exercising the conversion then possesses the remaining shares. This is a common process with employee stock options. Warrants Warrants give the right, but not the obligation, to buy or sell a security—most commonly a stock—at a certain price before expiration. The price at which the underlying security is bought or sold is referred to as the exercise price or strike price; however, in order to be cashless, the warrant itself must be defined as a cashless warrant. In this case, the holder would pay the exercise price from the value of the shares received. For example, if the warrant is for the purchase of 10,000 shares at $1.00 per share, and the market price of the stock at exercise is $10.00 per share, the holder would, upon exercise, receive the market value of the shares ($100,000) minus $10,000 (shares multiplied by warrant strike) for a total value of $90,000 or 9,000 shares. Example of a Cashless Conversion Convertible preferred shares have a conversion ratio, which describes how many common shares each preferred share can be converted to. For example, a $100 preferred share may have a conversion ratio of four. This means the holder can convert the $100 preferred into four common shares. It may be beneficial to convert if the price of the common stock is trading above $25 ($100 / conversion ratio). Once converted though, the preferred shareholder becomes a common shareholder and is no longer entitled to the preferred dividend or a higher claim on assets. Therefore, the preferred shareholder may wish to wait until the common stock rises significantly before giving up their preferred shares. Assume the stock price rises to $40. For each $100 preferred share, the holder can get $160 worth of common stock (4 x $40). If they decide to convert the preferred shares, each preferred share will disappear from the account and be replaced by four shares of common stock. No cash changes hands, so it is a cashless conversion. How Does a Cashless Warrant Work? Upon exercise, a cashless warrant allows an investor to receive a certain number of shares without any outlay of cash. The "cashless" component refers to receiving a smaller amount of shares than would otherwise be received with a warrant plus cash. How Is a Cashless Exercise Taxed? A cashless exercise is taxed as ordinary income. The amount taxed is the difference between the strike price (the price you can purchase the stock for) and the price the shares are sold for. What Is the Difference Between an ISO and an NSO? The difference between a qualified incentive stock option (ISO) and a non-qualified incentive stock option (NSO) is how they are taxed, their expiration date, and when taxes are due. ISOs are subject to an alternative minimum tax (AMT) while NSOs are subject to ordinary tax plus payroll taxes. ISOs are only effective while you are employed with the company and up to 90 days after you leave. NSOs don't have such an expiration date and are effective after you leave a company. NSO taxes are due when the options are exercised whereas the AMT portion of ISOs is due during regular annual tax filings.

https://www.investopedia.com/ask/answers/111915/how-does-netspend-overdraft-protection-work.asp

How Does Netspend Overdraft Protection Work?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Many banks offer overdraft protection, a short-term solution customers can use to compensate for insufficient funds. This service is also offered by Netspend, a provider of prepaid debit cards for both personal and commercial customers in the U.S. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Learn more about what <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overdraft-protection.asp">overdraft protection</a> is and how it works, as well as about <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/company-insights/082716/how-netspend-works-and-makes-money-tss.asp">Netspend</a>'s overdraft protection policies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Netspend offers prepaid debit card users overdraft protection when their account balance goes under -$10.01.</li><li>Customers must enroll and have at least one direct deposit of $500 or more every 30 days.</li><li>Netspend charges $20 per overdraft transaction up to a maximum of five transactions each month.</li><li>Netspend service is canceled if the customer has a negative balance for more than 30 days three different times, or for more than 60 days at one time.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-overdraft-protection"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is Overdraft Protection? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/071114/what-are-pros-and-cons-overdraft-protection.asp">Overdraft protection</a> is a credit facility added to an account such as a checking or savings account. It gives you access to funds if and when your account reaches a zero balance, up to a specified amount. This means the bank allows you to continue using the account even when there is no money in it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> In essence, overdraft is a short-term loan extended by the bank to the account holder. It must be paid back, though, by making one or more deposits into the account to bring the account back above zero.<span class="ql-inline-citation" data-cite="3"></span> Just like any other credit product, overdraft protection can't be added to an account without authorization from the customer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Banks generally charge interest for the average balance that remains in overdraft at the end of each month. Most accounts charge a lower interest rate than a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp">credit card</a>, making it a more affordable option in an emergency.<span class="ql-inline-citation" data-cite="4"></span> Customers also incur a monthly fee for having the service on their account, even if they don't use it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Because of the nature of the service and the fees involved, overdraft is meant to be used for emergencies only and isn't intended for everyday use.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> According to the Federal Reserve Bank of St. Louis, the average overdraft fee in the U.S. was $35 in 2023, which could add up to hundreds of dollars a year in charges, if used frequently.<span class="ql-inline-citation" data-cite="5"></span> Keep in mind, though, this figure doesn't include any interest incurred on the balance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_18-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="What to Know About Netspend Overdraft Protection" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/wWIukqJBP-q42Yvyy3KJSQmpsyE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/wWIukqJBP-q42Yvyy3KJSQmpsyE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png" data-srcset="https://www.investopedia.com/thmb/WLCuaBldHyNd6IBO9uqKHWSwSh0=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="What to Know About Netspend Overdraft Protection" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/wWIukqJBP-q42Yvyy3KJSQmpsyE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png" srcset="https://www.investopedia.com/thmb/WLCuaBldHyNd6IBO9uqKHWSwSh0=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Mira Norian</p></span> </figcaption></figure> <span class="heading-toc" id="toc-netspend-and-overdrafts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Netspend and Overdrafts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> As noted, Netspend provides <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/042315/how-do-prepaid-debit-cards-work.asp">prepaid debit cards</a> for both personal and commercial clients. The company was founded in 1999, and, according to its website, serves 68 million underbanked consumers—especially those who don't have a bank account and people who prefer different financial services options.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> You can load your debit cards with cash or link them up to bank accounts to do transfers. You can also have your paychecks, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxreturn.asp">income tax refunds</a>, or other benefits <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">deposited directly</a> to your Netspend accounts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Netspend <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/112315/will-netspend-cards-let-you-overdraw-your-account.asp">offers overdraft protection</a> to eligible cardholders through MetaBank.<span class="ql-inline-citation" data-cite="7"></span> This feature allows you to make transactions or incur fees with amounts that exceed the balance on your card after meeting activation and eligibility requirements. Because it is optional and not automatic, you must enroll in order to activate overdraft protection on your Netspend account.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Here's how it works. Netspend allows customers a buffer of $10, which means overdraft protection kicks in when the balance goes beyond -$10.01. The service fee Netspend charges is $20 for each transaction that overdraws a customer's account, with a maximum of five overdraft-protection service fees per calendar month. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Netspend transactions subject to an overdraft fee are signature and PIN purchases and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp">automated teller machine (ATM)</a> transactions. ACH debit transactions aren't eligible for overdraft protection coverage.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_30-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_31-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Netspend charges $20 each time the balance goes into overdraft for a maximum of five transaction fees each month.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-activation-and-eligibility"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Activation and Eligibility </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> To activate Netspend overdraft protection, a customer must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms to the contract associated with signing up for overdraft protection. Additionally, a Netspend customer must receive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deposit.asp">deposits</a> of $500 or more every 30 days to qualify for overdraft protection.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> If a customer overdraws his <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountbalance.asp">account balance</a> by more than $10, Netspend sends a notification about the overdraft. The customer has 24 hours to replenish the account to restore its balance to more than $10. If a customer fails to act on the notice, Netspend charges an overdraft protection service fee of $20.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-overdraft-protection-deactivation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Overdraft Protection Deactivation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> If a customer fails to receive deposits of at least $500 every 30 days, Netspend cancels the overdraft protection, meaning the customer must go through the application steps again. However, if a card account has a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/060916/can-checking-account-go-negative.asp">negative balance</a> for more than 30 days three times or for more than 60 days at one time, the overdraft protection will be permanently canceled.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Netspend customers should be careful not to delete their email addresses or withdraw consent to receive electronic disclosures because if those things happen, their Netspend overdraft protection is automatically deactivated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-is-overdraft-protection"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Overdraft Protection?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Overdraft protection is effectively a short-term loan offered by the bank to an account holder. It must be paid back by making one or more deposits into the account to bring the account back above zero.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-by-how-much-will-netspend-let-you-overdraft-your-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">By How Much Will Netspend Let You Overdraft Your Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Approved purchase transactions are allowed to create up to a $10.00 negative balance on a Netspend account. You are responsible as the account holder for repayment of any negative balance.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-whats-the-maximum-number-of-overdraft-fees-you-can-receive-on-your-netspend-account-in-a-month"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Maximum Number of Overdraft Fees You Can Receive on Your Netspend Account in a Month?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most fees—at $20 each—you can be assessed for overdrawing a Netspend account is five per month.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Many banks give overdraft protection, a short-term way for customers to compensate for insufficient funds. This service is also offered by Netspend, which provides prepaid debit cards for personal and commercial customers in the U.S. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Because it's optional and not automatic, you must enroll in order to activate overdraft protection on your account. The card issuer allows you a buffer of $10, so overdraft protection starts when the balance goes beyond -$10.01. Netspend charges a $20 service fee for each transaction that overdraws, up to a limit of five per month. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> To activate Netspend overdraft protection, you must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms. Then you must receive deposits of $500 or more every 30 days to qualify for the service. </p></div>

Many banks offer overdraft protection, a short-term solution customers can use to compensate for insufficient funds. This service is also offered by Netspend, a provider of prepaid debit cards for both personal and commercial customers in the U.S. Learn more about what [overdraft protection](https://www.investopedia.com/terms/o/overdraft-protection.asp) is and how it works, as well as about [Netspend](https://www.investopedia.com/articles/company-insights/082716/how-netspend-works-and-makes-money-tss.asp)'s overdraft protection policies. ### Key Takeaways * Netspend offers prepaid debit card users overdraft protection when their account balance goes under -$10.01. * Customers must enroll and have at least one direct deposit of $500 or more every 30 days. * Netspend charges $20 per overdraft transaction up to a maximum of five transactions each month. * Netspend service is canceled if the customer has a negative balance for more than 30 days three different times, or for more than 60 days at one time. ## What Is Overdraft Protection? [Overdraft protection](https://www.investopedia.com/ask/answers/071114/what-are-pros-and-cons-overdraft-protection.asp) is a credit facility added to an account such as a checking or savings account. It gives you access to funds if and when your account reaches a zero balance, up to a specified amount. This means the bank allows you to continue using the account even when there is no money in it. In essence, overdraft is a short-term loan extended by the bank to the account holder. It must be paid back, though, by making one or more deposits into the account to bring the account back above zero. Just like any other credit product, overdraft protection can't be added to an account without authorization from the customer. Banks generally charge interest for the average balance that remains in overdraft at the end of each month. Most accounts charge a lower interest rate than a [credit card](https://www.investopedia.com/terms/c/creditcard.asp), making it a more affordable option in an emergency. Customers also incur a monthly fee for having the service on their account, even if they don't use it. ### Note Because of the nature of the service and the fees involved, overdraft is meant to be used for emergencies only and isn't intended for everyday use. According to the Federal Reserve Bank of St. Louis, the average overdraft fee in the U.S. was $35 in 2023, which could add up to hundreds of dollars a year in charges, if used frequently. Keep in mind, though, this figure doesn't include any interest incurred on the balance. ![What to Know About Netspend Overdraft Protection]() :max_bytes(150000):strip_icc()/how-does-netspend-overdraft-protection-work.asp-final-e1b3e8969ccf452a86c31ed9bf69c65b.png) Investopedia / Mira Norian ## Netspend and Overdrafts As noted, Netspend provides [prepaid debit cards](https://www.investopedia.com/ask/answers/042315/how-do-prepaid-debit-cards-work.asp) for both personal and commercial clients. The company was founded in 1999, and, according to its website, serves 68 million underbanked consumers—especially those who don't have a bank account and people who prefer different financial services options. You can load your debit cards with cash or link them up to bank accounts to do transfers. You can also have your paychecks, [income tax refunds](https://www.investopedia.com/terms/t/taxreturn.asp), or other benefits [deposited directly](https://www.investopedia.com/terms/d/directdeposit.asp) to your Netspend accounts. Netspend [offers overdraft protection](https://www.investopedia.com/ask/answers/112315/will-netspend-cards-let-you-overdraw-your-account.asp) to eligible cardholders through MetaBank. This feature allows you to make transactions or incur fees with amounts that exceed the balance on your card after meeting activation and eligibility requirements. Because it is optional and not automatic, you must enroll in order to activate overdraft protection on your Netspend account. Here's how it works. Netspend allows customers a buffer of $10, which means overdraft protection kicks in when the balance goes beyond -$10.01. The service fee Netspend charges is $20 for each transaction that overdraws a customer's account, with a maximum of five overdraft-protection service fees per calendar month. Netspend transactions subject to an overdraft fee are signature and PIN purchases and [automated teller machine (ATM)](https://www.investopedia.com/terms/a/atm.asp) transactions. ACH debit transactions aren't eligible for overdraft protection coverage. ### Netspend charges $20 each time the balance goes into overdraft for a maximum of five transaction fees each month. ## Activation and Eligibility To activate Netspend overdraft protection, a customer must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms to the contract associated with signing up for overdraft protection. Additionally, a Netspend customer must receive [deposits](https://www.investopedia.com/terms/d/deposit.asp) of $500 or more every 30 days to qualify for overdraft protection. If a customer overdraws his [account balance](https://www.investopedia.com/terms/a/accountbalance.asp) by more than $10, Netspend sends a notification about the overdraft. The customer has 24 hours to replenish the account to restore its balance to more than $10. If a customer fails to act on the notice, Netspend charges an overdraft protection service fee of $20. ## Overdraft Protection Deactivation If a customer fails to receive deposits of at least $500 every 30 days, Netspend cancels the overdraft protection, meaning the customer must go through the application steps again. However, if a card account has a [negative balance](https://www.investopedia.com/ask/answers/060916/can-checking-account-go-negative.asp) for more than 30 days three times or for more than 60 days at one time, the overdraft protection will be permanently canceled. Netspend customers should be careful not to delete their email addresses or withdraw consent to receive electronic disclosures because if those things happen, their Netspend overdraft protection is automatically deactivated. ## What Is Overdraft Protection? Overdraft protection is effectively a short-term loan offered by the bank to an account holder. It must be paid back by making one or more deposits into the account to bring the account back above zero. ## By How Much Will Netspend Let You Overdraft Your Account? Approved purchase transactions are allowed to create up to a $10.00 negative balance on a Netspend account. You are responsible as the account holder for repayment of any negative balance. ## What's the Maximum Number of Overdraft Fees You Can Receive on Your Netspend Account in a Month? The most fees—at $20 each—you can be assessed for overdrawing a Netspend account is five per month. ## The Bottom Line Many banks give overdraft protection, a short-term way for customers to compensate for insufficient funds. This service is also offered by Netspend, which provides prepaid debit cards for personal and commercial customers in the U.S. Because it's optional and not automatic, you must enroll in order to activate overdraft protection on your account. The card issuer allows you a buffer of $10, so overdraft protection starts when the balance goes beyond -$10.01. Netspend charges a $20 service fee for each transaction that overdraws, up to a limit of five per month. To activate Netspend overdraft protection, you must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms. Then you must receive deposits of $500 or more every 30 days to qualify for the service.

Many banks offer overdraft protection, a short-term solution customers can use to compensate for insufficient funds. This service is also offered by Netspend, a provider of prepaid debit cards for both personal and commercial customers in the U.S. Learn more about what overdraft protection is and how it works, as well as about Netspend's overdraft protection policies. Key Takeaways Netspend offers prepaid debit card users overdraft protection when their account balance goes under -$10.01.Customers must enroll and have at least one direct deposit of $500 or more every 30 days.Netspend charges $20 per overdraft transaction up to a maximum of five transactions each month.Netspend service is canceled if the customer has a negative balance for more than 30 days three different times, or for more than 60 days at one time. What Is Overdraft Protection? Overdraft protection is a credit facility added to an account such as a checking or savings account. It gives you access to funds if and when your account reaches a zero balance, up to a specified amount. This means the bank allows you to continue using the account even when there is no money in it. In essence, overdraft is a short-term loan extended by the bank to the account holder. It must be paid back, though, by making one or more deposits into the account to bring the account back above zero. Just like any other credit product, overdraft protection can't be added to an account without authorization from the customer. Banks generally charge interest for the average balance that remains in overdraft at the end of each month. Most accounts charge a lower interest rate than a credit card, making it a more affordable option in an emergency. Customers also incur a monthly fee for having the service on their account, even if they don't use it. Note Because of the nature of the service and the fees involved, overdraft is meant to be used for emergencies only and isn't intended for everyday use. According to the Federal Reserve Bank of St. Louis, the average overdraft fee in the U.S. was $35 in 2023, which could add up to hundreds of dollars a year in charges, if used frequently. Keep in mind, though, this figure doesn't include any interest incurred on the balance. Investopedia / Mira Norian Netspend and Overdrafts As noted, Netspend provides prepaid debit cards for both personal and commercial clients. The company was founded in 1999, and, according to its website, serves 68 million underbanked consumers—especially those who don't have a bank account and people who prefer different financial services options. You can load your debit cards with cash or link them up to bank accounts to do transfers. You can also have your paychecks, income tax refunds, or other benefits deposited directly to your Netspend accounts. Netspend offers overdraft protection to eligible cardholders through MetaBank. This feature allows you to make transactions or incur fees with amounts that exceed the balance on your card after meeting activation and eligibility requirements. Because it is optional and not automatic, you must enroll in order to activate overdraft protection on your Netspend account. Here's how it works. Netspend allows customers a buffer of $10, which means overdraft protection kicks in when the balance goes beyond -$10.01. The service fee Netspend charges is $20 for each transaction that overdraws a customer's account, with a maximum of five overdraft-protection service fees per calendar month. Netspend transactions subject to an overdraft fee are signature and PIN purchases and automated teller machine (ATM) transactions. ACH debit transactions aren't eligible for overdraft protection coverage. Netspend charges $20 each time the balance goes into overdraft for a maximum of five transaction fees each month. Activation and Eligibility To activate Netspend overdraft protection, a customer must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms to the contract associated with signing up for overdraft protection. Additionally, a Netspend customer must receive deposits of $500 or more every 30 days to qualify for overdraft protection. If a customer overdraws his account balance by more than $10, Netspend sends a notification about the overdraft. The customer has 24 hours to replenish the account to restore its balance to more than $10. If a customer fails to act on the notice, Netspend charges an overdraft protection service fee of $20. Overdraft Protection Deactivation If a customer fails to receive deposits of at least $500 every 30 days, Netspend cancels the overdraft protection, meaning the customer must go through the application steps again. However, if a card account has a negative balance for more than 30 days three times or for more than 60 days at one time, the overdraft protection will be permanently canceled. Netspend customers should be careful not to delete their email addresses or withdraw consent to receive electronic disclosures because if those things happen, their Netspend overdraft protection is automatically deactivated. What Is Overdraft Protection? Overdraft protection is effectively a short-term loan offered by the bank to an account holder. It must be paid back by making one or more deposits into the account to bring the account back above zero. By How Much Will Netspend Let You Overdraft Your Account? Approved purchase transactions are allowed to create up to a $10.00 negative balance on a Netspend account. You are responsible as the account holder for repayment of any negative balance. What's the Maximum Number of Overdraft Fees You Can Receive on Your Netspend Account in a Month? The most fees—at $20 each—you can be assessed for overdrawing a Netspend account is five per month. The Bottom Line Many banks give overdraft protection, a short-term way for customers to compensate for insufficient funds. This service is also offered by Netspend, which provides prepaid debit cards for personal and commercial customers in the U.S. Because it's optional and not automatic, you must enroll in order to activate overdraft protection on your account. The card issuer allows you a buffer of $10, so overdraft protection starts when the balance goes beyond -$10.01. Netspend charges a $20 service fee for each transaction that overdraws, up to a limit of five per month. To activate Netspend overdraft protection, you must provide a valid email address and agree to Netspend's electronic delivery of disclosures and amended terms. Then you must receive deposits of $500 or more every 30 days to qualify for the service.

https://www.investopedia.com/biden-administration-expands-push-to-shift-workplace-rules-in-favor-of-workers-8638630

Biden Administration Expands Push to Shift Workplace Rules in Favor of Workers

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>President Joe Biden released major workplace regulation changes last week, the latest moves in his administration's campaign to give more power to workers.</li><li>One expands the number of workers covered by federal overtime rules, while another bans non-compete clauses in employment agreements.</li><li>Business trade groups largely came out against the rulings, and legal challenges have already been filed against the non-compete ban.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> President Joe Biden’s administration released major regulations last week aimed at tilting workplace rules in favor of workers, the latest in a series of actions by Biden to use the power of federal regulatory agencies to advance policy goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Federal regulators finalized rules expanding required overtime pay for workers making less than $58,656 and banning non-compete agreements on Tuesday. And in a move affecting employer-sponsored retirement plans, they finalized a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-biden-rule-would-make-your-retirement-advisor-work-for-you-not-for-commission-8385142">rule requiring retirement advisors to act as fiduciaries</a>, in the best interest of their clients rather than being paid to promote certain financial products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Taken together, the policies could alter the balance of power in the workplace, giving employees more leverage to switch jobs, potentially raising their bargaining power and ultimately their wages. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> “It appears that the Biden administration is taking a number of steps to benefit workers, potentially at the expense of their employers, and is trying to tilt the playing field more in favor of workers,” said  Leonard Samuels, a labor and employment expert and partner at Berger Singerman law firm. “What the Biden administration is doing all at once is fairly breathtaking.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The new rules are an attempt to “get American workers a better deal,” Biden said in a post on social media platform X.<span class="ql-inline-citation" data-cite="1"></span> “Workers ought to have the right to choose who they want to work for,” Biden wrote of the non-compete ban. And regarding the overtime rule: “If you work extra hours, you deserve extra pay.”  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Businesses stand to be affected by the new rules, and some leaders have come out against them. The non-compete ban already faces a legal challenge from a large national group representing businesses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy," Suzanne Clark, the President of the U.S. Chamber of Commerce, a trade group representing businesses, said in a press release Tuesday. The Chamber sued the Federal Trade Commission's ban on non-compete agreements.<span class="ql-inline-citation" data-cite="10"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-more-workers-eligible-for-overtime-pay"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> More Workers Eligible For Overtime Pay </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The Biden administration has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/biden-administration-forgives-usd7-4-billion-more-in-student-loans-8630647">forgiven federal student loan debt</a> for millions of borrowers, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/federal-financial-watchdog-wants-to-cut-overdraft-fees-to-as-little-as-usd3-8430578">cracked down on</a> <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/airline-junk-fees-can-no-longer-fly-under-the-radar-new-rule-says-8637885">“junk fees” across industries</a>, and made it <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-worker-classification-rule-could-disrupt-the-us-gig-economy-8546526">harder for companies to classify their workers as contractors</a> in order to avoid workplace rules protecting employees—all without legislation from Congress.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Among last week's regulations, the Department of Labor expanded the number of workers covered by federal overtime rules, which require employers to pay people at 1.5 times their regular hourly rate for any work they do beyond 40 hours a week.<span class="ql-inline-citation" data-cite="2"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Starting in July, anyone who makes less than $43,888 per year will be entitled to overtime pay no matter what kind of work they do, up from the current level of $35,568. That limit will be raised once again in January to $58,656 a year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> An additional 4 million people will become eligible for overtime by the new year, the department estimated.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Workers will earn an additional $1.5 billion extra per year under the new rules, according to an analysis by the Economic Policy Institute, a progressive think tank.<span class="ql-inline-citation" data-cite="4"></span> It’s also likely to reduce the amount of unpaid overtime that salaried workers undertake, economists at the EPI said in a blog post. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The National Retail Federation, a trade group representing retailers, predicted the rule could backfire by causing employers to offer less flexible working arrangements.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> “The new rules will cause employers to reexamine compensation packages for millions of workers nationwide,” David French, executive vice president of government relations at the federation said in a press release. “Some workers may lose the status of a managerial position. Some may lose much-desired flexibility as to when, how and where they work, including the ability to work from home.”<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-no-more-non-compete-agreements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> No More Non-Compete Agreements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The Federal Trade Commission also finalized a rule <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-ftc-rule-bans-employee-non-compete-clauses-in-contracts-8637832">banning employers from making their workers sign agreements limiting where they can work</a> in the future as a condition of employment.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> For example, employers can no longer prevent workers from moving to another company in the same industry for a year after they quit. Such “non-compete” clauses have become extremely common, the FTC said, covering some 30 million workers and preventing people from switching jobs, negotiating for higher pay, or quitting to start their own companies.<span class="ql-inline-citation" data-cite="5"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The FTC cited stories sent in from workers in various industries including an asphalt salesperson, a bartender, a veterinarian, a doctor, and even a power-washer who had their careers hindered by non-compete agreements.<br/><br/>“All I know is power-washing and these business owners all want me to sign a non-compete clause,” one of the anonymous commenters told the FTC. “It’s one big circle of wealthy business owners keeping the little man down.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> The rule not only bans future noncompete contracts for all workers other than senior executives, but it would render current noncompetes null and void, freeing employees to work wherever they want or start their own companies competing with their former bosses.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Samuels said the part of the rule most vulnerable to being blocked by a lawsuit was probably the nullification of existing contracts. But if the rule survives legal challenges, it could have a massive impact on the workplace, he said.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> “I think you're going to see a lot more movement among employees,” Samuels said. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-business-groups-have-mixed-feelings"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> Business Groups Have Mixed Feelings </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Business groups argued the ban would have unintended consequences.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> “The FTC’s rule banning noncompete agreements is unprecedented and threatens manufacturers’ ability to attract and retain talent,” Chris Netram, managing vice president of policy for the National Association of Manufacturers, said in a statement.<span class="ql-inline-citation" data-cite="7"></span> “In addition, today’s action puts at risk the security of intellectual property and trade secrets.”<br/><br/>The Federation of American Hospitals, a group representing for-profit healthcare facilities, said the ban would backfire by making it harder to recruit and retain caregivers.<span class="ql-inline-citation" data-cite="8"></span> The federation said it would give nonprofit hospitals an edge as legal experts say the rule will not apply to those entities.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Small Business Majority, an advocacy group, was among several small business advocacy groups that came out in support of the rule.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> “Small businesses overwhelmingly want a level playing field, and non-competes don’t deliver because they are a threat to the free, fair and open competition that is essential to a thriving and equitable economy,” John Arensymeyer, CEO of the group, wrote in a statement. <br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * President Joe Biden released major workplace regulation changes last week, the latest moves in his administration's campaign to give more power to workers. * One expands the number of workers covered by federal overtime rules, while another bans non-compete clauses in employment agreements. * Business trade groups largely came out against the rulings, and legal challenges have already been filed against the non-compete ban. President Joe Biden’s administration released major regulations last week aimed at tilting workplace rules in favor of workers, the latest in a series of actions by Biden to use the power of federal regulatory agencies to advance policy goals. Federal regulators finalized rules expanding required overtime pay for workers making less than $58,656 and banning non-compete agreements on Tuesday. And in a move affecting employer-sponsored retirement plans, they finalized a [rule requiring retirement advisors to act as fiduciaries](https://www.investopedia.com/new-biden-rule-would-make-your-retirement-advisor-work-for-you-not-for-commission-8385142), in the best interest of their clients rather than being paid to promote certain financial products. Taken together, the policies could alter the balance of power in the workplace, giving employees more leverage to switch jobs, potentially raising their bargaining power and ultimately their wages. “It appears that the Biden administration is taking a number of steps to benefit workers, potentially at the expense of their employers, and is trying to tilt the playing field more in favor of workers,” said  Leonard Samuels, a labor and employment expert and partner at Berger Singerman law firm. “What the Biden administration is doing all at once is fairly breathtaking.” The new rules are an attempt to “get American workers a better deal,” Biden said in a post on social media platform X. “Workers ought to have the right to choose who they want to work for,” Biden wrote of the non-compete ban. And regarding the overtime rule: “If you work extra hours, you deserve extra pay.”  Businesses stand to be affected by the new rules, and some leaders have come out against them. The non-compete ban already faces a legal challenge from a large national group representing businesses. “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy," Suzanne Clark, the President of the U.S. Chamber of Commerce, a trade group representing businesses, said in a press release Tuesday. The Chamber sued the Federal Trade Commission's ban on non-compete agreements. ## More Workers Eligible For Overtime Pay The Biden administration has [forgiven federal student loan debt](https://www.investopedia.com/biden-administration-forgives-usd7-4-billion-more-in-student-loans-8630647) for millions of borrowers, [cracked down on](https://www.investopedia.com/federal-financial-watchdog-wants-to-cut-overdraft-fees-to-as-little-as-usd3-8430578) [“junk fees” across industries](https://www.investopedia.com/airline-junk-fees-can-no-longer-fly-under-the-radar-new-rule-says-8637885), and made it [harder for companies to classify their workers as contractors](https://www.investopedia.com/new-worker-classification-rule-could-disrupt-the-us-gig-economy-8546526) in order to avoid workplace rules protecting employees—all without legislation from Congress.  Among last week's regulations, the Department of Labor expanded the number of workers covered by federal overtime rules, which require employers to pay people at 1.5 times their regular hourly rate for any work they do beyond 40 hours a week.  Starting in July, anyone who makes less than $43,888 per year will be entitled to overtime pay no matter what kind of work they do, up from the current level of $35,568. That limit will be raised once again in January to $58,656 a year. An additional 4 million people will become eligible for overtime by the new year, the department estimated. Workers will earn an additional $1.5 billion extra per year under the new rules, according to an analysis by the Economic Policy Institute, a progressive think tank. It’s also likely to reduce the amount of unpaid overtime that salaried workers undertake, economists at the EPI said in a blog post. The National Retail Federation, a trade group representing retailers, predicted the rule could backfire by causing employers to offer less flexible working arrangements.  “The new rules will cause employers to reexamine compensation packages for millions of workers nationwide,” David French, executive vice president of government relations at the federation said in a press release. “Some workers may lose the status of a managerial position. Some may lose much-desired flexibility as to when, how and where they work, including the ability to work from home.” ## No More Non-Compete Agreements The Federal Trade Commission also finalized a rule [banning employers from making their workers sign agreements limiting where they can work](https://www.investopedia.com/new-ftc-rule-bans-employee-non-compete-clauses-in-contracts-8637832) in the future as a condition of employment.  For example, employers can no longer prevent workers from moving to another company in the same industry for a year after they quit. Such “non-compete” clauses have become extremely common, the FTC said, covering some 30 million workers and preventing people from switching jobs, negotiating for higher pay, or quitting to start their own companies.  The FTC cited stories sent in from workers in various industries including an asphalt salesperson, a bartender, a veterinarian, a doctor, and even a power-washer who had their careers hindered by non-compete agreements. “All I know is power-washing and these business owners all want me to sign a non-compete clause,” one of the anonymous commenters told the FTC. “It’s one big circle of wealthy business owners keeping the little man down.” The rule not only bans future noncompete contracts for all workers other than senior executives, but it would render current noncompetes null and void, freeing employees to work wherever they want or start their own companies competing with their former bosses.  Samuels said the part of the rule most vulnerable to being blocked by a lawsuit was probably the nullification of existing contracts. But if the rule survives legal challenges, it could have a massive impact on the workplace, he said.  “I think you're going to see a lot more movement among employees,” Samuels said. ## Business Groups Have Mixed Feelings Business groups argued the ban would have unintended consequences.  “The FTC’s rule banning noncompete agreements is unprecedented and threatens manufacturers’ ability to attract and retain talent,” Chris Netram, managing vice president of policy for the National Association of Manufacturers, said in a statement. “In addition, today’s action puts at risk the security of intellectual property and trade secrets.” The Federation of American Hospitals, a group representing for-profit healthcare facilities, said the ban would backfire by making it harder to recruit and retain caregivers. The federation said it would give nonprofit hospitals an edge as legal experts say the rule will not apply to those entities. Small Business Majority, an advocacy group, was among several small business advocacy groups that came out in support of the rule.  “Small businesses overwhelmingly want a level playing field, and non-competes don’t deliver because they are a threat to the free, fair and open competition that is essential to a thriving and equitable economy,” John Arensymeyer, CEO of the group, wrote in a statement.  Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways President Joe Biden released major workplace regulation changes last week, the latest moves in his administration's campaign to give more power to workers.One expands the number of workers covered by federal overtime rules, while another bans non-compete clauses in employment agreements.Business trade groups largely came out against the rulings, and legal challenges have already been filed against the non-compete ban. President Joe Biden’s administration released major regulations last week aimed at tilting workplace rules in favor of workers, the latest in a series of actions by Biden to use the power of federal regulatory agencies to advance policy goals. Federal regulators finalized rules expanding required overtime pay for workers making less than $58,656 and banning non-compete agreements on Tuesday. And in a move affecting employer-sponsored retirement plans, they finalized a rule requiring retirement advisors to act as fiduciaries, in the best interest of their clients rather than being paid to promote certain financial products. Taken together, the policies could alter the balance of power in the workplace, giving employees more leverage to switch jobs, potentially raising their bargaining power and ultimately their wages. “It appears that the Biden administration is taking a number of steps to benefit workers, potentially at the expense of their employers, and is trying to tilt the playing field more in favor of workers,” said  Leonard Samuels, a labor and employment expert and partner at Berger Singerman law firm. “What the Biden administration is doing all at once is fairly breathtaking.” The new rules are an attempt to “get American workers a better deal,” Biden said in a post on social media platform X. “Workers ought to have the right to choose who they want to work for,” Biden wrote of the non-compete ban. And regarding the overtime rule: “If you work extra hours, you deserve extra pay.”  Businesses stand to be affected by the new rules, and some leaders have come out against them. The non-compete ban already faces a legal challenge from a large national group representing businesses. “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy," Suzanne Clark, the President of the U.S. Chamber of Commerce, a trade group representing businesses, said in a press release Tuesday. The Chamber sued the Federal Trade Commission's ban on non-compete agreements. More Workers Eligible For Overtime Pay The Biden administration has forgiven federal student loan debt for millions of borrowers, cracked down on “junk fees” across industries, and made it harder for companies to classify their workers as contractors in order to avoid workplace rules protecting employees—all without legislation from Congress.  Among last week's regulations, the Department of Labor expanded the number of workers covered by federal overtime rules, which require employers to pay people at 1.5 times their regular hourly rate for any work they do beyond 40 hours a week.  Starting in July, anyone who makes less than $43,888 per year will be entitled to overtime pay no matter what kind of work they do, up from the current level of $35,568. That limit will be raised once again in January to $58,656 a year. An additional 4 million people will become eligible for overtime by the new year, the department estimated. Workers will earn an additional $1.5 billion extra per year under the new rules, according to an analysis by the Economic Policy Institute, a progressive think tank. It’s also likely to reduce the amount of unpaid overtime that salaried workers undertake, economists at the EPI said in a blog post. The National Retail Federation, a trade group representing retailers, predicted the rule could backfire by causing employers to offer less flexible working arrangements.  “The new rules will cause employers to reexamine compensation packages for millions of workers nationwide,” David French, executive vice president of government relations at the federation said in a press release. “Some workers may lose the status of a managerial position. Some may lose much-desired flexibility as to when, how and where they work, including the ability to work from home.” No More Non-Compete Agreements The Federal Trade Commission also finalized a rule banning employers from making their workers sign agreements limiting where they can work in the future as a condition of employment.  For example, employers can no longer prevent workers from moving to another company in the same industry for a year after they quit. Such “non-compete” clauses have become extremely common, the FTC said, covering some 30 million workers and preventing people from switching jobs, negotiating for higher pay, or quitting to start their own companies.  The FTC cited stories sent in from workers in various industries including an asphalt salesperson, a bartender, a veterinarian, a doctor, and even a power-washer who had their careers hindered by non-compete agreements.“All I know is power-washing and these business owners all want me to sign a non-compete clause,” one of the anonymous commenters told the FTC. “It’s one big circle of wealthy business owners keeping the little man down.” The rule not only bans future noncompete contracts for all workers other than senior executives, but it would render current noncompetes null and void, freeing employees to work wherever they want or start their own companies competing with their former bosses.  Samuels said the part of the rule most vulnerable to being blocked by a lawsuit was probably the nullification of existing contracts. But if the rule survives legal challenges, it could have a massive impact on the workplace, he said.  “I think you're going to see a lot more movement among employees,” Samuels said. Business Groups Have Mixed Feelings Business groups argued the ban would have unintended consequences.  “The FTC’s rule banning noncompete agreements is unprecedented and threatens manufacturers’ ability to attract and retain talent,” Chris Netram, managing vice president of policy for the National Association of Manufacturers, said in a statement. “In addition, today’s action puts at risk the security of intellectual property and trade secrets.”The Federation of American Hospitals, a group representing for-profit healthcare facilities, said the ban would backfire by making it harder to recruit and retain caregivers. The federation said it would give nonprofit hospitals an edge as legal experts say the rule will not apply to those entities. Small Business Majority, an advocacy group, was among several small business advocacy groups that came out in support of the rule.  “Small businesses overwhelmingly want a level playing field, and non-competes don’t deliver because they are a threat to the free, fair and open competition that is essential to a thriving and equitable economy,” John Arensymeyer, CEO of the group, wrote in a statement.  Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/f/forwardmarket.asp

Forward Market: Definition and Foreign Exchange Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-forward-market"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Forward Market? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A forward market is an over-the-counter marketplace that sets the price of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialinstrument.asp">financial instrument</a> or asset for future delivery. Forward markets are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market. It can also apply to markets for securities and interest rates as well as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodities</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Forward contracts differ from future contracts in that they are customizable in terms of size and length, or maturity term.</li><li>Forward contract pricing is based on interest rate discrepancies.</li><li>The most commonly traded currencies in the forward market are the same as on the spot market: EUR/USD, USD/JPY and GBP/USD.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-forward-market-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How A Forward Market Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> A forward market leads to the creation of forward contracts. While forward contracts—like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurescontract.asp">futures contracts</a>—may be used for both <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedging</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/speculation.asp">speculation</a>, there are some notable differences between the two. <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forwardcontract.asp">Forward contracts</a> can be customized to fit a customer's requirements, while futures contracts have standardized features in terms of their <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/contractsize.asp">contract size</a> and maturity.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Forwards are executed between banks or between a bank and a customer; futures are done on an exchange, which is a party to the transaction. The flexibility of forwards contributes to their attractiveness in the foreign exchange market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-pricing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Pricing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Prices in the forward market are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest-rate</a> based. In the foreign exchange market, the forward price is derived from the interest rate differential between the two currencies, which is applied over the period from the transaction date to the settlement date of the contract. In interest rate forwards, the price is based on the yield curve to maturity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-foreign-exchange-forwards"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Foreign Exchange Forwards </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Interbank forward foreign exchange markets are priced and executed as swaps. This means that currency A is purchased vs. currency B for delivery on the spot date at the spot rate in the market at the time the transaction is executed. At maturity, currency A is sold vs. currency B at the original spot rate plus or minus the forward points; this price is set when the swap is initiated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The interbank market usually trades for straight dates, such as a week or a month from the spot date. Three- and six-month maturities are among the most common, while the market is less liquid beyond 12 months. Amounts are commonly $25 million or more and can range into the billions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Customers, both corporations and financial institutions such as hedge funds and mutual funds, can execute forwards with a bank <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/counterparty.asp">counter-party</a> either as a swap or an outright transaction. In an outright forward, currency A is bought vs. currency B for delivery on the maturity date, which can be any business day beyond the spot date. The price is again the spot rate plus or minus the forward points, but no money changes hands until the maturity date. Outright forwards are often for odd dates and amounts; they can be for any size. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-non-deliverable-forwards"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Non-Deliverable Forwards </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Currencies for which there is no standard forward market can be traded via a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ndf.asp">non-deliverable forward</a>. These are executed off-shore to avoid trading restrictions, are only executed as swaps and are cash-settled in dollars or euros. The most commonly traded currencies are the Chinese remnimbi, South Korean won, and Indian rupee. </p></div>

## What Is a Forward Market? A forward market is an over-the-counter marketplace that sets the price of a [financial instrument](https://www.investopedia.com/terms/f/financialinstrument.asp) or asset for future delivery. Forward markets are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market. It can also apply to markets for securities and interest rates as well as [commodities](https://www.investopedia.com/terms/c/commodity.asp). ### Key Takeaways * Forward contracts differ from future contracts in that they are customizable in terms of size and length, or maturity term. * Forward contract pricing is based on interest rate discrepancies. * The most commonly traded currencies in the forward market are the same as on the spot market: EUR/USD, USD/JPY and GBP/USD. ## How A Forward Market Works A forward market leads to the creation of forward contracts. While forward contracts—like [futures contracts](https://www.investopedia.com/terms/f/futurescontract.asp)—may be used for both [hedging](https://www.investopedia.com/terms/h/hedge.asp) and [speculation](https://www.investopedia.com/terms/s/speculation.asp), there are some notable differences between the two. [Forward contracts](https://www.investopedia.com/terms/f/forwardcontract.asp) can be customized to fit a customer's requirements, while futures contracts have standardized features in terms of their [contract size](https://www.investopedia.com/terms/c/contractsize.asp) and maturity. Forwards are executed between banks or between a bank and a customer; futures are done on an exchange, which is a party to the transaction. The flexibility of forwards contributes to their attractiveness in the foreign exchange market. ## Pricing Prices in the forward market are [interest-rate](https://www.investopedia.com/terms/i/interestrate.asp) based. In the foreign exchange market, the forward price is derived from the interest rate differential between the two currencies, which is applied over the period from the transaction date to the settlement date of the contract. In interest rate forwards, the price is based on the yield curve to maturity. ## Foreign Exchange Forwards Interbank forward foreign exchange markets are priced and executed as swaps. This means that currency A is purchased vs. currency B for delivery on the spot date at the spot rate in the market at the time the transaction is executed. At maturity, currency A is sold vs. currency B at the original spot rate plus or minus the forward points; this price is set when the swap is initiated. The interbank market usually trades for straight dates, such as a week or a month from the spot date. Three- and six-month maturities are among the most common, while the market is less liquid beyond 12 months. Amounts are commonly $25 million or more and can range into the billions. Customers, both corporations and financial institutions such as hedge funds and mutual funds, can execute forwards with a bank [counter-party](https://www.investopedia.com/terms/c/counterparty.asp) either as a swap or an outright transaction. In an outright forward, currency A is bought vs. currency B for delivery on the maturity date, which can be any business day beyond the spot date. The price is again the spot rate plus or minus the forward points, but no money changes hands until the maturity date. Outright forwards are often for odd dates and amounts; they can be for any size. ## Non-Deliverable Forwards Currencies for which there is no standard forward market can be traded via a [non-deliverable forward](https://www.investopedia.com/terms/n/ndf.asp). These are executed off-shore to avoid trading restrictions, are only executed as swaps and are cash-settled in dollars or euros. The most commonly traded currencies are the Chinese remnimbi, South Korean won, and Indian rupee.

What Is a Forward Market? A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery. Forward markets are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market. It can also apply to markets for securities and interest rates as well as commodities. Key Takeaways Forward contracts differ from future contracts in that they are customizable in terms of size and length, or maturity term.Forward contract pricing is based on interest rate discrepancies.The most commonly traded currencies in the forward market are the same as on the spot market: EUR/USD, USD/JPY and GBP/USD. How A Forward Market Works A forward market leads to the creation of forward contracts. While forward contracts—like futures contracts—may be used for both hedging and speculation, there are some notable differences between the two. Forward contracts can be customized to fit a customer's requirements, while futures contracts have standardized features in terms of their contract size and maturity. Forwards are executed between banks or between a bank and a customer; futures are done on an exchange, which is a party to the transaction. The flexibility of forwards contributes to their attractiveness in the foreign exchange market. Pricing Prices in the forward market are interest-rate based. In the foreign exchange market, the forward price is derived from the interest rate differential between the two currencies, which is applied over the period from the transaction date to the settlement date of the contract. In interest rate forwards, the price is based on the yield curve to maturity. Foreign Exchange Forwards Interbank forward foreign exchange markets are priced and executed as swaps. This means that currency A is purchased vs. currency B for delivery on the spot date at the spot rate in the market at the time the transaction is executed. At maturity, currency A is sold vs. currency B at the original spot rate plus or minus the forward points; this price is set when the swap is initiated. The interbank market usually trades for straight dates, such as a week or a month from the spot date. Three- and six-month maturities are among the most common, while the market is less liquid beyond 12 months. Amounts are commonly $25 million or more and can range into the billions. Customers, both corporations and financial institutions such as hedge funds and mutual funds, can execute forwards with a bank counter-party either as a swap or an outright transaction. In an outright forward, currency A is bought vs. currency B for delivery on the maturity date, which can be any business day beyond the spot date. The price is again the spot rate plus or minus the forward points, but no money changes hands until the maturity date. Outright forwards are often for odd dates and amounts; they can be for any size. Non-Deliverable Forwards Currencies for which there is no standard forward market can be traded via a non-deliverable forward. These are executed off-shore to avoid trading restrictions, are only executed as swaps and are cash-settled in dollars or euros. The most commonly traded currencies are the Chinese remnimbi, South Korean won, and Indian rupee.

https://www.investopedia.com/trillionaire-5197050

Trillionaire Definition: How Much Money Is That and Who Will Be First?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> A trillionaire is an individual with a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency, such as the euro or the British pound. Currently, no one has yet claimed trillionaire status, although some of the world’s richest individuals <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0211/the-first-trillionaire.aspx">may only be a few years away from this milestone</a>.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>In the United States, the title “trillionaire” refers to someone with a net worth of at least $1 trillion.</li><li>Net worth refers to a person’s total assets—including business interests, investments, and personal property—minus their debts.</li><li>No one has yet claimed the title of trillionaire, although the speed at which the world’s wealthiest individuals have grown their fortunes suggests that it could happen in just a few years.</li><li>As of 2022, 18 countries have a gross domestic product (GDP) that exceeds $1 trillion.<span class="ql-inline-citation" data-cite="19"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-calculating-net-worth"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Calculating Net Worth  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Extremely affluent individuals often derive their wealth from a variety of sources: business interests, investments, real estate holdings, cash, and personal property. To tabulate your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/networth.asp">net worth</a>, start by totaling up all of those <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">assets</a>. You then deduct <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability.asp">liabilities</a>—everything from personal loans to mortgages. Someone with at least $1 trillion (or one trillion euros) of net assets would qualify as a trillionaire. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> For those in the highest strata of wealth, arriving at an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/importance-of-knowing-your-net-worth.asp">accurate net worth figure</a> tends to be a complex undertaking. While some assets are relatively stable, the value of business interests, in particular, can fluctuate wildly from one day to the next. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> In fact, <em>Forbes</em>, which publishes the preeminent list of the world’s wealthiest people, operates a “Real-Time Billionaires List” that is updated by the minute, based on stock valuations. Sitting atop it in the first three slots, as of Feb. 19, 2024, are Bernard Arnault &amp; family ($221.7 billion), Elon Musk ($205.2 billion), and Jeff Bezos ($190.7 billion), who are each separated by $15 to $16 billion. Trailing them in slots four and five are Mark Zuckerberg and Larry Ellison.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-examples-of-net-worth-whos-on-first"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Examples of Net Worth: Who’s on First? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Let’s look at French fashion magnate Arnault. Most of his and his family's roughly $221.7 billion wealth isn’t simply sitting in a bank account. It’s tied to the value of his holding company, LVMH, which owns famed brands such as Louis Vuitton, Christian Dior, and Hennessy.<span class="ql-inline-citation" data-cite="3"></span> A quick rise in the value of LVMH stock, relative to the holdings of Musk and Bezos, vaulted him to the first slot in May 2021. And, indeed, the three men often change positions with each other. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> As the value of Arnault’s brands surged during the COVID-19 pandemic, so did his net worth. Back in March 2020, <em>Forbes</em> estimated it at $76 billion.<span class="ql-inline-citation" data-cite="1"></span> In nearly four years as of February 2024, that figure had grown nearly 200%.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Second on the current <em>Forbes</em> list is Musk, who has a current net worth of approximately $205.2 billion.<span class="ql-inline-citation" data-cite="2"></span> As of February 2024, he owns roughly 21% of electric car manufacturer Tesla and about 42% of the aerospace company SpaceX.<span class="ql-inline-citation" data-cite="17"></span><span class="ql-inline-citation" data-cite="16"></span> Bezos, founder of Amazon, is second and worth $190 billion, with a 12.3% ownership of shares in the online retailer’s stock (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN">AMZN</a> on Nasdaq).<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As an example of how volatile those personal wealth estimates can be, Musk lost a reported $8.9 billion in one day back in December 2020, when a J.P. Morgan analyst concluded that Tesla shares were significantly overvalued.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-the-worlds-first-trillionaire"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> The World’s First Trillionaire? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Even the likes of Arnault and Musk—with $221.7 billion and $205 billion, respectively—might seem a long way off from reaching the trillionaire designation. However, the pace at which some of the world’s richest people have been able to accumulate wealth suggests that it may only be a few short years before someone garners that designation.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Arnault, for instance, was able to increase his net worth by about six-fold in eight years—from $33.5 billion in 2014 to $221.7 billion in 2024. Were he to repeat that accomplishment, he would be a trillionaire before the decade is over.<span class="ql-inline-citation" data-cite="8"></span>   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Musk, who has built his wealth on game-changing companies—Tesla in the realm of electric cars and SpaceX for commercially developed rockets—may stand as good a chance as any. Just five years ago in 2019, the enigmatic entrepreneur had a net worth estimated at $22.3 billion. As of Feb. 19, 2024, his wealth is in the ballpark of $205 billion.<span class="ql-inline-citation" data-cite="16"></span> If those ventures continue on anything like their current valuation trajectory, then he could get to trillionaire status before long.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Bezos, who owns <em>The Washington Post</em> and aerospace firm Blue Origin in addition to his stake in Amazon, has similarly experienced a rapid buildup of wealth. Since 2017, the <em>Forbes</em> estimate of Bezos’ net worth soared from nearly $72.8 billion to $190 billion, a more than 2 1/2 times gain.<span class="ql-inline-citation" data-cite="9"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-how-much-is-1-trillion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> How Much Is $1 Trillion? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> To put it mildly, a fortune of $1 trillion is an enormous amount of money—so much that it’s hard to conceptualize how much wealth that actually is.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Here’s some context: According to the Federal Reserve’s latest Survey of Consumer Finances, taken in 2022, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/median.asp">median</a> <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/median.asp">net wo</a>rth of U.S. households was $192,900.<span class="ql-inline-citation" data-cite="21"></span> Thus, a trillionaire would have wealth equal to 5.2 million<em> </em>times that of the typical American family. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Here is another way to put that amount of personal treasure in perspective: It took the U.S. Senate months of arduous negotiations to agree on a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/here-s-what-s-in-the-usd1-trillion-infrastructure-bill-passed-by-the-senate-5196817">$1.2 trillion infrastructure bill</a> which was passed in November 2021. That was largely because many Republicans balked at that much additional federal spending (though, technically, the bill has only $550 billion of new expenditures).<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Net assets of $1 trillion represents a greater sum than the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gdp.asp">gross domestic product (GDP)</a> of countries such as Switzerland, Sweden, and Austria. In fact, only 18 countries have a GDP that exceeds $1 trillion.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> No individual has claimed the status of trillionaire just yet. But a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency isn't unattainable, but it will be a couple of years yet. Only 18 countries have a GDP that exceeds that amount. </p></div>

A trillionaire is an individual with a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency, such as the euro or the British pound. Currently, no one has yet claimed trillionaire status, although some of the world’s richest individuals [may only be a few years away from this milestone](https://www.investopedia.com/financial-edge/0211/the-first-trillionaire.aspx).   ### Key Takeaways * In the United States, the title “trillionaire” refers to someone with a net worth of at least $1 trillion. * Net worth refers to a person’s total assets—including business interests, investments, and personal property—minus their debts. * No one has yet claimed the title of trillionaire, although the speed at which the world’s wealthiest individuals have grown their fortunes suggests that it could happen in just a few years. * As of 2022, 18 countries have a gross domestic product (GDP) that exceeds $1 trillion. ## Calculating Net Worth Extremely affluent individuals often derive their wealth from a variety of sources: business interests, investments, real estate holdings, cash, and personal property. To tabulate your [net worth](https://www.investopedia.com/terms/n/networth.asp), start by totaling up all of those [assets](https://www.investopedia.com/terms/a/asset.asp). You then deduct [liabilities](https://www.investopedia.com/terms/l/liability.asp)—everything from personal loans to mortgages. Someone with at least $1 trillion (or one trillion euros) of net assets would qualify as a trillionaire. For those in the highest strata of wealth, arriving at an [accurate net worth figure](https://www.investopedia.com/articles/pf/13/importance-of-knowing-your-net-worth.asp) tends to be a complex undertaking. While some assets are relatively stable, the value of business interests, in particular, can fluctuate wildly from one day to the next. In fact, *Forbes*, which publishes the preeminent list of the world’s wealthiest people, operates a “Real-Time Billionaires List” that is updated by the minute, based on stock valuations. Sitting atop it in the first three slots, as of Feb. 19, 2024, are Bernard Arnault & family ($221.7 billion), Elon Musk ($205.2 billion), and Jeff Bezos ($190.7 billion), who are each separated by $15 to $16 billion. Trailing them in slots four and five are Mark Zuckerberg and Larry Ellison. ## Examples of Net Worth: Who’s on First? Let’s look at French fashion magnate Arnault. Most of his and his family's roughly $221.7 billion wealth isn’t simply sitting in a bank account. It’s tied to the value of his holding company, LVMH, which owns famed brands such as Louis Vuitton, Christian Dior, and Hennessy. A quick rise in the value of LVMH stock, relative to the holdings of Musk and Bezos, vaulted him to the first slot in May 2021. And, indeed, the three men often change positions with each other. As the value of Arnault’s brands surged during the COVID-19 pandemic, so did his net worth. Back in March 2020, *Forbes* estimated it at $76 billion. In nearly four years as of February 2024, that figure had grown nearly 200%.  Second on the current *Forbes* list is Musk, who has a current net worth of approximately $205.2 billion. As of February 2024, he owns roughly 21% of electric car manufacturer Tesla and about 42% of the aerospace company SpaceX. Bezos, founder of Amazon, is second and worth $190 billion, with a 12.3% ownership of shares in the online retailer’s stock ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN) on Nasdaq). As an example of how volatile those personal wealth estimates can be, Musk lost a reported $8.9 billion in one day back in December 2020, when a J.P. Morgan analyst concluded that Tesla shares were significantly overvalued. ## The World’s First Trillionaire? Even the likes of Arnault and Musk—with $221.7 billion and $205 billion, respectively—might seem a long way off from reaching the trillionaire designation. However, the pace at which some of the world’s richest people have been able to accumulate wealth suggests that it may only be a few short years before someone garners that designation.  Arnault, for instance, was able to increase his net worth by about six-fold in eight years—from $33.5 billion in 2014 to $221.7 billion in 2024. Were he to repeat that accomplishment, he would be a trillionaire before the decade is over.   Musk, who has built his wealth on game-changing companies—Tesla in the realm of electric cars and SpaceX for commercially developed rockets—may stand as good a chance as any. Just five years ago in 2019, the enigmatic entrepreneur had a net worth estimated at $22.3 billion. As of Feb. 19, 2024, his wealth is in the ballpark of $205 billion. If those ventures continue on anything like their current valuation trajectory, then he could get to trillionaire status before long.  Bezos, who owns *The Washington Post* and aerospace firm Blue Origin in addition to his stake in Amazon, has similarly experienced a rapid buildup of wealth. Since 2017, the *Forbes* estimate of Bezos’ net worth soared from nearly $72.8 billion to $190 billion, a more than 2 1/2 times gain. ## How Much Is $1 Trillion? To put it mildly, a fortune of $1 trillion is an enormous amount of money—so much that it’s hard to conceptualize how much wealth that actually is.  Here’s some context: According to the Federal Reserve’s latest Survey of Consumer Finances, taken in 2022, the [median](https://www.investopedia.com/terms/m/median.asp) [net wo](https://www.investopedia.com/terms/m/median.asp)rth of U.S. households was $192,900. Thus, a trillionaire would have wealth equal to 5.2 milliontimes that of the typical American family. Here is another way to put that amount of personal treasure in perspective: It took the U.S. Senate months of arduous negotiations to agree on a [$1.2 trillion infrastructure bill](https://www.investopedia.com/here-s-what-s-in-the-usd1-trillion-infrastructure-bill-passed-by-the-senate-5196817) which was passed in November 2021. That was largely because many Republicans balked at that much additional federal spending (though, technically, the bill has only $550 billion of new expenditures). Net assets of $1 trillion represents a greater sum than the [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp) of countries such as Switzerland, Sweden, and Austria. In fact, only 18 countries have a GDP that exceeds $1 trillion. ## The Bottom Line No individual has claimed the status of trillionaire just yet. But a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency isn't unattainable, but it will be a couple of years yet. Only 18 countries have a GDP that exceeds that amount.

A trillionaire is an individual with a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency, such as the euro or the British pound. Currently, no one has yet claimed trillionaire status, although some of the world’s richest individuals may only be a few years away from this milestone.   Key Takeaways In the United States, the title “trillionaire” refers to someone with a net worth of at least $1 trillion.Net worth refers to a person’s total assets—including business interests, investments, and personal property—minus their debts.No one has yet claimed the title of trillionaire, although the speed at which the world’s wealthiest individuals have grown their fortunes suggests that it could happen in just a few years.As of 2022, 18 countries have a gross domestic product (GDP) that exceeds $1 trillion. Calculating Net Worth  Extremely affluent individuals often derive their wealth from a variety of sources: business interests, investments, real estate holdings, cash, and personal property. To tabulate your net worth, start by totaling up all of those assets. You then deduct liabilities—everything from personal loans to mortgages. Someone with at least $1 trillion (or one trillion euros) of net assets would qualify as a trillionaire. For those in the highest strata of wealth, arriving at an accurate net worth figure tends to be a complex undertaking. While some assets are relatively stable, the value of business interests, in particular, can fluctuate wildly from one day to the next. In fact, Forbes, which publishes the preeminent list of the world’s wealthiest people, operates a “Real-Time Billionaires List” that is updated by the minute, based on stock valuations. Sitting atop it in the first three slots, as of Feb. 19, 2024, are Bernard Arnault & family ($221.7 billion), Elon Musk ($205.2 billion), and Jeff Bezos ($190.7 billion), who are each separated by $15 to $16 billion. Trailing them in slots four and five are Mark Zuckerberg and Larry Ellison. Examples of Net Worth: Who’s on First? Let’s look at French fashion magnate Arnault. Most of his and his family's roughly $221.7 billion wealth isn’t simply sitting in a bank account. It’s tied to the value of his holding company, LVMH, which owns famed brands such as Louis Vuitton, Christian Dior, and Hennessy. A quick rise in the value of LVMH stock, relative to the holdings of Musk and Bezos, vaulted him to the first slot in May 2021. And, indeed, the three men often change positions with each other. As the value of Arnault’s brands surged during the COVID-19 pandemic, so did his net worth. Back in March 2020, Forbes estimated it at $76 billion. In nearly four years as of February 2024, that figure had grown nearly 200%.  Second on the current Forbes list is Musk, who has a current net worth of approximately $205.2 billion. As of February 2024, he owns roughly 21% of electric car manufacturer Tesla and about 42% of the aerospace company SpaceX. Bezos, founder of Amazon, is second and worth $190 billion, with a 12.3% ownership of shares in the online retailer’s stock (AMZN on Nasdaq). As an example of how volatile those personal wealth estimates can be, Musk lost a reported $8.9 billion in one day back in December 2020, when a J.P. Morgan analyst concluded that Tesla shares were significantly overvalued. The World’s First Trillionaire? Even the likes of Arnault and Musk—with $221.7 billion and $205 billion, respectively—might seem a long way off from reaching the trillionaire designation. However, the pace at which some of the world’s richest people have been able to accumulate wealth suggests that it may only be a few short years before someone garners that designation.  Arnault, for instance, was able to increase his net worth by about six-fold in eight years—from $33.5 billion in 2014 to $221.7 billion in 2024. Were he to repeat that accomplishment, he would be a trillionaire before the decade is over.   Musk, who has built his wealth on game-changing companies—Tesla in the realm of electric cars and SpaceX for commercially developed rockets—may stand as good a chance as any. Just five years ago in 2019, the enigmatic entrepreneur had a net worth estimated at $22.3 billion. As of Feb. 19, 2024, his wealth is in the ballpark of $205 billion. If those ventures continue on anything like their current valuation trajectory, then he could get to trillionaire status before long.  Bezos, who owns The Washington Post and aerospace firm Blue Origin in addition to his stake in Amazon, has similarly experienced a rapid buildup of wealth. Since 2017, the Forbes estimate of Bezos’ net worth soared from nearly $72.8 billion to $190 billion, a more than 2 1/2 times gain. How Much Is $1 Trillion? To put it mildly, a fortune of $1 trillion is an enormous amount of money—so much that it’s hard to conceptualize how much wealth that actually is.  Here’s some context: According to the Federal Reserve’s latest Survey of Consumer Finances, taken in 2022, the median net worth of U.S. households was $192,900. Thus, a trillionaire would have wealth equal to 5.2 million times that of the typical American family. Here is another way to put that amount of personal treasure in perspective: It took the U.S. Senate months of arduous negotiations to agree on a $1.2 trillion infrastructure bill which was passed in November 2021. That was largely because many Republicans balked at that much additional federal spending (though, technically, the bill has only $550 billion of new expenditures). Net assets of $1 trillion represents a greater sum than the gross domestic product (GDP) of countries such as Switzerland, Sweden, and Austria. In fact, only 18 countries have a GDP that exceeds $1 trillion. The Bottom Line No individual has claimed the status of trillionaire just yet. But a net worth equal to at least one trillion in U.S. dollars or a similarly valued currency isn't unattainable, but it will be a couple of years yet. Only 18 countries have a GDP that exceeds that amount.

https://www.investopedia.com/overlooked-sources-free-college-aid-5323083

Overlooked Sources of Free College Aid

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Paying for college can be an expensive proposition. For the 2022–2023 academic year, average in-state tuition at four-year public institutions was $10,950, $190 higher than in 2021–22 (1.8% before adjusting for inflation), according to College Board. The average out-of-state tuition costs a little more than $28,240, and private schools averaged a sticker price of just above $39,400.<span class="ql-inline-citation" data-cite="16"></span> And that doesn’t even include other costs associated with attending college, such as room and board. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> So, how can you reduce your cost to attend school? Well, one way is to apply for free college aid. Many students <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/free-college-aid-missed-5324800">overlook several sources of free college aid</a>, much to their detriment.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Filling out the Free Application for Federal Student Aid (FAFSA) is one of the most overlooked ways to get free college aid in the form of Pell Grants. Nearly $3.75 billion in Pell Grants went unclaimed in 2021.<span class="ql-inline-citation" data-cite="2"></span></li><li>There are several schools in the United States with programs that can completely cover the cost of tuition—however, to be eligible, these may necessitate living in a specific area as well as agreeing to other stipulations.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="5"></span></li><li>Many states offer programs that can partially or completely cover the cost of a higher education. However, these programs may be limited based on an applicant’s income or merit as well as being restricted to community college attendees.<span class="ql-inline-citation" data-cite="11"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-three-overlooked-sources-of-free-college-aid"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Three Overlooked Sources of Free College Aid </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> As parents and prospective students begin to think about applying for scholarships, what they often don’t realize is that they may already qualify for free college aid, depending on where they live and their financial situation. Here are three sources of aid that you might be missing out on. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-subheading__text"> Free Application for Federal Student Aid (FAFSA) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> One of the biggest overlooked sources of free college aid comes from filling out the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp">Free Application for Federal Student Aid (FAFSA)</a>. A report from the National College Attainment Network found that approximately $3.75 billion in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pell-grant.asp">Pell Grants</a> went unclaimed by the high school class of 2021.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The FAFSA needs to be filled out once a year to qualify again for the following year. Students are already missing out on the opportunity to get free aid from the U.S. government in the form of Pell Grants, and on top of that, many states and schools use information from the FAFSA to determine whether students are eligible for additional free college aid programs.<span class="ql-inline-citation" data-cite="15"></span> By filling out the FAFSA, even if you can’t get enough free aid to fully cover the cost of a higher education, it could still reduce your need for federal student loans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Colleges offering free tuition </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> While the FAFSA can be a source of college financial aid, you might not need the tuition help if you’re able to attend a school that pays for the education that it’s providing you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Some colleges have programs, such as Alice Lloyd College’s Appalachian Leaders Scholarship, designed to help attendees avoid the costs associated with higher education. As long as you live in the school’s service area and agree to any conditions of the program, your out-of-pocket tuition costs may be completely covered.<span class="ql-inline-citation" data-cite="5"></span> Additional schools that offer free tuition include Berea College in Kentucky, the U.S. Air Force Academy in Colorado (though you must commit to serve), and the University of New Hampshire.<span class="ql-inline-citation" data-cite="6"></span><span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> In some cases, if you meet certain need-based requirements, you can even attend Ivy League schools for free. For example, for the 2022–2023 academic year, Harvard students from families making less than $75,000 per year will have their entire tuition covered. According to Harvard, about 20% of students don’t pay to attend.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> State-sponsored free college aid </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> It’s not just colleges and universities offering access to free college aid. Your state government also might be an option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> In some states, like New Mexico and Oregon, there are programs that allow students to access free tuition without a lot of restrictions.<span class="ql-inline-citation" data-cite="11"></span> There are some states, however, where a free education only applies to community colleges.<span class="ql-inline-citation" data-cite="12"></span> Once you finish attending community college, you might have to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/community-college-students-transferring-four-year-schools-6824884">transfer to another school</a> to complete your education. But even with just two years of debt-free community schooling, you can still make a lot of progress without piling on debt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Other states that offer free college aid, like New York, might have specific requirements for income or merit.<span class="ql-inline-citation" data-cite="14"></span> Even so, checking with your state’s Department of Education can help you find out what programs are available to help cover some of your costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-what-resources-exist-to-help-pay-for-college"></span> <h2 class="mntl-sc-block-questionandanswer__question">What resources exist to help pay for college?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Outside of an individual or their parents’ savings and income, some of the most common resources used to help pay for college include federal and private loans, scholarships, grants, and work-study programs. Student loans are perhaps the most frequently used means of financing a higher education, though these will need to be repaid.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-how-do-people-afford-college-without-financial-aid"></span> <h2 class="mntl-sc-block-questionandanswer__question">How do people afford college without financial aid?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Without any forms of financial aid (i.e., loans, scholarships, grants, and work-study programs), the main recourse left to most students would be paying out of pocket, whether from the student’s savings or contributions from members of their family. In this scenario, it would be wise to take advantage of any means of easing the financial burden, such as by taking Advanced Placement (AP) courses in high school, attending a community college, and/or taking on a part-time job (and either switching to a full-time role or picking up additional part-time work during the summer) while enrolled.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-is-free-college-actually-free"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is free college actually free?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes and no. “Free college” typically only refers to colleges that cover the cost of a student’s tuition, while the costs of room and board, school supplies, transportation, and other expenses are still their responsibility to pay.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> According to the National Student Clearinghouse Research Center, college enrollment continues to decline. One cause of this decline is rising college costs.<span class="ql-inline-citation" data-cite="3"></span> As such, according to a study conducted by the National Center for Education Statistics, nearly a third of surveyed students didn’t believe their family could afford to send them to college.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> However, as a student, you might be surprised to learn that college is more affordable than you think. Opportunities for free college aid are out there, and taking advantage of them—especially by filling out the FAFSA—can help make college more affordable. </p></div>

Paying for college can be an expensive proposition. For the 2022–2023 academic year, average in-state tuition at four-year public institutions was $10,950, $190 higher than in 2021–22 (1.8% before adjusting for inflation), according to College Board. The average out-of-state tuition costs a little more than $28,240, and private schools averaged a sticker price of just above $39,400. And that doesn’t even include other costs associated with attending college, such as room and board. So, how can you reduce your cost to attend school? Well, one way is to apply for free college aid. Many students [overlook several sources of free college aid](https://www.investopedia.com/free-college-aid-missed-5324800), much to their detriment. ### Key Takeaways * Filling out the Free Application for Federal Student Aid (FAFSA) is one of the most overlooked ways to get free college aid in the form of Pell Grants. Nearly $3.75 billion in Pell Grants went unclaimed in 2021. * There are several schools in the United States with programs that can completely cover the cost of tuition—however, to be eligible, these may necessitate living in a specific area as well as agreeing to other stipulations. * Many states offer programs that can partially or completely cover the cost of a higher education. However, these programs may be limited based on an applicant’s income or merit as well as being restricted to community college attendees. ## Three Overlooked Sources of Free College Aid As parents and prospective students begin to think about applying for scholarships, what they often don’t realize is that they may already qualify for free college aid, depending on where they live and their financial situation. Here are three sources of aid that you might be missing out on. ### Free Application for Federal Student Aid (FAFSA) One of the biggest overlooked sources of free college aid comes from filling out the [Free Application for Federal Student Aid (FAFSA)](https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp). A report from the National College Attainment Network found that approximately $3.75 billion in [Pell Grants](https://www.investopedia.com/terms/p/pell-grant.asp) went unclaimed by the high school class of 2021. The FAFSA needs to be filled out once a year to qualify again for the following year. Students are already missing out on the opportunity to get free aid from the U.S. government in the form of Pell Grants, and on top of that, many states and schools use information from the FAFSA to determine whether students are eligible for additional free college aid programs. By filling out the FAFSA, even if you can’t get enough free aid to fully cover the cost of a higher education, it could still reduce your need for federal student loans. ### Colleges offering free tuition While the FAFSA can be a source of college financial aid, you might not need the tuition help if you’re able to attend a school that pays for the education that it’s providing you. Some colleges have programs, such as Alice Lloyd College’s Appalachian Leaders Scholarship, designed to help attendees avoid the costs associated with higher education. As long as you live in the school’s service area and agree to any conditions of the program, your out-of-pocket tuition costs may be completely covered. Additional schools that offer free tuition include Berea College in Kentucky, the U.S. Air Force Academy in Colorado (though you must commit to serve), and the University of New Hampshire. In some cases, if you meet certain need-based requirements, you can even attend Ivy League schools for free. For example, for the 2022–2023 academic year, Harvard students from families making less than $75,000 per year will have their entire tuition covered. According to Harvard, about 20% of students don’t pay to attend. ### State-sponsored free college aid It’s not just colleges and universities offering access to free college aid. Your state government also might be an option. In some states, like New Mexico and Oregon, there are programs that allow students to access free tuition without a lot of restrictions. There are some states, however, where a free education only applies to community colleges. Once you finish attending community college, you might have to [transfer to another school](https://www.investopedia.com/community-college-students-transferring-four-year-schools-6824884) to complete your education. But even with just two years of debt-free community schooling, you can still make a lot of progress without piling on debt. Other states that offer free college aid, like New York, might have specific requirements for income or merit. Even so, checking with your state’s Department of Education can help you find out what programs are available to help cover some of your costs. ## What resources exist to help pay for college? Outside of an individual or their parents’ savings and income, some of the most common resources used to help pay for college include federal and private loans, scholarships, grants, and work-study programs. Student loans are perhaps the most frequently used means of financing a higher education, though these will need to be repaid. ## How do people afford college without financial aid? Without any forms of financial aid (i.e., loans, scholarships, grants, and work-study programs), the main recourse left to most students would be paying out of pocket, whether from the student’s savings or contributions from members of their family. In this scenario, it would be wise to take advantage of any means of easing the financial burden, such as by taking Advanced Placement (AP) courses in high school, attending a community college, and/or taking on a part-time job (and either switching to a full-time role or picking up additional part-time work during the summer) while enrolled. ## Is free college actually free? Yes and no. “Free college” typically only refers to colleges that cover the cost of a student’s tuition, while the costs of room and board, school supplies, transportation, and other expenses are still their responsibility to pay. ## The Bottom Line According to the National Student Clearinghouse Research Center, college enrollment continues to decline. One cause of this decline is rising college costs. As such, according to a study conducted by the National Center for Education Statistics, nearly a third of surveyed students didn’t believe their family could afford to send them to college. However, as a student, you might be surprised to learn that college is more affordable than you think. Opportunities for free college aid are out there, and taking advantage of them—especially by filling out the FAFSA—can help make college more affordable.

Paying for college can be an expensive proposition. For the 2022–2023 academic year, average in-state tuition at four-year public institutions was $10,950, $190 higher than in 2021–22 (1.8% before adjusting for inflation), according to College Board. The average out-of-state tuition costs a little more than $28,240, and private schools averaged a sticker price of just above $39,400. And that doesn’t even include other costs associated with attending college, such as room and board. So, how can you reduce your cost to attend school? Well, one way is to apply for free college aid. Many students overlook several sources of free college aid, much to their detriment. Key Takeaways Filling out the Free Application for Federal Student Aid (FAFSA) is one of the most overlooked ways to get free college aid in the form of Pell Grants. Nearly $3.75 billion in Pell Grants went unclaimed in 2021.There are several schools in the United States with programs that can completely cover the cost of tuition—however, to be eligible, these may necessitate living in a specific area as well as agreeing to other stipulations.Many states offer programs that can partially or completely cover the cost of a higher education. However, these programs may be limited based on an applicant’s income or merit as well as being restricted to community college attendees. Three Overlooked Sources of Free College Aid As parents and prospective students begin to think about applying for scholarships, what they often don’t realize is that they may already qualify for free college aid, depending on where they live and their financial situation. Here are three sources of aid that you might be missing out on. Free Application for Federal Student Aid (FAFSA) One of the biggest overlooked sources of free college aid comes from filling out the Free Application for Federal Student Aid (FAFSA). A report from the National College Attainment Network found that approximately $3.75 billion in Pell Grants went unclaimed by the high school class of 2021. The FAFSA needs to be filled out once a year to qualify again for the following year. Students are already missing out on the opportunity to get free aid from the U.S. government in the form of Pell Grants, and on top of that, many states and schools use information from the FAFSA to determine whether students are eligible for additional free college aid programs. By filling out the FAFSA, even if you can’t get enough free aid to fully cover the cost of a higher education, it could still reduce your need for federal student loans. Colleges offering free tuition While the FAFSA can be a source of college financial aid, you might not need the tuition help if you’re able to attend a school that pays for the education that it’s providing you. Some colleges have programs, such as Alice Lloyd College’s Appalachian Leaders Scholarship, designed to help attendees avoid the costs associated with higher education. As long as you live in the school’s service area and agree to any conditions of the program, your out-of-pocket tuition costs may be completely covered. Additional schools that offer free tuition include Berea College in Kentucky, the U.S. Air Force Academy in Colorado (though you must commit to serve), and the University of New Hampshire. In some cases, if you meet certain need-based requirements, you can even attend Ivy League schools for free. For example, for the 2022–2023 academic year, Harvard students from families making less than $75,000 per year will have their entire tuition covered. According to Harvard, about 20% of students don’t pay to attend. State-sponsored free college aid It’s not just colleges and universities offering access to free college aid. Your state government also might be an option. In some states, like New Mexico and Oregon, there are programs that allow students to access free tuition without a lot of restrictions. There are some states, however, where a free education only applies to community colleges. Once you finish attending community college, you might have to transfer to another school to complete your education. But even with just two years of debt-free community schooling, you can still make a lot of progress without piling on debt. Other states that offer free college aid, like New York, might have specific requirements for income or merit. Even so, checking with your state’s Department of Education can help you find out what programs are available to help cover some of your costs. What resources exist to help pay for college? Outside of an individual or their parents’ savings and income, some of the most common resources used to help pay for college include federal and private loans, scholarships, grants, and work-study programs. Student loans are perhaps the most frequently used means of financing a higher education, though these will need to be repaid. How do people afford college without financial aid? Without any forms of financial aid (i.e., loans, scholarships, grants, and work-study programs), the main recourse left to most students would be paying out of pocket, whether from the student’s savings or contributions from members of their family. In this scenario, it would be wise to take advantage of any means of easing the financial burden, such as by taking Advanced Placement (AP) courses in high school, attending a community college, and/or taking on a part-time job (and either switching to a full-time role or picking up additional part-time work during the summer) while enrolled. Is free college actually free? Yes and no. “Free college” typically only refers to colleges that cover the cost of a student’s tuition, while the costs of room and board, school supplies, transportation, and other expenses are still their responsibility to pay. The Bottom Line According to the National Student Clearinghouse Research Center, college enrollment continues to decline. One cause of this decline is rising college costs. As such, according to a study conducted by the National Center for Education Statistics, nearly a third of surveyed students didn’t believe their family could afford to send them to college. However, as a student, you might be surprised to learn that college is more affordable than you think. Opportunities for free college aid are out there, and taking advantage of them—especially by filling out the FAFSA—can help make college more affordable.

https://www.investopedia.com/ask/answers/08/find-stocks-in-sp500.asp

The Top 25 Stocks in the S&P 500

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The S&amp;P 500 consists of 500 companies that have issued a total of 503 stocks. Some companies, such as Alphabet, have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&amp;P Global website. An S&amp;P 500 company must meet specific requirements to be included as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/constituent.asp">constituent</a> within the index. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> However, S&amp;P does not currently provide the total list of holdings, at least not for free. Subscribers to S&amp;P's research unit, Capital IQ, can get access to the entire list.<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp"> S&amp;P 500</a> companies represent the top companies within their industries and are a gauge of U.S. economic activity.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The S&amp;P 500 includes some of the top companies that are leaders within their industries and represent a gauge of the U.S. economy.</li><li>Companies must meet certain requirement criteria, which are determined by the publishers of the index before being added to the S&amp;P.</li><li>The S&amp;P 500 index is market capitalization-weighted, where it gives a higher percentage allocation to companies with the largest market cap.</li><li>A stock must meet certain criteria, including a total market cap of $14.5 billion, to join the S&amp;P 500. </li><li>Companies may be removed from the S&amp;P 500 if they deviate substantially from these standards.</li></ul></div></div></div> <span class="heading-toc" id="toc-sp-500-inclusion-criteria"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> S&amp;P 500 Inclusion Criteria </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The S&amp;P 500 was created in 1957 and is one of the most widely quoted stock market indexes. S&amp;P 500 stocks represent the largest publicly traded companies in the U.S. The S&amp;P 500 focuses on the U.S. market's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/large-cap.asp">large-cap</a> sector.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> An S&amp;P 500 company must meet a broad set of criteria to be added to the index, including the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>A total <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">market capitalization</a> of at least $14.5 billion</li> <li>Must be a U.S. company</li> <li>A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75</li> <li>A positive sum of the most recent four consecutive quarters of trailing earnings</li> <li>Positive earnings for its most recent quarter</li> <li>Must meet certain liquidity requirements<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="8"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Companies may be removed from the S&amp;P 500 if they deviate substantially from these standards.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">$39.7 Trillion</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The total combined market cap of the 503 constituents in the S&amp;P 500 as of Aug. 31, 2023.<span class="ql-inline-citation" data-cite="5"></span></p></div></div></div> <span class="heading-toc" id="toc-sp-500-calculation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> S&amp;P 500 Calculation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The S&amp;P 500 is a free-float <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wamc.asp">market capitalization-weighted index</a>. Market capitalization represents the total dollar market value of a company's outstanding equity shares. Market cap is calculated by multiplying the total number of outstanding shares of stock by the company's current stock price. For example, a company with 20 million shares outstanding in which its stock is selling for $100 per share would have a market cap of $2 billion.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> As a result, the more valuable an individual company's stock becomes, the more it contributes to the S&amp;P 500's overall return. It is not uncommon for three-quarters of the index's return to be linked to only 50 to 75 stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Therefore, the addition or subtraction of smaller companies from the index will not have a noticeable impact on the overall return of the index; however, the removal or addition of even just one of the largest stocks can have a major impact. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-sp-500-sector-breakdown"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> S&amp;P 500 Sector Breakdown </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Below are the top sectors and their weightings within the S&amp;P 500 index as of Aug. 31, 2023.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_28-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">S&amp;P 500 Sector Weighting</th> </tr> <tr> <th> Sector</th> <th>Index Weighting</th> </tr> </thead> <tbody data-check="0"> <tr> <td>Information Technology</td> <td>28.2%</td> </tr> <tr> <td>Healthcare </td> <td>13.2%</td> </tr> <tr> <td>Financials</td> <td>12.5%</td> </tr> <tr> <td>Consumer Discretionary</td> <td>10.6%</td> </tr> <tr> <td>Communication Services</td> <td>8.8%</td> </tr> <tr> <td>Industrials</td> <td>8.4%</td> </tr> <tr> <td>Consumer Staples </td> <td>6.6%</td> </tr> <tr> <td>Energy</td> <td>4.4%</td> </tr> <tr> <td>Materials</td> <td>2.5%</td> </tr> <tr> <td>Real Estate</td> <td>2.4%</td> </tr> <tr> <td>Utilities</td> <td>2.4%</td> </tr> </tbody> </table> <figcaption>Source: S&amp;P Dow Jones Indices</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Being aware of the S&amp;P's sector weighting is important because sectors with a smaller weighting may not have a material impact on the value of the overall index even if they're outperforming or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underperform.asp">underperforming</a> the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> For example, if oil prices are rising, leading to increased profits for the energy sector, those stocks represent only 4.4% of the S&amp;P 500. As a result, oil stocks may not lead to a higher S&amp;P if, for example, the more heavily weighted information technology sector is underperforming. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>S&amp;P 500 components are weighted by free-float market capitalization, which means that larger companies can affect the value of the index to a greater degree.<span class="ql-inline-citation" data-cite="6"></span></p></div></div></div> <span class="heading-toc" id="toc-top-25-components-by-market-cap"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Top 25 Components by Market Cap </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Because the exact weightings of the top 25 components are not available from S&amp;P directly, the weightings below are from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/122215/spy-spdr-sp-500-trust-etf.asp">SPDR S&amp;P 500 Trust ETF</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPY">SPY</a>). SPY is the oldest <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded fund (ETF)</a> that tracks the S&amp;P 500 and holds $406.6 billion in assets under management (AUM) as of Sept. 20, 2023, and is highly traded.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> As a result, the SPY's portfolio weightings provide a good proxy for investing in the underlying S&amp;P 500 index, although the two may not be exactly the same. As of Sept. 21, 2023, the following are the 25 largest S&amp;P 500 index constituents by weight: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> <li>Apple (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>): 7.05%</li> <li>Microsoft (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>): 6.54%</li> <li>Amazon (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN">AMZN</a>): 3.24%</li> <li>NVIDIA (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>): 2.79%</li> <li>Alphabet Class A (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL">GOOGL</a>): 2.13%</li> <li>Tesla (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA">TSLA</a>): 1.95%</li> <li>Alphabet Class C (<a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOG">GOOG</a>): 1.83%<br/></li> <li>Berkshire Hathaway (<a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.B">BRK.B</a>): 1.83%<br/></li> <li>Meta (<a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=META">META</a>), formerly Facebook, Class A: 1.81%<br/></li> <li>UnitedHealth Group (<a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=UNH">UNH</a>): 1.28%</li> <li>Exxon Mobil (<a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=XOM">XOM</a>): 1.27%</li> <li>Eli Lilly (<a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LLY">LLY</a>): 1.21%</li> <li>JPMorgan Chase (<a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM">JPM</a>): 1.18%</li> <li>Johnson &amp; Johnson (<a data-component="link" data-ordinal="14" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=JNJ">JNJ</a>): 1.07%<br/></li> <li>Visa Class A (<a data-component="link" data-ordinal="15" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=V">V</a>): 1.05%<br/></li> <li>Procter &amp; Gamble (<a data-component="link" data-ordinal="16" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PG">PG</a>): 0.99%</li> <li>Mastercard Class A (<a data-component="link" data-ordinal="17" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MA">MA</a>): 0.93%</li> <li>Broadcom (<a data-component="link" data-ordinal="18" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AVGO">AVGO</a>): 0.92%<br/></li> <li>Home Depot (<a data-component="link" data-ordinal="19" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HD">HD</a>): 0.85%</li> <li>Chevron Corporation (<a data-component="link" data-ordinal="20" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CVX">CVX</a>): 0.81%</li> <li>Merck (<a data-component="link" data-ordinal="21" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MRK">MRK</a>): 0.75%</li> <li>AbbVie (<a data-component="link" data-ordinal="22" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ABBV">ABBV</a>): 0.75%</li> <li>Costco (<a data-component="link" data-ordinal="23" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=COST">COST</a>): 0.67%</li> <li>PepsiCo (<a data-component="link" data-ordinal="24" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PEP">PEP</a>): 0.67%</li> <li>Adobe (<a data-component="link" data-ordinal="25" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ADBE">ADBE</a>): 0.65%<span class="ql-inline-citation" data-cite="3"></span></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-how-many-companies-are-in-the-sp-500"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Companies Are in the S&amp;P 500?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Although there are generally 500 companies within the index, that number has grown. There were 503 stocks that made up the S&amp;P 500 as of Aug. 31, 2023. That's because some companies have multiple classes of equity shares, such as Alphabet.<span class="ql-inline-citation" data-cite="14"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-how-are-companies-selected-for-the-sp-500"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Are Companies Selected for the S&amp;P 500?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A company must meet certain requirements for inclusion in the S&amp;P 500, which include:</p><ul><li>A market cap of at least $14.5 billion</li><li>Must be a U.S. company</li><li>A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75</li><li>Positive earnings over the most recent four consecutive quarters summed together</li><li>A profitable earnings report for the company's most recent quarter</li><li>Liquidity requirements<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="8"></span></li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-how-to-buy-the-sp-500"></span> <h2 class="mntl-sc-block-questionandanswer__question">How to Buy the S&amp;P 500?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Since the S&amp;P 500 is an index, it can not be purchased directly; however, exchange-traded funds that mirror or track the index can be purchased, such as the State Street Global Advisors' SPDR S&amp;P 500 Trust ETF (SPY).</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The top 25 companies in the S&amp;P 500 are some of the most well-known companies in the world, a large portion of the top 10 being tech companies, such as Apple, Microsoft, and Google. To invest in the companies in the index, investors can purchase the individual stocks of the companies or invest in a fund that tracks the S&amp;P 500. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> <em>The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer">warranty and liability disclaimer</a> for more info.</em><br/> </p></div>

The S&P 500 consists of 500 companies that have issued a total of 503 stocks. Some companies, such as Alphabet, have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&P Global website. An S&P 500 company must meet specific requirements to be included as a [constituent](https://www.investopedia.com/terms/c/constituent.asp) within the index. However, S&P does not currently provide the total list of holdings, at least not for free. Subscribers to S&P's research unit, Capital IQ, can get access to the entire list. [S&P 500](https://www.investopedia.com/terms/s/sp500.asp) companies represent the top companies within their industries and are a gauge of U.S. economic activity. ### Key Takeaways * The S&P 500 includes some of the top companies that are leaders within their industries and represent a gauge of the U.S. economy. * Companies must meet certain requirement criteria, which are determined by the publishers of the index before being added to the S&P. * The S&P 500 index is market capitalization-weighted, where it gives a higher percentage allocation to companies with the largest market cap. * A stock must meet certain criteria, including a total market cap of $14.5 billion, to join the S&P 500. * Companies may be removed from the S&P 500 if they deviate substantially from these standards. ## S&P 500 Inclusion Criteria The S&P 500 was created in 1957 and is one of the most widely quoted stock market indexes. S&P 500 stocks represent the largest publicly traded companies in the U.S. The S&P 500 focuses on the U.S. market's [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) sector. An S&P 500 company must meet a broad set of criteria to be added to the index, including the following: * A total [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp) of at least $14.5 billion * Must be a U.S. company * A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75 * A positive sum of the most recent four consecutive quarters of trailing earnings * Positive earnings for its most recent quarter * Must meet certain liquidity requirements Companies may be removed from the S&P 500 if they deviate substantially from these standards. ### $39.7 Trillion The total combined market cap of the 503 constituents in the S&P 500 as of Aug. 31, 2023. ## S&P 500 Calculation The S&P 500 is a free-float [market capitalization-weighted index](https://www.investopedia.com/terms/w/wamc.asp). Market capitalization represents the total dollar market value of a company's outstanding equity shares. Market cap is calculated by multiplying the total number of outstanding shares of stock by the company's current stock price. For example, a company with 20 million shares outstanding in which its stock is selling for $100 per share would have a market cap of $2 billion. As a result, the more valuable an individual company's stock becomes, the more it contributes to the S&P 500's overall return. It is not uncommon for three-quarters of the index's return to be linked to only 50 to 75 stocks. Therefore, the addition or subtraction of smaller companies from the index will not have a noticeable impact on the overall return of the index; however, the removal or addition of even just one of the largest stocks can have a major impact. ## S&P 500 Sector Breakdown Below are the top sectors and their weightings within the S&P 500 index as of Aug. 31, 2023. | S&P 500 Sector Weighting | | | --- | --- | | Sector | Index Weighting | | Information Technology | 28.2% | | Healthcare | 13.2% | | Financials | 12.5% | | Consumer Discretionary | 10.6% | | Communication Services | 8.8% | | Industrials | 8.4% | | Consumer Staples | 6.6% | | Energy | 4.4% | | Materials | 2.5% | | Real Estate | 2.4% | | Utilities | 2.4% | Source: S&P Dow Jones Indices Being aware of the S&P's sector weighting is important because sectors with a smaller weighting may not have a material impact on the value of the overall index even if they're outperforming or [underperforming](https://www.investopedia.com/terms/u/underperform.asp) the market. For example, if oil prices are rising, leading to increased profits for the energy sector, those stocks represent only 4.4% of the S&P 500. As a result, oil stocks may not lead to a higher S&P if, for example, the more heavily weighted information technology sector is underperforming. ### S&P 500 components are weighted by free-float market capitalization, which means that larger companies can affect the value of the index to a greater degree. ## Top 25 Components by Market Cap Because the exact weightings of the top 25 components are not available from S&P directly, the weightings below are from the [SPDR S&P 500 Trust ETF](https://www.investopedia.com/articles/investing/122215/spy-spdr-sp-500-trust-etf.asp) ([SPY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPY)). SPY is the oldest [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) that tracks the S&P 500 and holds $406.6 billion in assets under management (AUM) as of Sept. 20, 2023, and is highly traded. As a result, the SPY's portfolio weightings provide a good proxy for investing in the underlying S&P 500 index, although the two may not be exactly the same. As of Sept. 21, 2023, the following are the 25 largest S&P 500 index constituents by weight: 1. Apple ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)): 7.05% 2. Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)): 6.54% 3. Amazon ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN)): 3.24% 4. NVIDIA ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)): 2.79% 5. Alphabet Class A ([GOOGL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL)): 2.13% 6. Tesla ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)): 1.95% 7. Alphabet Class C ([GOOG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOG)): 1.83% 8. Berkshire Hathaway ([BRK.B](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.B)): 1.83% 9. Meta ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)), formerly Facebook, Class A: 1.81% 10. UnitedHealth Group ([UNH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=UNH)): 1.28% 11. Exxon Mobil ([XOM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=XOM)): 1.27% 12. Eli Lilly ([LLY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LLY)): 1.21% 13. JPMorgan Chase ([JPM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JPM)): 1.18% 14. Johnson & Johnson ([JNJ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JNJ)): 1.07% 15. Visa Class A ([V](https://www.investopedia.com/markets/quote?tvwidgetsymbol=V)): 1.05% 16. Procter & Gamble ([PG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PG)): 0.99% 17. Mastercard Class A ([MA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MA)): 0.93% 18. Broadcom ([AVGO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AVGO)): 0.92% 19. Home Depot ([HD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HD)): 0.85% 20. Chevron Corporation ([CVX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CVX)): 0.81% 21. Merck ([MRK](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MRK)): 0.75% 22. AbbVie ([ABBV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ABBV)): 0.75% 23. Costco ([COST](https://www.investopedia.com/markets/quote?tvwidgetsymbol=COST)): 0.67% 24. PepsiCo ([PEP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PEP)): 0.67% 25. Adobe ([ADBE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ADBE)): 0.65% ## How Many Companies Are in the S&P 500? Although there are generally 500 companies within the index, that number has grown. There were 503 stocks that made up the S&P 500 as of Aug. 31, 2023. That's because some companies have multiple classes of equity shares, such as Alphabet. ## How Are Companies Selected for the S&P 500? A company must meet certain requirements for inclusion in the S&P 500, which include: * A market cap of at least $14.5 billion * Must be a U.S. company * A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75 * Positive earnings over the most recent four consecutive quarters summed together * A profitable earnings report for the company's most recent quarter * Liquidity requirements ## How to Buy the S&P 500? Since the S&P 500 is an index, it can not be purchased directly; however, exchange-traded funds that mirror or track the index can be purchased, such as the State Street Global Advisors' SPDR S&P 500 Trust ETF (SPY). ## The Bottom Line The top 25 companies in the S&P 500 are some of the most well-known companies in the world, a large portion of the top 10 being tech companies, such as Apple, Microsoft, and Google. To invest in the companies in the index, investors can purchase the individual stocks of the companies or invest in a fund that tracks the S&P 500. *The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our [warranty and liability disclaimer](https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer) for more info.*

The S&P 500 consists of 500 companies that have issued a total of 503 stocks. Some companies, such as Alphabet, have issued multiple classes of shares. The top 10 largest holdings are listed on the official S&P Global website. An S&P 500 company must meet specific requirements to be included as a constituent within the index. However, S&P does not currently provide the total list of holdings, at least not for free. Subscribers to S&P's research unit, Capital IQ, can get access to the entire list. S&P 500 companies represent the top companies within their industries and are a gauge of U.S. economic activity. Key Takeaways The S&P 500 includes some of the top companies that are leaders within their industries and represent a gauge of the U.S. economy.Companies must meet certain requirement criteria, which are determined by the publishers of the index before being added to the S&P.The S&P 500 index is market capitalization-weighted, where it gives a higher percentage allocation to companies with the largest market cap.A stock must meet certain criteria, including a total market cap of $14.5 billion, to join the S&P 500. Companies may be removed from the S&P 500 if they deviate substantially from these standards. S&P 500 Inclusion Criteria The S&P 500 was created in 1957 and is one of the most widely quoted stock market indexes. S&P 500 stocks represent the largest publicly traded companies in the U.S. The S&P 500 focuses on the U.S. market's large-cap sector. An S&P 500 company must meet a broad set of criteria to be added to the index, including the following: A total market capitalization of at least $14.5 billion Must be a U.S. company A float-adjusted liquidity ratio (FALR) greater than or equal to 0.75 A positive sum of the most recent four consecutive quarters of trailing earnings Positive earnings for its most recent quarter Must meet certain liquidity requirements Companies may be removed from the S&P 500 if they deviate substantially from these standards. $39.7 Trillion The total combined market cap of the 503 constituents in the S&P 500 as of Aug. 31, 2023. S&P 500 Calculation The S&P 500 is a free-float market capitalization-weighted index. Market capitalization represents the total dollar market value of a company's outstanding equity shares. Market cap is calculated by multiplying the total number of outstanding shares of stock by the company's current stock price. For example, a company with 20 million shares outstanding in which its stock is selling for $100 per share would have a market cap of $2 billion. As a result, the more valuable an individual company's stock becomes, the more it contributes to the S&P 500's overall return. It is not uncommon for three-quarters of the index's return to be linked to only 50 to 75 stocks. Therefore, the addition or subtraction of smaller companies from the index will not have a noticeable impact on the overall return of the index; however, the removal or addition of even just one of the largest stocks can have a major impact. S&P 500 Sector Breakdown Below are the top sectors and their weightings within the S&P 500 index as of Aug. 31, 2023. S&P 500 Sector Weighting  Sector Index Weighting Information Technology 28.2% Healthcare  13.2% Financials 12.5% Consumer Discretionary 10.6% Communication Services 8.8% Industrials 8.4% Consumer Staples  6.6% Energy 4.4% Materials 2.5% Real Estate 2.4% Utilities 2.4% Source: S&P Dow Jones Indices Being aware of the S&P's sector weighting is important because sectors with a smaller weighting may not have a material impact on the value of the overall index even if they're outperforming or underperforming the market. For example, if oil prices are rising, leading to increased profits for the energy sector, those stocks represent only 4.4% of the S&P 500. As a result, oil stocks may not lead to a higher S&P if, for example, the more heavily weighted information technology sector is underperforming. S&P 500 components are weighted by free-float market capitalization, which means that larger companies can affect the value of the index to a greater degree. Top 25 Components by Market Cap Because the exact weightings of the top 25 components are not available from S&P directly, the weightings below are from the SPDR S&P 500 Trust ETF (SPY). SPY is the oldest exchange-traded fund (ETF) that tracks the S&P 500 and holds $406.6 billion in assets under management (AUM) as of Sept. 20, 2023, and is highly traded. As a result, the SPY's portfolio weightings provide a good proxy for investing in the underlying S&P 500 index, although the two may not be exactly the same. As of Sept. 21, 2023, the following are the 25 largest S&P 500 index constituents by weight: Apple (AAPL): 7.05% Microsoft (MSFT): 6.54% Amazon (AMZN): 3.24% NVIDIA (NVDA): 2.79% Alphabet Class A (GOOGL): 2.13% Tesla (TSLA): 1.95% Alphabet Class C (GOOG): 1.83% Berkshire Hathaway (BRK.B): 1.83% Meta (META), formerly Facebook, Class A: 1.81% UnitedHealth Group (UNH): 1.28% Exxon Mobil (XOM): 1.27% Eli Lilly (LLY): 1.21% JPMorgan Chase (JPM): 1.18% Johnson & Johnson (JNJ): 1.07% Visa Class A (V): 1.05% Procter & Gamble (PG): 0.99% Mastercard Class A (MA): 0.93% Broadcom (AVGO): 0.92% Home Depot (HD): 0.85% Chevron Corporation (CVX): 0.81% Merck (MRK): 0.75% AbbVie (ABBV): 0.75% Costco (COST): 0.67% PepsiCo (PEP): 0.67% Adobe (ADBE): 0.65% How Many Companies Are in the S&P 500? Although there are generally 500 companies within the index, that number has grown. There were 503 stocks that made up the S&P 500 as of Aug. 31, 2023. That's because some companies have multiple classes of equity shares, such as Alphabet. How Are Companies Selected for the S&P 500? A company must meet certain requirements for inclusion in the S&P 500, which include:A market cap of at least $14.5 billionMust be a U.S. companyA float-adjusted liquidity ratio (FALR) greater than or equal to 0.75Positive earnings over the most recent four consecutive quarters summed togetherA profitable earnings report for the company's most recent quarterLiquidity requirements How to Buy the S&P 500? Since the S&P 500 is an index, it can not be purchased directly; however, exchange-traded funds that mirror or track the index can be purchased, such as the State Street Global Advisors' SPDR S&P 500 Trust ETF (SPY). The Bottom Line The top 25 companies in the S&P 500 are some of the most well-known companies in the world, a large portion of the top 10 being tech companies, such as Apple, Microsoft, and Google. To invest in the companies in the index, investors can purchase the individual stocks of the companies or invest in a fund that tracks the S&P 500. The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

https://www.investopedia.com/earn-up-to-400-with-one-of-these-five-citizens-bank-checking-accounts-by-april-11-8629090

Earn Up to $400 With One of These Five Citizens Bank Checking Accounts by April 11

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p><strong>Update: </strong>This promotional offer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/citizens-bank-extends-400-dollar-checking-account-bonus-to-june-6-8636133">has been extended to June 6, 2024</a>. The promotion details, including the bonus amounts and requirements, remain the same.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><ul> <li>New Citizens Bank checking account customers can <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.citizensbank.com/promo/checking/special-offer-2024-b2.aspx" rel="sponsored nofollow">earn up to $400 in bonus money</a> when they set up direct deposit and meet a threshold for debit card transactions.</li> <li>Direct deposit $500 within 60 days to earn a $300 bonus. Then earn $2 per debit card transaction within 60 days to earn up to $100.</li> <li>This bonus is available on five Citizens Bank checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking.</li> <li>This is still a highly valuable promotion even if you don’t get the debit card transaction bonus: Earning $300 for a $500 deposit is a 60% return. With the debit card transactions, it’s an 80% return.</li> <li>This bonus offer expires on April 11, 2024.</li> </ul></div></div></div> <span class="heading-toc" id="toc-citizens-bank-checking-accounts-up-to-400-how-to-get-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Citizens Bank Checking Accounts - Up to $400: How To Get It </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> <li><strong>Open a new eligible personal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.citizensbank.com/promo/checking/special-offer-2024-b2.aspx" rel="sponsored nofollow">Citizens Bank checking account</a> by April 11, 2024:</strong> This offer is available on five checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking. These accounts have different fees and features, such as earning interest or access to financial advisors.</li> <li><strong>Receive at least one single direct deposit of $500 or more within the first 60 days to earn $300:</strong> Unlike most other bonuses, where the requirement involves the total amount of your deposits, Citizens Bank requires a single deposit of at least $500.</li> <li><strong>Earn $2 per debit card transaction, up to $100, within the first 60 days:</strong> Signature and PIN-based transactions (in-person, in-app, and online) are eligible and will count toward this bonus. Fund transfers through services like Zelle are not eligible.</li> <li><strong>Wait and receive the bonus:</strong> Citizens Bank may take up to five months after the date of account opening to pay out this bonus. That’s longer than most bank bonus offers (many others that we track pay out bonus money within four or less months), but the high payout may be worth the wait.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Learn more about <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/citizens-bank-bonuses-7112710">Citizens Bank bonuses</a>, account requirements, and fees.</p></div></div></div> <span class="heading-toc" id="toc-are-citizens-bank-bonuses-worth-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Are Citizens Bank Bonuses Worth It? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> If you live in an eligible state where <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/citizens-bank-review-4801474">Citizens Bank</a> operates, it could be worthwhile to pursue a bonus for one of the checking accounts above, especially if you often make debit card purchases.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Citizens Bank operates in Connecticut, Delaware, Florida, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, D.C.<span class="ql-inline-citation" data-cite="1"></span> If you live outside of those states, you can’t bank with Citizens.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The $300 deposit bonus is relatively easy to get. Many other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-a-bank-sign-up-bonus-7969724">bank bonuses</a> require thousands of dollars in deposits to earn that much or less, but Citizens only asks for $500. This 60% return is quite a bit better than most bonuses we track (the median ROI is about 15%), and the extra $100 you can get for debit card transactions makes it even better. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>We track bank bonuses daily. Through our research, we’ve found the average bank bonus to be $300. We only write about bank bonuses that are at least as high as this average, and that are a 10% or better return on your deposit to ensure you are getting a good deal. </p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Another point in this offer’s favor: Citizens Bank offers the same bonus for a variety of account types, giving you some flexibility to get the checking account you need without sacrificing bonus value. With many other banks we track, premium accounts have higher bonuses and higher requirements, while simpler accounts (like student accounts) have lower bonuses and lower requirements.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_6-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_6-0"><p>Compare the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-a-rewards-credit-card-5071957">rewards you’d typically get for credit card purchases</a> before going after the transaction bonus—you’ll only get a $2 bonus for each transaction, no matter how large the transaction is.</p></div></div></div> <span class="heading-toc" id="toc-how-we-track-bank-account-bonuses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> How We Track Bank Account Bonuses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Every business day, Investopedia tracks 16 banks and the current, new, extended, and expired account bonuses they offer customers. Banks were chosen based on consumer interest. We update our picks for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-bank-account-bonuses-5104710">best bank account bonuses</a>, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-checking-account-bonuses-7152530">best checking account bonuses</a>, and the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-savings-account-bonuses-7152450">best savings account bonuses</a> as needed, chosen based on bonus amounts, bonus requirements, and account features. We aim to provide you with news about checking and savings account bonus offers so you can take advantage of them as soon as possible. </p></div>

### **Update:**This promotional offer [has been extended to June 6, 2024](https://www.investopedia.com/citizens-bank-extends-400-dollar-checking-account-bonus-to-june-6-8636133). The promotion details, including the bonus amounts and requirements, remain the same. ### Key Takeaways * New Citizens Bank checking account customers can [earn up to $400 in bonus money](https://www.citizensbank.com/promo/checking/special-offer-2024-b2.aspx) when they set up direct deposit and meet a threshold for debit card transactions. * Direct deposit $500 within 60 days to earn a $300 bonus. Then earn $2 per debit card transaction within 60 days to earn up to $100. * This bonus is available on five Citizens Bank checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking. * This is still a highly valuable promotion even if you don’t get the debit card transaction bonus: Earning $300 for a $500 deposit is a 60% return. With the debit card transactions, it’s an 80% return. * This bonus offer expires on April 11, 2024. ## Citizens Bank Checking Accounts - Up to $400: How To Get It * **Open a new eligible personal [Citizens Bank checking account](https://www.citizensbank.com/promo/checking/special-offer-2024-b2.aspx) by April 11, 2024:** This offer is available on five checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking. These accounts have different fees and features, such as earning interest or access to financial advisors. * **Receive at least one single direct deposit of $500 or more within the first 60 days to earn $300:** Unlike most other bonuses, where the requirement involves the total amount of your deposits, Citizens Bank requires a single deposit of at least $500. * **Earn $2 per debit card transaction, up to $100, within the first 60 days:** Signature and PIN-based transactions (in-person, in-app, and online) are eligible and will count toward this bonus. Fund transfers through services like Zelle are not eligible. * **Wait and receive the bonus:** Citizens Bank may take up to five months after the date of account opening to pay out this bonus. That’s longer than most bank bonus offers (many others that we track pay out bonus money within four or less months), but the high payout may be worth the wait. ### Learn more about [Citizens Bank bonuses](https://www.investopedia.com/citizens-bank-bonuses-7112710), account requirements, and fees. ## Are Citizens Bank Bonuses Worth It? If you live in an eligible state where [Citizens Bank](https://www.investopedia.com/citizens-bank-review-4801474) operates, it could be worthwhile to pursue a bonus for one of the checking accounts above, especially if you often make debit card purchases.  ### Citizens Bank operates in Connecticut, Delaware, Florida, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, D.C. If you live outside of those states, you can’t bank with Citizens. The $300 deposit bonus is relatively easy to get. Many other [bank bonuses](https://www.investopedia.com/what-is-a-bank-sign-up-bonus-7969724) require thousands of dollars in deposits to earn that much or less, but Citizens only asks for $500. This 60% return is quite a bit better than most bonuses we track (the median ROI is about 15%), and the extra $100 you can get for debit card transactions makes it even better. ### We track bank bonuses daily. Through our research, we’ve found the average bank bonus to be $300. We only write about bank bonuses that are at least as high as this average, and that are a 10% or better return on your deposit to ensure you are getting a good deal.  Another point in this offer’s favor: Citizens Bank offers the same bonus for a variety of account types, giving you some flexibility to get the checking account you need without sacrificing bonus value. With many other banks we track, premium accounts have higher bonuses and higher requirements, while simpler accounts (like student accounts) have lower bonuses and lower requirements. ### Compare the [rewards you’d typically get for credit card purchases](https://www.investopedia.com/what-is-a-rewards-credit-card-5071957) before going after the transaction bonus—you’ll only get a $2 bonus for each transaction, no matter how large the transaction is. ## How We Track Bank Account Bonuses Every business day, Investopedia tracks 16 banks and the current, new, extended, and expired account bonuses they offer customers. Banks were chosen based on consumer interest. We update our picks for the [best bank account bonuses](https://www.investopedia.com/best-bank-account-bonuses-5104710), the [best checking account bonuses](https://www.investopedia.com/best-checking-account-bonuses-7152530), and the [best savings account bonuses](https://www.investopedia.com/best-savings-account-bonuses-7152450) as needed, chosen based on bonus amounts, bonus requirements, and account features. We aim to provide you with news about checking and savings account bonus offers so you can take advantage of them as soon as possible.

Update: This promotional offer has been extended to June 6, 2024. The promotion details, including the bonus amounts and requirements, remain the same. Key Takeaways New Citizens Bank checking account customers can earn up to $400 in bonus money when they set up direct deposit and meet a threshold for debit card transactions. Direct deposit $500 within 60 days to earn a $300 bonus. Then earn $2 per debit card transaction within 60 days to earn up to $100. This bonus is available on five Citizens Bank checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking. This is still a highly valuable promotion even if you don’t get the debit card transaction bonus: Earning $300 for a $500 deposit is a 60% return. With the debit card transactions, it’s an 80% return. This bonus offer expires on April 11, 2024. Citizens Bank Checking Accounts - Up to $400: How To Get It Open a new eligible personal Citizens Bank checking account by April 11, 2024: This offer is available on five checking accounts: One Deposit Checking, Quest Checking, EverValue Checking, Student Checking, and Private Client Checking. These accounts have different fees and features, such as earning interest or access to financial advisors. Receive at least one single direct deposit of $500 or more within the first 60 days to earn $300: Unlike most other bonuses, where the requirement involves the total amount of your deposits, Citizens Bank requires a single deposit of at least $500. Earn $2 per debit card transaction, up to $100, within the first 60 days: Signature and PIN-based transactions (in-person, in-app, and online) are eligible and will count toward this bonus. Fund transfers through services like Zelle are not eligible. Wait and receive the bonus: Citizens Bank may take up to five months after the date of account opening to pay out this bonus. That’s longer than most bank bonus offers (many others that we track pay out bonus money within four or less months), but the high payout may be worth the wait. Learn more about Citizens Bank bonuses, account requirements, and fees. Are Citizens Bank Bonuses Worth It? If you live in an eligible state where Citizens Bank operates, it could be worthwhile to pursue a bonus for one of the checking accounts above, especially if you often make debit card purchases.  Citizens Bank operates in Connecticut, Delaware, Florida, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, D.C. If you live outside of those states, you can’t bank with Citizens. The $300 deposit bonus is relatively easy to get. Many other bank bonuses require thousands of dollars in deposits to earn that much or less, but Citizens only asks for $500. This 60% return is quite a bit better than most bonuses we track (the median ROI is about 15%), and the extra $100 you can get for debit card transactions makes it even better. We track bank bonuses daily. Through our research, we’ve found the average bank bonus to be $300. We only write about bank bonuses that are at least as high as this average, and that are a 10% or better return on your deposit to ensure you are getting a good deal.  Another point in this offer’s favor: Citizens Bank offers the same bonus for a variety of account types, giving you some flexibility to get the checking account you need without sacrificing bonus value. With many other banks we track, premium accounts have higher bonuses and higher requirements, while simpler accounts (like student accounts) have lower bonuses and lower requirements. Compare the rewards you’d typically get for credit card purchases before going after the transaction bonus—you’ll only get a $2 bonus for each transaction, no matter how large the transaction is. How We Track Bank Account Bonuses Every business day, Investopedia tracks 16 banks and the current, new, extended, and expired account bonuses they offer customers. Banks were chosen based on consumer interest. We update our picks for the best bank account bonuses, the best checking account bonuses, and the best savings account bonuses as needed, chosen based on bonus amounts, bonus requirements, and account features. We aim to provide you with news about checking and savings account bonus offers so you can take advantage of them as soon as possible.

https://www.investopedia.com/terms/f/forwardrate.asp

Forward Rate: Definition, Uses, and Calculations

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-forward-rate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Forward Rate? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A forward rate is an interest rate applicable to a financial transaction that will take place in the future. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/043015/how-do-i-convert-spot-rate-forward-rate.asp">Forward rates are calculated from the spot rate</a> and are adjusted for the cost of carry to determine the future interest rate that equates the total return of a longer-term investment with a strategy of rolling over a shorter-term investment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The term may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_6-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Forward Rate" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/K3RHAJ94BHBfcrgtvIvmO1-9TQo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/K3RHAJ94BHBfcrgtvIvmO1-9TQo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png" data-srcset="https://www.investopedia.com/thmb/GjhyZfi0o10eUs-k65901Tx7GD8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Forward Rate" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/K3RHAJ94BHBfcrgtvIvmO1-9TQo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png" srcset="https://www.investopedia.com/thmb/GjhyZfi0o10eUs-k65901Tx7GD8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Theresa Chiechi</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-forward-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Understanding Forward Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> In <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forex.asp">forex</a>, the forward rate specified in an agreement is a contractual obligation that must be honored by the parties involved. For example, consider an American exporter with a large export order pending for Europe, and the exporter undertakes to sell 10 million euros in exchange for dollars at a forward rate of 1.35 euros per U.S. dollar in six months' time. The exporter is <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leadsandlags.asp">obligated to deliver</a> 10 million euros at the specified forward rate on the specified date, regardless of the status of the export order or the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchangerate.asp">exchange rate</a> prevailing in the spot market at that time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> For this reason, forward rates are widely used for hedging purposes in the currency markets, since <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currencyforward.asp">currency forwards</a> can be tailored for specific requirements, unlike <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a>, which have <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixed-income-forward.asp">fixed contract</a> sizes and expiry dates and therefore cannot be customized. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> In the context of bonds, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/052115/how-do-i-calculate-forward-rate-excel.asp">forward rates are calculated</a> to determine <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurevalue.asp">future values</a>. For example, an investor can purchase a one-year <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybill.asp">Treasury bill</a> or buy a six-month bill and roll it into another six-month bill once it matures. The investor will be indifferent if both investments produce the same total return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> For example, the investor will know the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spot_rate.asp">spot rate</a> for the six-month bill and will also know the rate of a one-year bond at the initiation of the investment, but they will not know the value of a six-month bill that is to be purchased six months from now. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-forward-rates-in-practice"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Forward Rates in Practice </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> To mitigate reinvestment risks, the investor could enter into a contractual agreement that would allow them to invest funds six months from now at the current forward rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Now, fast-forward six months. If the market spot rate for a new six-month investment is lower, the investor could use the forward rate agreement to invest the funds from the matured t-bill at the more favorable forward rate. If the spot rate is high enough, the investor could cancel the forward rate agreement and invest the funds at the prevailing market rate of interest on a new six-month investment. </p></div>

## What Is a Forward Rate? A forward rate is an interest rate applicable to a financial transaction that will take place in the future. [Forward rates are calculated from the spot rate](https://www.investopedia.com/ask/answers/043015/how-do-i-convert-spot-rate-forward-rate.asp) and are adjusted for the cost of carry to determine the future interest rate that equates the total return of a longer-term investment with a strategy of rolling over a shorter-term investment. The term may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. ![Forward Rate]() :max_bytes(150000):strip_icc()/forwardrate.asp-final-abecab1927554cd58edbbe2e392e4b80.png) Investopedia / Theresa Chiechi ## Understanding Forward Rates In [forex](https://www.investopedia.com/terms/f/forex.asp), the forward rate specified in an agreement is a contractual obligation that must be honored by the parties involved. For example, consider an American exporter with a large export order pending for Europe, and the exporter undertakes to sell 10 million euros in exchange for dollars at a forward rate of 1.35 euros per U.S. dollar in six months' time. The exporter is [obligated to deliver](https://www.investopedia.com/terms/l/leadsandlags.asp) 10 million euros at the specified forward rate on the specified date, regardless of the status of the export order or the [exchange rate](https://www.investopedia.com/terms/e/exchangerate.asp) prevailing in the spot market at that time. For this reason, forward rates are widely used for hedging purposes in the currency markets, since [currency forwards](https://www.investopedia.com/terms/c/currencyforward.asp) can be tailored for specific requirements, unlike [futures](https://www.investopedia.com/terms/f/futures.asp), which have [fixed contract](https://www.investopedia.com/terms/f/fixed-income-forward.asp) sizes and expiry dates and therefore cannot be customized. In the context of bonds, [forward rates are calculated](https://www.investopedia.com/ask/answers/052115/how-do-i-calculate-forward-rate-excel.asp) to determine [future values](https://www.investopedia.com/terms/f/futurevalue.asp). For example, an investor can purchase a one-year [Treasury bill](https://www.investopedia.com/terms/t/treasurybill.asp) or buy a six-month bill and roll it into another six-month bill once it matures. The investor will be indifferent if both investments produce the same total return. For example, the investor will know the [spot rate](https://www.investopedia.com/terms/s/spot_rate.asp) for the six-month bill and will also know the rate of a one-year bond at the initiation of the investment, but they will not know the value of a six-month bill that is to be purchased six months from now. ## Forward Rates in Practice To mitigate reinvestment risks, the investor could enter into a contractual agreement that would allow them to invest funds six months from now at the current forward rate. Now, fast-forward six months. If the market spot rate for a new six-month investment is lower, the investor could use the forward rate agreement to invest the funds from the matured t-bill at the more favorable forward rate. If the spot rate is high enough, the investor could cancel the forward rate agreement and invest the funds at the prevailing market rate of interest on a new six-month investment.

What Is a Forward Rate? A forward rate is an interest rate applicable to a financial transaction that will take place in the future. Forward rates are calculated from the spot rate and are adjusted for the cost of carry to determine the future interest rate that equates the total return of a longer-term investment with a strategy of rolling over a shorter-term investment. The term may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. Investopedia / Theresa Chiechi Understanding Forward Rates In forex, the forward rate specified in an agreement is a contractual obligation that must be honored by the parties involved. For example, consider an American exporter with a large export order pending for Europe, and the exporter undertakes to sell 10 million euros in exchange for dollars at a forward rate of 1.35 euros per U.S. dollar in six months' time. The exporter is obligated to deliver 10 million euros at the specified forward rate on the specified date, regardless of the status of the export order or the exchange rate prevailing in the spot market at that time. For this reason, forward rates are widely used for hedging purposes in the currency markets, since currency forwards can be tailored for specific requirements, unlike futures, which have fixed contract sizes and expiry dates and therefore cannot be customized. In the context of bonds, forward rates are calculated to determine future values. For example, an investor can purchase a one-year Treasury bill or buy a six-month bill and roll it into another six-month bill once it matures. The investor will be indifferent if both investments produce the same total return. For example, the investor will know the spot rate for the six-month bill and will also know the rate of a one-year bond at the initiation of the investment, but they will not know the value of a six-month bill that is to be purchased six months from now. Forward Rates in Practice To mitigate reinvestment risks, the investor could enter into a contractual agreement that would allow them to invest funds six months from now at the current forward rate. Now, fast-forward six months. If the market spot rate for a new six-month investment is lower, the investor could use the forward rate agreement to invest the funds from the matured t-bill at the more favorable forward rate. If the spot rate is high enough, the investor could cancel the forward rate agreement and invest the funds at the prevailing market rate of interest on a new six-month investment.

https://www.investopedia.com/terms/s/sonia.asp

What Is Sterling Overnight Interbank Average (SONIA) Rate?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-sterling-overnight-interbank-average-sonia-rate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Sterling Overnight Interbank Average (SONIA) Rate? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Sterling Overnight Index Average (SONIA) rate is an interest rate benchmark used in the United Kingdom. It is the effective overnight interest rate paid by banks for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecured.asp">unsecured</a> transactions in the British sterling market. Administered by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/boe.asp">Bank of England (BoE)</a>, SONIA is used to fund trades that occur overnight during off-hours. As such, it represents the depth of overnight business in the marketplace. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Sterling Overnight Index Average, or SONIA, is an index of very short-term unsecured loans among and between U.K. financial institutions.</li><li>Launched in 1997, several changes made in 2017 and 2018 have led the SONIA rate to be the preferred risk-free benchmark interest rate by U.K. securities dealers.</li><li>This comes as the LIBOR rate, and its methodology for calculation, has come under criticism for fixing and fraud.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-sterling-overnight-interbank-average-sonia-rate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the Sterling Overnight Interbank Average (SONIA) Rate </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The Sterling Overnight Interbank Average Rate is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp">benchmark</a> interest rate used in the United Kingdom and operated by the BoE. It represents the average interest rate banks use when they borrow British currency from others, including financial institutions and large <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/institutionalinvestor.asp">institutional investors</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Calculated each business day in London, SONIA fixing is the weighted average rate of unsecured overnight sterling transactions that are brokered by members of the Wholesale Markets Brokers’ Association. The daily SONIA rate as of June 15, 2023, was 4.42840%.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The eligibility criteria for transactions to qualify for SONIA include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <li>Must be reported to the BoE's Sterling Money Market daily data collection</li> <li>Unsecured with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity date</a> of one business day</li> <li>Same-day settled transactions that take place between 12 a.m. and 6 p.m.</li> <li>A minimum deal size for inclusion is £25 million<span class="ql-inline-citation" data-cite="5"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> SONIA "provides up-front certainty of the amount of interest due at the end of the interest period."<span class="ql-inline-citation" data-cite="7"></span> The rate also encouraged the formulation of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overnightindexswap.asp">Overnight Index Swap (OIS)</a> market, and the Sterling Money Markets in Great Britain. SONIA is a widely used benchmark for many financial transactions, among which is the reference rate for the sterling OIS market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>According to the BoE, the rate is "used to value around £30 trillion of assets each year."<span class="ql-inline-citation" data-cite="4"></span><br/></p></div></div></div> <span class="heading-toc" id="toc-calculating-the-sonia-rate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Calculating the SONIA Rate </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Here's how SONIA is calculated: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>The central bank collects the previous day's data from banks and financial institutions by 7 a.m.</li><li>Data is analyzed to ensure it is accurate and formatted properly</li><li>The bank calculates the rate along with any other necessary statistics</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Once all of these steps are completed, the BoE publishes the rate.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-history-of-the-sonia-rate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> History of the SONIA Rate </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> SONIA was established in 1997 by the WMBA in the United Kingdom. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-conduct-authority-uk-fca.asp">Financial Conduct Authority (FCA)</a> in the U.K. regulated the WMBA as a calculation and publication agent. The WMBA had no sterling overnight funding rate before SONIA. This created <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> in the country's overnight interest rates. The creation of SONIA brought stability to overnight rates.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> The rate is managed and operated by the BoE, the country's central bank, which took control of the rate in April 2016.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="3"></span> The central bank made changes to the way it calculates SONIA in April 2018 and began publishing the SONIA Compounded Index on a daily basis in August 2020.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> In April 2017, the Working Group on Sterling Risk-Free Reference Rates, which is a group of active, influential dealers in the sterling interest rate swap market, announced SONIA would be its preferred, near-risk-free interest rate benchmark. This change impacted sterling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> and related financial contracts. It also provided an alternative interest rate to the dominant <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/libor.asp">London Interbank Offered Rate (LIBOR)</a>. To that end, the FCA announced it would no longer require banks to submit LIBOR quotes after 2021.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>SONIA provided traders and financial institutions with an alternative to the LIBOR as a benchmark for short-term financial transactions. All contracts using LIBOR are to be wrapped up by June 30, 2023.<span class="ql-inline-citation" data-cite="1"></span> LIBOR will be replaced by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/secured-overnight-financing-rate-sofr-4683954#toc-history-of-the-sofr">Secured Overnight Financing Rate (SOFR)</a>.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Changes to the SONIA Rate </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The Bank of England reported several changes that became valid as of April 2018: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li>SONIA was expanded to include overnight unsecured transactions which will be negotiated bilaterally as well as those arranged via <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker.asp">brokers</a>. They now collect data using their Sterling Money Market data collection system.</li> <li>The bank uses a volume-weighted trimmed mean method for calculating the rate.</li> <li>The SONIA rate appears on the business day after the day the rate relates at 9 a.m. This delayed publication allows the bank to account for a higher <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volume.asp">volume</a> of activity. <span class="ql-inline-citation" data-cite="5"></span><br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-is-the-sterling-overnight-interbank-average-rate"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Sterling Overnight Interbank Average Rate?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Sterling Overnight Interbank Average rate is a benchmark interest rate used in the United Kingdom. The rate, which is managed, calculated, and published by the Bank of England, is the overnight interest rate that banks and other financial institutions pay for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecured.asp">unsecured</a> transactions in the British sterling market. Transactions must meet certain criteria to qualify. Among them, transactions must be executed between a certain time frame (12 a.m. and 6 p.m.) and must be worth at least £25 million.<span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-is-the-current-sonia-rate"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Current SONIA Rate?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SONIA rate calculated, published, and set on June 15, 2023, was 4.42840%.<span class="ql-inline-citation" data-cite="6"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-who-oversees-sonia"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Oversees SONIA?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Bank of England manages and operates the Sterling Overnight Interbank Average rate. It took control of SONIA in 2016 and made changes to its methodology two years later. But it was established by Wholesale Markets Brokers’ Association in 1997. Prior to this, there was no such rate. As such, there was a greater degree of volatility in the overnight interest rate environment in the United Kingdom. SONIA, though, brought more stability to these rates. It is now used as a broad benchmark for different types of unsecured financial transactions.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The Bank of England is responsible for publishing the SONIA rate, which is the interest rate benchmark used by banks for different unsecured financial transactions in the overnight sterling market. It provides some degree of stability to the country's overnight market and represents the depth of overnight business in the country's financial markets. </p></div>

## What Is the Sterling Overnight Interbank Average (SONIA) Rate? The Sterling Overnight Index Average (SONIA) rate is an interest rate benchmark used in the United Kingdom. It is the effective overnight interest rate paid by banks for [unsecured](https://www.investopedia.com/terms/u/unsecured.asp) transactions in the British sterling market. Administered by the [Bank of England (BoE)](https://www.investopedia.com/terms/b/boe.asp), SONIA is used to fund trades that occur overnight during off-hours. As such, it represents the depth of overnight business in the marketplace. ### Key Takeaways * The Sterling Overnight Index Average, or SONIA, is an index of very short-term unsecured loans among and between U.K. financial institutions. * Launched in 1997, several changes made in 2017 and 2018 have led the SONIA rate to be the preferred risk-free benchmark interest rate by U.K. securities dealers. * This comes as the LIBOR rate, and its methodology for calculation, has come under criticism for fixing and fraud. ## Understanding the Sterling Overnight Interbank Average (SONIA) Rate The Sterling Overnight Interbank Average Rate is a [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) interest rate used in the United Kingdom and operated by the BoE. It represents the average interest rate banks use when they borrow British currency from others, including financial institutions and large [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp). Calculated each business day in London, SONIA fixing is the weighted average rate of unsecured overnight sterling transactions that are brokered by members of the Wholesale Markets Brokers’ Association. The daily SONIA rate as of June 15, 2023, was 4.42840%. The eligibility criteria for transactions to qualify for SONIA include: * Must be reported to the BoE's Sterling Money Market daily data collection * Unsecured with a [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp) of one business day * Same-day settled transactions that take place between 12 a.m. and 6 p.m. * A minimum deal size for inclusion is £25 million SONIA "provides up-front certainty of the amount of interest due at the end of the interest period." The rate also encouraged the formulation of the [Overnight Index Swap (OIS)](https://www.investopedia.com/terms/o/overnightindexswap.asp) market, and the Sterling Money Markets in Great Britain. SONIA is a widely used benchmark for many financial transactions, among which is the reference rate for the sterling OIS market. ### According to the BoE, the rate is "used to value around £30 trillion of assets each year." ## Calculating the SONIA Rate Here's how SONIA is calculated: * The central bank collects the previous day's data from banks and financial institutions by 7 a.m. * Data is analyzed to ensure it is accurate and formatted properly * The bank calculates the rate along with any other necessary statistics Once all of these steps are completed, the BoE publishes the rate. ## History of the SONIA Rate SONIA was established in 1997 by the WMBA in the United Kingdom. The [Financial Conduct Authority (FCA)](https://www.investopedia.com/terms/f/financial-conduct-authority-uk-fca.asp) in the U.K. regulated the WMBA as a calculation and publication agent. The WMBA had no sterling overnight funding rate before SONIA. This created [volatility](https://www.investopedia.com/terms/v/volatility.asp) in the country's overnight interest rates. The creation of SONIA brought stability to overnight rates. The rate is managed and operated by the BoE, the country's central bank, which took control of the rate in April 2016. The central bank made changes to the way it calculates SONIA in April 2018 and began publishing the SONIA Compounded Index on a daily basis in August 2020. In April 2017, the Working Group on Sterling Risk-Free Reference Rates, which is a group of active, influential dealers in the sterling interest rate swap market, announced SONIA would be its preferred, near-risk-free interest rate benchmark. This change impacted sterling [derivatives](https://www.investopedia.com/terms/d/derivative.asp) and related financial contracts. It also provided an alternative interest rate to the dominant [London Interbank Offered Rate (LIBOR)](https://www.investopedia.com/terms/l/libor.asp). To that end, the FCA announced it would no longer require banks to submit LIBOR quotes after 2021. ### SONIA provided traders and financial institutions with an alternative to the LIBOR as a benchmark for short-term financial transactions. All contracts using LIBOR are to be wrapped up by June 30, 2023. LIBOR will be replaced by the [Secured Overnight Financing Rate (SOFR)](https://www.investopedia.com/secured-overnight-financing-rate-sofr-4683954#toc-history-of-the-sofr). ### Changes to the SONIA Rate The Bank of England reported several changes that became valid as of April 2018: 1. SONIA was expanded to include overnight unsecured transactions which will be negotiated bilaterally as well as those arranged via [brokers](https://www.investopedia.com/terms/b/broker.asp). They now collect data using their Sterling Money Market data collection system. 2. The bank uses a volume-weighted trimmed mean method for calculating the rate. 3. The SONIA rate appears on the business day after the day the rate relates at 9 a.m. This delayed publication allows the bank to account for a higher [volume](https://www.investopedia.com/terms/v/volume.asp) of activity. ## What Is the Sterling Overnight Interbank Average Rate? The Sterling Overnight Interbank Average rate is a benchmark interest rate used in the United Kingdom. The rate, which is managed, calculated, and published by the Bank of England, is the overnight interest rate that banks and other financial institutions pay for [unsecured](https://www.investopedia.com/terms/u/unsecured.asp) transactions in the British sterling market. Transactions must meet certain criteria to qualify. Among them, transactions must be executed between a certain time frame (12 a.m. and 6 p.m.) and must be worth at least £25 million. ## What Is the Current SONIA Rate? The SONIA rate calculated, published, and set on June 15, 2023, was 4.42840%. ## Who Oversees SONIA? The Bank of England manages and operates the Sterling Overnight Interbank Average rate. It took control of SONIA in 2016 and made changes to its methodology two years later. But it was established by Wholesale Markets Brokers’ Association in 1997. Prior to this, there was no such rate. As such, there was a greater degree of volatility in the overnight interest rate environment in the United Kingdom. SONIA, though, brought more stability to these rates. It is now used as a broad benchmark for different types of unsecured financial transactions. ## The Bottom Line The Bank of England is responsible for publishing the SONIA rate, which is the interest rate benchmark used by banks for different unsecured financial transactions in the overnight sterling market. It provides some degree of stability to the country's overnight market and represents the depth of overnight business in the country's financial markets.

What Is the Sterling Overnight Interbank Average (SONIA) Rate? The Sterling Overnight Index Average (SONIA) rate is an interest rate benchmark used in the United Kingdom. It is the effective overnight interest rate paid by banks for unsecured transactions in the British sterling market. Administered by the Bank of England (BoE), SONIA is used to fund trades that occur overnight during off-hours. As such, it represents the depth of overnight business in the marketplace. Key Takeaways The Sterling Overnight Index Average, or SONIA, is an index of very short-term unsecured loans among and between U.K. financial institutions.Launched in 1997, several changes made in 2017 and 2018 have led the SONIA rate to be the preferred risk-free benchmark interest rate by U.K. securities dealers.This comes as the LIBOR rate, and its methodology for calculation, has come under criticism for fixing and fraud. Understanding the Sterling Overnight Interbank Average (SONIA) Rate The Sterling Overnight Interbank Average Rate is a benchmark interest rate used in the United Kingdom and operated by the BoE. It represents the average interest rate banks use when they borrow British currency from others, including financial institutions and large institutional investors. Calculated each business day in London, SONIA fixing is the weighted average rate of unsecured overnight sterling transactions that are brokered by members of the Wholesale Markets Brokers’ Association. The daily SONIA rate as of June 15, 2023, was 4.42840%. The eligibility criteria for transactions to qualify for SONIA include: Must be reported to the BoE's Sterling Money Market daily data collection Unsecured with a maturity date of one business day Same-day settled transactions that take place between 12 a.m. and 6 p.m. A minimum deal size for inclusion is £25 million SONIA "provides up-front certainty of the amount of interest due at the end of the interest period." The rate also encouraged the formulation of the Overnight Index Swap (OIS) market, and the Sterling Money Markets in Great Britain. SONIA is a widely used benchmark for many financial transactions, among which is the reference rate for the sterling OIS market. According to the BoE, the rate is "used to value around £30 trillion of assets each year." Calculating the SONIA Rate Here's how SONIA is calculated: The central bank collects the previous day's data from banks and financial institutions by 7 a.m.Data is analyzed to ensure it is accurate and formatted properlyThe bank calculates the rate along with any other necessary statistics Once all of these steps are completed, the BoE publishes the rate. History of the SONIA Rate SONIA was established in 1997 by the WMBA in the United Kingdom. The Financial Conduct Authority (FCA) in the U.K. regulated the WMBA as a calculation and publication agent. The WMBA had no sterling overnight funding rate before SONIA. This created volatility in the country's overnight interest rates. The creation of SONIA brought stability to overnight rates. The rate is managed and operated by the BoE, the country's central bank, which took control of the rate in April 2016. The central bank made changes to the way it calculates SONIA in April 2018 and began publishing the SONIA Compounded Index on a daily basis in August 2020. In April 2017, the Working Group on Sterling Risk-Free Reference Rates, which is a group of active, influential dealers in the sterling interest rate swap market, announced SONIA would be its preferred, near-risk-free interest rate benchmark. This change impacted sterling derivatives and related financial contracts. It also provided an alternative interest rate to the dominant London Interbank Offered Rate (LIBOR). To that end, the FCA announced it would no longer require banks to submit LIBOR quotes after 2021. SONIA provided traders and financial institutions with an alternative to the LIBOR as a benchmark for short-term financial transactions. All contracts using LIBOR are to be wrapped up by June 30, 2023. LIBOR will be replaced by the Secured Overnight Financing Rate (SOFR). Changes to the SONIA Rate The Bank of England reported several changes that became valid as of April 2018: SONIA was expanded to include overnight unsecured transactions which will be negotiated bilaterally as well as those arranged via brokers. They now collect data using their Sterling Money Market data collection system. The bank uses a volume-weighted trimmed mean method for calculating the rate. The SONIA rate appears on the business day after the day the rate relates at 9 a.m. This delayed publication allows the bank to account for a higher volume of activity.  What Is the Sterling Overnight Interbank Average Rate? The Sterling Overnight Interbank Average rate is a benchmark interest rate used in the United Kingdom. The rate, which is managed, calculated, and published by the Bank of England, is the overnight interest rate that banks and other financial institutions pay for unsecured transactions in the British sterling market. Transactions must meet certain criteria to qualify. Among them, transactions must be executed between a certain time frame (12 a.m. and 6 p.m.) and must be worth at least £25 million. What Is the Current SONIA Rate? The SONIA rate calculated, published, and set on June 15, 2023, was 4.42840%. Who Oversees SONIA? The Bank of England manages and operates the Sterling Overnight Interbank Average rate. It took control of SONIA in 2016 and made changes to its methodology two years later. But it was established by Wholesale Markets Brokers’ Association in 1997. Prior to this, there was no such rate. As such, there was a greater degree of volatility in the overnight interest rate environment in the United Kingdom. SONIA, though, brought more stability to these rates. It is now used as a broad benchmark for different types of unsecured financial transactions. The Bottom Line The Bank of England is responsible for publishing the SONIA rate, which is the interest rate benchmark used by banks for different unsecured financial transactions in the overnight sterling market. It provides some degree of stability to the country's overnight market and represents the depth of overnight business in the country's financial markets.

https://www.investopedia.com/terms/m/medical-identity-theft.asp

Medical Identity Theft: What It Is, How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-medical-identity-theft"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Medical Identity Theft? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Medical identity theft involves the fraudulent use of a person’s health insurance information to receive reimbursement for healthcare services provided to an individual not covered by the policy. Both patients and providers may commit fraudulent medical claims, depending on circumstances. Other times, the information is stolen by employees or external hackers to profit from selling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personally-identifiable-information-pii.asp" rel="noopener noreferrer">personal identifying information</a> (PII). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Medical identity theft is the fraudulent use of a person's health insurance information in order to receive reimbursement for healthcare services.</li><li>It is possible that both patients and providers may commit fraudulent medical claims but information can also be stolen by employees or external hackers.</li><li>When an insurance provider commits identity theft it is to obtain reimbursement for procedures that were never performed on the insured individual.</li><li>Medical identity results in similar outcomes to other types of identity theft. Damages include lowered credit ratings, denial of services, increased costs of coverage, and denial of coverage.</li><li>Monitoring your credit reports, bills sent by insurance companies, and guarding your private information can help guard against or make you aware of medical identity theft.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-medical-identity-theft"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Medical Identity Theft </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Medical identity theft uses insurance coverage information for one individual to obtain or pay for care for another individual. In fact, medical organizations accounted for 30% of all observed enterprise attacks between 2006 and 2016.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Perpetrators of medical identity theft include hackers who use <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-engineering.asp" rel="noopener noreferrer">social engineering</a> to obtain social security numbers and health insurance information from unsuspecting medical providers and patients. However, hackers are not the only threat to the loss of data. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> A healthcare provider is almost equally likely to lose private information through either the theft of laptops, flash drives, and backup copies, or by the leaking of private data from an employee. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The loss of patient data from unauthorized access to an insurance company’s or healthcare provider’s database is like other types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/identitytheft.asp" rel="noopener noreferrer">identity theft</a>. Motivations for employees who steal patients’ data include greed, revenge, and other agendas.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-use-of-stolen-medical-identities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Use of Stolen Medical Identities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Stolen health insurance information gets misused in two primary ways.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li>Consumers steal insurance information to cover benefits their insurance may not include, or because they have no insurance at all. For example, a drug trafficker might use fraudulent insurance information to purchase prescription drugs.</li><li>Providers also may file fraudulent claims on an individual’s insurance to obtain reimbursement for procedures they never performed. They may do this to offset the cost of treating uninsured or under-insured clients.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Victims of medical identity theft can suffer similar outcomes to victims of other types of identity theft. Damages include lowered credit ratings and denial of services. If thieves trigger thresholds for maximum benefits on a policy, policyholders may find themselves unable to get timely coverage for urgent treatments. They might see the yearly cost of their insurance increase, or denied coverage altogether if the fraudulent treatment included care for things like diabetes, osteoarthritis, or cancer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> When medical identity fraud causes erroneous medical records, the consequences could become even more significant. For example, if an identity thief obtains medical care that enters the wrong blood type into a patient’s medical records and the victim of stolen identity needs a blood transfusion, the results could endanger their life. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-avoiding-medical-identity-theft"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Avoiding Medical Identity Theft </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The best protection against either external or internal theft is constant monitoring through the use of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cybersecurity-4427739" rel="noopener noreferrer">honeypots</a> and other security practices. Portable storage devices should be carefully regulated, and a regular inventory of their use and location kept. Regulation of employees with access to patient data also needs monitoring with the granting of access based on the work responsibilities of the employee. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hipaa.asp" rel="noopener noreferrer">Health Insurance Portability and Accountability Act</a> (HIPAA) passed by Congress in 1996 requires health care facilities in the U.S. to follow strict guidelines to ensure they treat patient data, including insurance information, carefully.<span class="ql-inline-citation" data-cite="3"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Providers who commit medical identity theft usually do so to obtain reimbursement from an insurance company or the government for services they did not provide. To detect and prevent this type of fraud, consumers should carefully review any explanations of the benefit payments they receive from their insurers. Contact your insurance provider immediately if you get a statement for a procedure you did not receive. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Medical identity thieves typically require a patient’s Social Security number as well as their medical insurance information. Therefore, consumers should guard this information carefully. Only provide your social security number or health insurance information when necessary and then, only release the information when its security is guaranteed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-credit-reports"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Credit Reports </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Consumers should watch their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp" rel="noopener noreferrer">credit reports</a> for unpaid medical bills that enter collections. The <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp" rel="noopener noreferrer">Fair Credit Reporting Act</a> requires each of the three credit reporting bureaus to supply consumers with a free credit report once per year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Federal law also entitles consumers to receive free credit reports if any company has taken adverse action against them.<span class="ql-inline-citation" data-cite="2"></span> This includes denial of credit, insurance, or employment as well as reports from collection agencies or judgments. Consumers must request reports within 60 days from the date of the adverse action. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Also, consumers whose main income is from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/government-assistance-programs-4845368" rel="noopener noreferrer">Temporary Assistance for Needy Families</a> (TANF) benefits, unemployed individuals planning to look for a job within 60 days, and victims of identity theft are also entitled to a free credit report from each of the reporting agencies. </p></div>

## What Is Medical Identity Theft? Medical identity theft involves the fraudulent use of a person’s health insurance information to receive reimbursement for healthcare services provided to an individual not covered by the policy. Both patients and providers may commit fraudulent medical claims, depending on circumstances. Other times, the information is stolen by employees or external hackers to profit from selling [personal identifying information](https://www.investopedia.com/terms/p/personally-identifiable-information-pii.asp) (PII). ### Key Takeaways * Medical identity theft is the fraudulent use of a person's health insurance information in order to receive reimbursement for healthcare services. * It is possible that both patients and providers may commit fraudulent medical claims but information can also be stolen by employees or external hackers. * When an insurance provider commits identity theft it is to obtain reimbursement for procedures that were never performed on the insured individual. * Medical identity results in similar outcomes to other types of identity theft. Damages include lowered credit ratings, denial of services, increased costs of coverage, and denial of coverage. * Monitoring your credit reports, bills sent by insurance companies, and guarding your private information can help guard against or make you aware of medical identity theft. ## Understanding Medical Identity Theft Medical identity theft uses insurance coverage information for one individual to obtain or pay for care for another individual. In fact, medical organizations accounted for 30% of all observed enterprise attacks between 2006 and 2016. Perpetrators of medical identity theft include hackers who use [social engineering](https://www.investopedia.com/terms/s/social-engineering.asp) to obtain social security numbers and health insurance information from unsuspecting medical providers and patients. However, hackers are not the only threat to the loss of data. A healthcare provider is almost equally likely to lose private information through either the theft of laptops, flash drives, and backup copies, or by the leaking of private data from an employee. The loss of patient data from unauthorized access to an insurance company’s or healthcare provider’s database is like other types of [identity theft](https://www.investopedia.com/terms/i/identitytheft.asp). Motivations for employees who steal patients’ data include greed, revenge, and other agendas.  ## Use of Stolen Medical Identities Stolen health insurance information gets misused in two primary ways.  1. Consumers steal insurance information to cover benefits their insurance may not include, or because they have no insurance at all. For example, a drug trafficker might use fraudulent insurance information to purchase prescription drugs. 2. Providers also may file fraudulent claims on an individual’s insurance to obtain reimbursement for procedures they never performed. They may do this to offset the cost of treating uninsured or under-insured clients. Victims of medical identity theft can suffer similar outcomes to victims of other types of identity theft. Damages include lowered credit ratings and denial of services. If thieves trigger thresholds for maximum benefits on a policy, policyholders may find themselves unable to get timely coverage for urgent treatments. They might see the yearly cost of their insurance increase, or denied coverage altogether if the fraudulent treatment included care for things like diabetes, osteoarthritis, or cancer. When medical identity fraud causes erroneous medical records, the consequences could become even more significant. For example, if an identity thief obtains medical care that enters the wrong blood type into a patient’s medical records and the victim of stolen identity needs a blood transfusion, the results could endanger their life. ## Avoiding Medical Identity Theft The best protection against either external or internal theft is constant monitoring through the use of [honeypots](https://www.investopedia.com/cybersecurity-4427739) and other security practices. Portable storage devices should be carefully regulated, and a regular inventory of their use and location kept. Regulation of employees with access to patient data also needs monitoring with the granting of access based on the work responsibilities of the employee. The [Health Insurance Portability and Accountability Act](https://www.investopedia.com/terms/h/hipaa.asp) (HIPAA) passed by Congress in 1996 requires health care facilities in the U.S. to follow strict guidelines to ensure they treat patient data, including insurance information, carefully.  Providers who commit medical identity theft usually do so to obtain reimbursement from an insurance company or the government for services they did not provide. To detect and prevent this type of fraud, consumers should carefully review any explanations of the benefit payments they receive from their insurers. Contact your insurance provider immediately if you get a statement for a procedure you did not receive. Medical identity thieves typically require a patient’s Social Security number as well as their medical insurance information. Therefore, consumers should guard this information carefully. Only provide your social security number or health insurance information when necessary and then, only release the information when its security is guaranteed. ## Credit Reports Consumers should watch their [credit reports](https://www.investopedia.com/terms/c/creditreport.asp) for unpaid medical bills that enter collections. The [Fair Credit Reporting Act](https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp) requires each of the three credit reporting bureaus to supply consumers with a free credit report once per year. Federal law also entitles consumers to receive free credit reports if any company has taken adverse action against them. This includes denial of credit, insurance, or employment as well as reports from collection agencies or judgments. Consumers must request reports within 60 days from the date of the adverse action. Also, consumers whose main income is from [Temporary Assistance for Needy Families](https://www.investopedia.com/government-assistance-programs-4845368) (TANF) benefits, unemployed individuals planning to look for a job within 60 days, and victims of identity theft are also entitled to a free credit report from each of the reporting agencies.

What Is Medical Identity Theft? Medical identity theft involves the fraudulent use of a person’s health insurance information to receive reimbursement for healthcare services provided to an individual not covered by the policy. Both patients and providers may commit fraudulent medical claims, depending on circumstances. Other times, the information is stolen by employees or external hackers to profit from selling personal identifying information (PII). Key Takeaways Medical identity theft is the fraudulent use of a person's health insurance information in order to receive reimbursement for healthcare services.It is possible that both patients and providers may commit fraudulent medical claims but information can also be stolen by employees or external hackers.When an insurance provider commits identity theft it is to obtain reimbursement for procedures that were never performed on the insured individual.Medical identity results in similar outcomes to other types of identity theft. Damages include lowered credit ratings, denial of services, increased costs of coverage, and denial of coverage.Monitoring your credit reports, bills sent by insurance companies, and guarding your private information can help guard against or make you aware of medical identity theft. Understanding Medical Identity Theft Medical identity theft uses insurance coverage information for one individual to obtain or pay for care for another individual. In fact, medical organizations accounted for 30% of all observed enterprise attacks between 2006 and 2016. Perpetrators of medical identity theft include hackers who use social engineering to obtain social security numbers and health insurance information from unsuspecting medical providers and patients. However, hackers are not the only threat to the loss of data. A healthcare provider is almost equally likely to lose private information through either the theft of laptops, flash drives, and backup copies, or by the leaking of private data from an employee. The loss of patient data from unauthorized access to an insurance company’s or healthcare provider’s database is like other types of identity theft. Motivations for employees who steal patients’ data include greed, revenge, and other agendas.  Use of Stolen Medical Identities Stolen health insurance information gets misused in two primary ways.  Consumers steal insurance information to cover benefits their insurance may not include, or because they have no insurance at all. For example, a drug trafficker might use fraudulent insurance information to purchase prescription drugs.Providers also may file fraudulent claims on an individual’s insurance to obtain reimbursement for procedures they never performed. They may do this to offset the cost of treating uninsured or under-insured clients. Victims of medical identity theft can suffer similar outcomes to victims of other types of identity theft. Damages include lowered credit ratings and denial of services. If thieves trigger thresholds for maximum benefits on a policy, policyholders may find themselves unable to get timely coverage for urgent treatments. They might see the yearly cost of their insurance increase, or denied coverage altogether if the fraudulent treatment included care for things like diabetes, osteoarthritis, or cancer. When medical identity fraud causes erroneous medical records, the consequences could become even more significant. For example, if an identity thief obtains medical care that enters the wrong blood type into a patient’s medical records and the victim of stolen identity needs a blood transfusion, the results could endanger their life. Avoiding Medical Identity Theft The best protection against either external or internal theft is constant monitoring through the use of honeypots and other security practices. Portable storage devices should be carefully regulated, and a regular inventory of their use and location kept. Regulation of employees with access to patient data also needs monitoring with the granting of access based on the work responsibilities of the employee. The Health Insurance Portability and Accountability Act (HIPAA) passed by Congress in 1996 requires health care facilities in the U.S. to follow strict guidelines to ensure they treat patient data, including insurance information, carefully.  Providers who commit medical identity theft usually do so to obtain reimbursement from an insurance company or the government for services they did not provide. To detect and prevent this type of fraud, consumers should carefully review any explanations of the benefit payments they receive from their insurers. Contact your insurance provider immediately if you get a statement for a procedure you did not receive. Medical identity thieves typically require a patient’s Social Security number as well as their medical insurance information. Therefore, consumers should guard this information carefully. Only provide your social security number or health insurance information when necessary and then, only release the information when its security is guaranteed. Credit Reports Consumers should watch their credit reports for unpaid medical bills that enter collections. The Fair Credit Reporting Act requires each of the three credit reporting bureaus to supply consumers with a free credit report once per year. Federal law also entitles consumers to receive free credit reports if any company has taken adverse action against them. This includes denial of credit, insurance, or employment as well as reports from collection agencies or judgments. Consumers must request reports within 60 days from the date of the adverse action. Also, consumers whose main income is from Temporary Assistance for Needy Families (TANF) benefits, unemployed individuals planning to look for a job within 60 days, and victims of identity theft are also entitled to a free credit report from each of the reporting agencies.

https://www.investopedia.com/terms/m/mifid.asp

Markets in Financial Instruments Directive (MiFID) Definition

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-markets-in-financial-instruments-directive-mifid"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Markets in Financial Instruments Directive (MiFID)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Markets in Financial Instruments Directive (MiFID) is a European regulation that increases the transparency across the European Union's financial markets and standardizes the regulatory disclosures required for firms operating there. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> MiFID implemented new measures, such as pre- and post-trade transparency requirements, and set out the standards of conduct to be followed by financial firms. MiFID has a defined scope that primarily focuses on stocks. The directive was drafted in 2004 and has been in force across the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/europeanunion.asp">European Union</a> (EU) since 2007. MiFID was replaced by MiFID II in 2018. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The goal of the Markets in Financial Instruments Directive (MiFID) is to increase transparency across EU financial markets and to standardize regulatory disclosures for firms.</li><li>MiFID is part of the regulatory changes sweeping the EU that impact all financial firms' compliance departments.</li><li>MiFID has been in force across the European Union since 2007.</li><li>MiFID was replaced by an updated regulatory directive, MiFID II, in 2018.</li><li>Stocks are the primary focus of MiFID, but the product scope has been expanded under MiFID II and more recent amendments.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-markets-in-financial-instruments-directive-mifid"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding the Markets in Financial Instruments Directive (MiFID) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The stated aim of MiFID is for all EU members to share a common, robust regulatory framework that protects investors. MiFID came into effect a year before the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp">2008 financial crisis</a>, but changes were made following it that took shape in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mifid-ii.asp">MiFID II</a>. One issue in the original drafts was that the regulatory approach in dealing with countries outside of the European Union was left up to each member state. This meant that some firms outside of the EU could have a competitive advantage over firms inside the union because of the easier regulatory oversight. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> This issue was addressed through MiFID II (implemented in January 2018), which harmonized the rules for all firms with EU clients. MiFID focused primarily on stocks, which was seen as a limitation because it did not include the vast amount of financial products available in the market, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/052815/what-overthecounter-derivative.asp">over-the-counter (OTC) derivatives</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> OTC transactions are done between two parties without any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchange.asp">exchange</a> in the middle to act as a supervisor. As a result, there was less regulatory oversight and transparency for the parties engaging in an OTC trade. Implementing MiFID II brought many more financial products under its purview. The Markets in Financial Instruments Regulation (MiFIR) works in conjunction with MiFID and MiFID II as a regulation rather than a directive to extend the codes of conduct beyond stocks to other types of assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The European Union began enforcing the Markets in Crypto-Asset Regulation (MiCA) in July 2023, which complements the 2022 MiFID II amendment that added crypto-assets, Regulation 2022/858.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-client-classifications-under-the-mifid"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Client Classifications Under the MiFID </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> One of the key aspects of MiFID is the classification of clients into specific client types. There are three client types: professional clients, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retailinvestor.asp">retail clients</a>, and eligible counterparties. The goal for the classifications is that the regulatory protection for the clients should reflect the different levels of risks for each client type. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The idea is that different types of clients, or investors, will have different levels of financial knowledge and should be given different levels of protection when dealing with a financial body, such as a bank. Eligible counterparties are provided the least protection, and retail clients are provided the highest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Depending on the client type, they are provided with different levels of information necessary for their understanding of the specific risks, overall explanations, and details of that transaction. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-european-union-regulatory-harmonization"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> European Union Regulatory Harmonization </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> MiFID is just one part of the regulatory changes sweeping the EU and impacting the financial firms' compliance departments, e.g., insurers, mutual fund providers, and banks operating there. Taken together with other regulatory initiatives, like the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/general-data-protection-regulation-gdpr.asp">General Data Protection Regulation </a>(GDPR) and MiFIR, the EU is following through on its vision of a transparent market with clear rights and protections for EU citizens.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> As with any regulatory framework, many rules are tweaks to existing regulations, such as the requirements for disclosure where a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conflict-of-interest.asp">conflict of interest</a> exists. However, several best practices, like appointing a single officer to protect client interests from inside the firm, are now explicit requirements for firms that want to access the EU market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-mifid-ii"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> MiFID II </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> In 2018, the European Commission enacted a revised directive called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mifid-ii.asp">MiFID II</a>. First proposed in 2012, the revised directive was intended to restore confidence in the markets following the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/great-recession.asp">2008 market crash</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> While MiFID was limited to equity stocks, MiFID II extended the requirements to issuers of all types of securities, including debt securities, derivatives, and structured instruments. The new regulation enhanced the transparency and reporting requirements of securities trades, reducing the use of dark pools and OTC trading. It also extended investor protection for all types of securities trades, whether the investor was located inside or outside of the European Union. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> In 2022, MiFID II was amended to include tokenized securities, crypto-assets, and other distributed ledger-based instruments.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_36-0"><span class="heading-toc" id="toc-how-did-mifid-ii-affect-investment-banks"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Did MiFID II Affect Investment Banks?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For banks that provide asset management or investment services, MiFID II requires financial instruments to be traded only in multilateral and regulated trading platforms, or those that adhere to the transparency requirements of OTC trading. These rules are intended to protect investors and eliminate dark trading of securities.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-what-is-the-difference-between-mifid-and-mifid-ii"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between MiFID and MiFID II?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>MiFID II enhanced the transparency and reporting requirements of the older MiFID regulation. One key difference is the expansion of its scope: while MiFID applied largely to equities markets, MiFID II applies to all types of securities and derivatives.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-how-does-brexit-affect-mifid-ii"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Brexit Affect MiFID II?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>After the United Kingdom left the European Union, the two economies had two substantially similar regulatory regimes, but they lost their ability to trade easily. British firms lost their license to provide financial services to EU clients and vice versa. It also created duplicate reporting requirements for the two areas.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> MiFID, or the Markets in Financial Instruments Directive, was a set of European regulations governing equities markets in the European Union. It was intended to enhance transparency and reporting requirements to protect European investors. These rules were replaced by the revised MiFID II regulation in 2018 and the amendment of 2022. </p></div>

## What Is the Markets in Financial Instruments Directive (MiFID)? The Markets in Financial Instruments Directive (MiFID) is a European regulation that increases the transparency across the European Union's financial markets and standardizes the regulatory disclosures required for firms operating there. MiFID implemented new measures, such as pre- and post-trade transparency requirements, and set out the standards of conduct to be followed by financial firms. MiFID has a defined scope that primarily focuses on stocks. The directive was drafted in 2004 and has been in force across the [European Union](https://www.investopedia.com/terms/e/europeanunion.asp) (EU) since 2007. MiFID was replaced by MiFID II in 2018. ### Key Takeaways * The goal of the Markets in Financial Instruments Directive (MiFID) is to increase transparency across EU financial markets and to standardize regulatory disclosures for firms. * MiFID is part of the regulatory changes sweeping the EU that impact all financial firms' compliance departments. * MiFID has been in force across the European Union since 2007. * MiFID was replaced by an updated regulatory directive, MiFID II, in 2018. * Stocks are the primary focus of MiFID, but the product scope has been expanded under MiFID II and more recent amendments. ## Understanding the Markets in Financial Instruments Directive (MiFID) The stated aim of MiFID is for all EU members to share a common, robust regulatory framework that protects investors. MiFID came into effect a year before the [2008 financial crisis](https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp), but changes were made following it that took shape in [MiFID II](https://www.investopedia.com/terms/m/mifid-ii.asp). One issue in the original drafts was that the regulatory approach in dealing with countries outside of the European Union was left up to each member state. This meant that some firms outside of the EU could have a competitive advantage over firms inside the union because of the easier regulatory oversight. This issue was addressed through MiFID II (implemented in January 2018), which harmonized the rules for all firms with EU clients. MiFID focused primarily on stocks, which was seen as a limitation because it did not include the vast amount of financial products available in the market, such as [over-the-counter (OTC) derivatives](https://www.investopedia.com/ask/answers/052815/what-overthecounter-derivative.asp). OTC transactions are done between two parties without any [exchange](https://www.investopedia.com/terms/e/exchange.asp) in the middle to act as a supervisor. As a result, there was less regulatory oversight and transparency for the parties engaging in an OTC trade. Implementing MiFID II brought many more financial products under its purview. The Markets in Financial Instruments Regulation (MiFIR) works in conjunction with MiFID and MiFID II as a regulation rather than a directive to extend the codes of conduct beyond stocks to other types of assets. ### The European Union began enforcing the Markets in Crypto-Asset Regulation (MiCA) in July 2023, which complements the 2022 MiFID II amendment that added crypto-assets, Regulation 2022/858. ## Client Classifications Under the MiFID One of the key aspects of MiFID is the classification of clients into specific client types. There are three client types: professional clients, [retail clients](https://www.investopedia.com/terms/r/retailinvestor.asp), and eligible counterparties. The goal for the classifications is that the regulatory protection for the clients should reflect the different levels of risks for each client type. The idea is that different types of clients, or investors, will have different levels of financial knowledge and should be given different levels of protection when dealing with a financial body, such as a bank. Eligible counterparties are provided the least protection, and retail clients are provided the highest. Depending on the client type, they are provided with different levels of information necessary for their understanding of the specific risks, overall explanations, and details of that transaction. ## European Union Regulatory Harmonization MiFID is just one part of the regulatory changes sweeping the EU and impacting the financial firms' compliance departments, e.g., insurers, mutual fund providers, and banks operating there. Taken together with other regulatory initiatives, like the [General Data Protection Regulation](https://www.investopedia.com/terms/g/general-data-protection-regulation-gdpr.asp) (GDPR) and MiFIR, the EU is following through on its vision of a transparent market with clear rights and protections for EU citizens.  As with any regulatory framework, many rules are tweaks to existing regulations, such as the requirements for disclosure where a [conflict of interest](https://www.investopedia.com/terms/c/conflict-of-interest.asp) exists. However, several best practices, like appointing a single officer to protect client interests from inside the firm, are now explicit requirements for firms that want to access the EU market. ## MiFID II In 2018, the European Commission enacted a revised directive called [MiFID II](https://www.investopedia.com/terms/m/mifid-ii.asp). First proposed in 2012, the revised directive was intended to restore confidence in the markets following the [2008 market crash](https://www.investopedia.com/terms/g/great-recession.asp). While MiFID was limited to equity stocks, MiFID II extended the requirements to issuers of all types of securities, including debt securities, derivatives, and structured instruments. The new regulation enhanced the transparency and reporting requirements of securities trades, reducing the use of dark pools and OTC trading. It also extended investor protection for all types of securities trades, whether the investor was located inside or outside of the European Union. In 2022, MiFID II was amended to include tokenized securities, crypto-assets, and other distributed ledger-based instruments. ## How Did MiFID II Affect Investment Banks? For banks that provide asset management or investment services, MiFID II requires financial instruments to be traded only in multilateral and regulated trading platforms, or those that adhere to the transparency requirements of OTC trading. These rules are intended to protect investors and eliminate dark trading of securities. ## What Is the Difference Between MiFID and MiFID II? MiFID II enhanced the transparency and reporting requirements of the older MiFID regulation. One key difference is the expansion of its scope: while MiFID applied largely to equities markets, MiFID II applies to all types of securities and derivatives. ## How Does Brexit Affect MiFID II? After the United Kingdom left the European Union, the two economies had two substantially similar regulatory regimes, but they lost their ability to trade easily. British firms lost their license to provide financial services to EU clients and vice versa. It also created duplicate reporting requirements for the two areas. ## The Bottom Line MiFID, or the Markets in Financial Instruments Directive, was a set of European regulations governing equities markets in the European Union. It was intended to enhance transparency and reporting requirements to protect European investors. These rules were replaced by the revised MiFID II regulation in 2018 and the amendment of 2022.

What Is the Markets in Financial Instruments Directive (MiFID)? The Markets in Financial Instruments Directive (MiFID) is a European regulation that increases the transparency across the European Union's financial markets and standardizes the regulatory disclosures required for firms operating there. MiFID implemented new measures, such as pre- and post-trade transparency requirements, and set out the standards of conduct to be followed by financial firms. MiFID has a defined scope that primarily focuses on stocks. The directive was drafted in 2004 and has been in force across the European Union (EU) since 2007. MiFID was replaced by MiFID II in 2018. Key Takeaways The goal of the Markets in Financial Instruments Directive (MiFID) is to increase transparency across EU financial markets and to standardize regulatory disclosures for firms.MiFID is part of the regulatory changes sweeping the EU that impact all financial firms' compliance departments.MiFID has been in force across the European Union since 2007.MiFID was replaced by an updated regulatory directive, MiFID II, in 2018.Stocks are the primary focus of MiFID, but the product scope has been expanded under MiFID II and more recent amendments. Understanding the Markets in Financial Instruments Directive (MiFID) The stated aim of MiFID is for all EU members to share a common, robust regulatory framework that protects investors. MiFID came into effect a year before the 2008 financial crisis, but changes were made following it that took shape in MiFID II. One issue in the original drafts was that the regulatory approach in dealing with countries outside of the European Union was left up to each member state. This meant that some firms outside of the EU could have a competitive advantage over firms inside the union because of the easier regulatory oversight. This issue was addressed through MiFID II (implemented in January 2018), which harmonized the rules for all firms with EU clients. MiFID focused primarily on stocks, which was seen as a limitation because it did not include the vast amount of financial products available in the market, such as over-the-counter (OTC) derivatives. OTC transactions are done between two parties without any exchange in the middle to act as a supervisor. As a result, there was less regulatory oversight and transparency for the parties engaging in an OTC trade. Implementing MiFID II brought many more financial products under its purview. The Markets in Financial Instruments Regulation (MiFIR) works in conjunction with MiFID and MiFID II as a regulation rather than a directive to extend the codes of conduct beyond stocks to other types of assets. The European Union began enforcing the Markets in Crypto-Asset Regulation (MiCA) in July 2023, which complements the 2022 MiFID II amendment that added crypto-assets, Regulation 2022/858. Client Classifications Under the MiFID One of the key aspects of MiFID is the classification of clients into specific client types. There are three client types: professional clients, retail clients, and eligible counterparties. The goal for the classifications is that the regulatory protection for the clients should reflect the different levels of risks for each client type. The idea is that different types of clients, or investors, will have different levels of financial knowledge and should be given different levels of protection when dealing with a financial body, such as a bank. Eligible counterparties are provided the least protection, and retail clients are provided the highest. Depending on the client type, they are provided with different levels of information necessary for their understanding of the specific risks, overall explanations, and details of that transaction. European Union Regulatory Harmonization MiFID is just one part of the regulatory changes sweeping the EU and impacting the financial firms' compliance departments, e.g., insurers, mutual fund providers, and banks operating there. Taken together with other regulatory initiatives, like the General Data Protection Regulation (GDPR) and MiFIR, the EU is following through on its vision of a transparent market with clear rights and protections for EU citizens.  As with any regulatory framework, many rules are tweaks to existing regulations, such as the requirements for disclosure where a conflict of interest exists. However, several best practices, like appointing a single officer to protect client interests from inside the firm, are now explicit requirements for firms that want to access the EU market. MiFID II In 2018, the European Commission enacted a revised directive called MiFID II. First proposed in 2012, the revised directive was intended to restore confidence in the markets following the 2008 market crash. While MiFID was limited to equity stocks, MiFID II extended the requirements to issuers of all types of securities, including debt securities, derivatives, and structured instruments. The new regulation enhanced the transparency and reporting requirements of securities trades, reducing the use of dark pools and OTC trading. It also extended investor protection for all types of securities trades, whether the investor was located inside or outside of the European Union. In 2022, MiFID II was amended to include tokenized securities, crypto-assets, and other distributed ledger-based instruments. How Did MiFID II Affect Investment Banks? For banks that provide asset management or investment services, MiFID II requires financial instruments to be traded only in multilateral and regulated trading platforms, or those that adhere to the transparency requirements of OTC trading. These rules are intended to protect investors and eliminate dark trading of securities. What Is the Difference Between MiFID and MiFID II? MiFID II enhanced the transparency and reporting requirements of the older MiFID regulation. One key difference is the expansion of its scope: while MiFID applied largely to equities markets, MiFID II applies to all types of securities and derivatives. How Does Brexit Affect MiFID II? After the United Kingdom left the European Union, the two economies had two substantially similar regulatory regimes, but they lost their ability to trade easily. British firms lost their license to provide financial services to EU clients and vice versa. It also created duplicate reporting requirements for the two areas. The Bottom Line MiFID, or the Markets in Financial Instruments Directive, was a set of European regulations governing equities markets in the European Union. It was intended to enhance transparency and reporting requirements to protect European investors. These rules were replaced by the revised MiFID II regulation in 2018 and the amendment of 2022.

https://www.investopedia.com/investing/etfs-vs-etns/

Exchange Traded Notes: An Alternative to ETFs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Exchange-traded notes (ETN), are close cousins to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/01/082901.asp">exchange-traded funds (ETFs)</a>, but there are some key structural differences. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> For investors interested in exploring this kind of investment, it's important to know how they work when it comes to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/index-investing.asp">index investing</a> and compared to ETFs.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Exchange-traded notes (ETNs) are unsecured debt securities that track an underlying index of securities.</li><li>ETNs are different from exchange-traded funds, which also track an underlying index of securities, but trade like a stock.</li><li>ETNs bring some credit risk that ETFs don't have, while ETFs bring tracking risk. They are also taxed differently.</li><li>Because ETNs don't hold portfolio securities, there are no dividend or interest rate payments paid to investors while they own the ETN. Only when the investor sells the ETN are they subject to a long-term capital gains tax.</li><li>This contrasts with conventional ETFs, in which a long-term holder would be subject to capital gains tax each year. </li></ul></div></div></div> <span class="heading-toc" id="toc-etn-vs-etf"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> ETN vs. ETF </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> ETNs are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/structurednote.asp">structured products</a> that are issued as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seniordebt.asp">senior debt</a> notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds, or gold. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Barclays Bank PLC, a 300-year-old financial institution with hundreds of millions in assets and a good credit rating from Standard &amp; Poor's, provides its ETNs with a fairly dependable backing.<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="10"></span> But even with this kind of credibility, the investments are not free of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrisk.asp">credit risk</a>. Despite its reputation, Barclays will never be as safe as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/centralbank.asp">central bank</a>, as we witnessed with the downfall of major banks, such as Lehman Brothers and Bear Stearns, during the 207-2009 financial crisis. Even more stringent regulations requiring more safety capital don’t make banks completely immune from collapse.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-distinctions-in-tax-treatment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Distinctions in Tax Treatment </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> ETNs track their underlying indexes minus an annual expense per year. Unlike ETFs, there are no tracking errors with ETNs.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Investors should treat ETNs as prepaid contracts. This means that any difference between the sale and purchase will be classified as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalgain.asp">capital gains</a>. In comparison, the return from commodity-based ETFs will come from the interest on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybill.asp">Treasury bills</a>, short-term capital gains realized on the rolling of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a> contracts, and long-term capital gains.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Since long-term capital gains are treated more favorably than short-term capital gains and interest, the tax treatment of ETNs should be more favorable than that of ETFs.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> However, the owner of an ETN will owe <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incometax.asp">income taxes</a> on interest or coupon payments made by the ETN. For international investors, the differences are compounded as a treatment for these <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/taxes/capital-gains-tax-101/">capital gains</a> and will be treated differently in their home countries.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Exchange-traded notes (ETNs) are similar to bonds, while exchange-traded funds (ETFs) are similar to stocks.</p></div></div></div> <span class="heading-toc" id="toc-different-risks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Different Risks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Outside of the tax treatment, the difference between ETNs and ETFs comes down to credit risk versus <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trackingerror.asp">tracking risk</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> ETNs possess credit risk, so if Barclays would go bankrupt, investors may have to get in line behind bigger creditors, and not receive the return they were promised. An ETF, on the other hand, has virtually no credit risk. But there is tracking risk involved with holding an ETF. In other words, there is a possibility that the ETF's returns will differ from its underlying index.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-which-is-better"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Which Is Better? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Now that you have a better understanding of the differences between ETNs and ETFs, which one should you choose? To some degree that will be determined by your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxbracket.asp">tax bracket</a> and your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/110813/using-time-horizons-investing.asp">investment time horizon</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> While the biggest benefit of an ETN is that the entire gain is treated as a capital gain, this gain is also <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxdeferred.asp">deferred</a> until the security is either sold or matures. That is something that should not be taken lightly by tax-conscious, long-term investors. With an ETF, capital gains and losses are realized as each <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurescontract.asp">futures contract</a> is rolled into another one.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> The big difference between ETNs and ETFs is between credit risk and tax treatment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> While the benefit of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">active management</a> is arguable, there is no disputing the value that financial engineering has brought to the financial markets since <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deregulate.asp">deregulation</a> took hold in the early 1980s.<span class="ql-inline-citation" data-cite="9"></span> Financial engineering has made our markets more liquid and more efficient. The creation of the ETN is a development all investors should learn about and consider adding to their portfolios. </p></div>

Exchange-traded notes (ETN), are close cousins to [exchange-traded funds (ETFs)](https://www.investopedia.com/articles/01/082901.asp), but there are some key structural differences. For investors interested in exploring this kind of investment, it's important to know how they work when it comes to [index investing](https://www.investopedia.com/terms/i/index-investing.asp) and compared to ETFs.  ### Key Takeaways * Exchange-traded notes (ETNs) are unsecured debt securities that track an underlying index of securities. * ETNs are different from exchange-traded funds, which also track an underlying index of securities, but trade like a stock. * ETNs bring some credit risk that ETFs don't have, while ETFs bring tracking risk. They are also taxed differently. * Because ETNs don't hold portfolio securities, there are no dividend or interest rate payments paid to investors while they own the ETN. Only when the investor sells the ETN are they subject to a long-term capital gains tax. * This contrasts with conventional ETFs, in which a long-term holder would be subject to capital gains tax each year. ## ETN vs. ETF ETNs are [structured products](https://www.investopedia.com/terms/s/structurednote.asp) that are issued as [senior debt](https://www.investopedia.com/terms/s/seniordebt.asp) notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds, or gold. Barclays Bank PLC, a 300-year-old financial institution with hundreds of millions in assets and a good credit rating from Standard & Poor's, provides its ETNs with a fairly dependable backing. But even with this kind of credibility, the investments are not free of [credit risk](https://www.investopedia.com/terms/c/creditrisk.asp). Despite its reputation, Barclays will never be as safe as a [central bank](https://www.investopedia.com/terms/c/centralbank.asp), as we witnessed with the downfall of major banks, such as Lehman Brothers and Bear Stearns, during the 207-2009 financial crisis. Even more stringent regulations requiring more safety capital don’t make banks completely immune from collapse. ## Distinctions in Tax Treatment ETNs track their underlying indexes minus an annual expense per year. Unlike ETFs, there are no tracking errors with ETNs. Investors should treat ETNs as prepaid contracts. This means that any difference between the sale and purchase will be classified as [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp). In comparison, the return from commodity-based ETFs will come from the interest on [Treasury bills](https://www.investopedia.com/terms/t/treasurybill.asp), short-term capital gains realized on the rolling of [futures](https://www.investopedia.com/terms/f/futures.asp) contracts, and long-term capital gains. Since long-term capital gains are treated more favorably than short-term capital gains and interest, the tax treatment of ETNs should be more favorable than that of ETFs. However, the owner of an ETN will owe [income taxes](https://www.investopedia.com/terms/i/incometax.asp) on interest or coupon payments made by the ETN. For international investors, the differences are compounded as a treatment for these [capital gains](https://www.investopedia.com/taxes/capital-gains-tax-101/) and will be treated differently in their home countries. ### Exchange-traded notes (ETNs) are similar to bonds, while exchange-traded funds (ETFs) are similar to stocks. ## Different Risks Outside of the tax treatment, the difference between ETNs and ETFs comes down to credit risk versus [tracking risk](https://www.investopedia.com/terms/t/trackingerror.asp). ETNs possess credit risk, so if Barclays would go bankrupt, investors may have to get in line behind bigger creditors, and not receive the return they were promised. An ETF, on the other hand, has virtually no credit risk. But there is tracking risk involved with holding an ETF. In other words, there is a possibility that the ETF's returns will differ from its underlying index. ## Which Is Better? Now that you have a better understanding of the differences between ETNs and ETFs, which one should you choose? To some degree that will be determined by your [tax bracket](https://www.investopedia.com/terms/t/taxbracket.asp) and your [investment time horizon](https://www.investopedia.com/articles/investing/110813/using-time-horizons-investing.asp). While the biggest benefit of an ETN is that the entire gain is treated as a capital gain, this gain is also [deferred](https://www.investopedia.com/terms/t/taxdeferred.asp) until the security is either sold or matures. That is something that should not be taken lightly by tax-conscious, long-term investors. With an ETF, capital gains and losses are realized as each [futures contract](https://www.investopedia.com/terms/f/futurescontract.asp) is rolled into another one. ## The Bottom Line The big difference between ETNs and ETFs is between credit risk and tax treatment. While the benefit of [active management](https://www.investopedia.com/terms/a/activemanagement.asp) is arguable, there is no disputing the value that financial engineering has brought to the financial markets since [deregulation](https://www.investopedia.com/terms/d/deregulate.asp) took hold in the early 1980s. Financial engineering has made our markets more liquid and more efficient. The creation of the ETN is a development all investors should learn about and consider adding to their portfolios.

Exchange-traded notes (ETN), are close cousins to exchange-traded funds (ETFs), but there are some key structural differences. For investors interested in exploring this kind of investment, it's important to know how they work when it comes to index investing and compared to ETFs.  Key Takeaways Exchange-traded notes (ETNs) are unsecured debt securities that track an underlying index of securities.ETNs are different from exchange-traded funds, which also track an underlying index of securities, but trade like a stock.ETNs bring some credit risk that ETFs don't have, while ETFs bring tracking risk. They are also taxed differently.Because ETNs don't hold portfolio securities, there are no dividend or interest rate payments paid to investors while they own the ETN. Only when the investor sells the ETN are they subject to a long-term capital gains tax.This contrasts with conventional ETFs, in which a long-term holder would be subject to capital gains tax each year.  ETN vs. ETF ETNs are structured products that are issued as senior debt notes, while ETFs represent a stake in an underlying commodity. ETNs are more like bonds in that they are unsecured. ETFs provide investments into a fund that holds the assets it tracks, like stocks, bonds, or gold. Barclays Bank PLC, a 300-year-old financial institution with hundreds of millions in assets and a good credit rating from Standard & Poor's, provides its ETNs with a fairly dependable backing. But even with this kind of credibility, the investments are not free of credit risk. Despite its reputation, Barclays will never be as safe as a central bank, as we witnessed with the downfall of major banks, such as Lehman Brothers and Bear Stearns, during the 207-2009 financial crisis. Even more stringent regulations requiring more safety capital don’t make banks completely immune from collapse. Distinctions in Tax Treatment ETNs track their underlying indexes minus an annual expense per year. Unlike ETFs, there are no tracking errors with ETNs. Investors should treat ETNs as prepaid contracts. This means that any difference between the sale and purchase will be classified as capital gains. In comparison, the return from commodity-based ETFs will come from the interest on Treasury bills, short-term capital gains realized on the rolling of futures contracts, and long-term capital gains. Since long-term capital gains are treated more favorably than short-term capital gains and interest, the tax treatment of ETNs should be more favorable than that of ETFs. However, the owner of an ETN will owe income taxes on interest or coupon payments made by the ETN. For international investors, the differences are compounded as a treatment for these capital gains and will be treated differently in their home countries. Exchange-traded notes (ETNs) are similar to bonds, while exchange-traded funds (ETFs) are similar to stocks. Different Risks Outside of the tax treatment, the difference between ETNs and ETFs comes down to credit risk versus tracking risk. ETNs possess credit risk, so if Barclays would go bankrupt, investors may have to get in line behind bigger creditors, and not receive the return they were promised. An ETF, on the other hand, has virtually no credit risk. But there is tracking risk involved with holding an ETF. In other words, there is a possibility that the ETF's returns will differ from its underlying index. Which Is Better? Now that you have a better understanding of the differences between ETNs and ETFs, which one should you choose? To some degree that will be determined by your tax bracket and your investment time horizon. While the biggest benefit of an ETN is that the entire gain is treated as a capital gain, this gain is also deferred until the security is either sold or matures. That is something that should not be taken lightly by tax-conscious, long-term investors. With an ETF, capital gains and losses are realized as each futures contract is rolled into another one. The Bottom Line The big difference between ETNs and ETFs is between credit risk and tax treatment. While the benefit of active management is arguable, there is no disputing the value that financial engineering has brought to the financial markets since deregulation took hold in the early 1980s. Financial engineering has made our markets more liquid and more efficient. The creation of the ETN is a development all investors should learn about and consider adding to their portfolios.

https://www.investopedia.com/alibaba-stock-sinks-as-profit-plunges-on-investment-losses-8648037

Alibaba Stock Sinks as Profit Plunges on Investment Losses

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Alibaba Group Holding's ADRs sank Tuesday after the Chinese tech giant posted an 86% plunge in fiscal fourth-quarter net income on the back of investment losses.</li><li>Both quarterly net income and earnings per share were below forecasts.</li><li>Revenue beat estimates as its core Taobao and Tmall online shopping businesses posted a 4% sales gain.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/adr.asp">American depositary receipts (ADRs)</a> of Alibaba Group Holding (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA">BABA</a>) sank as the Chinese e-commerce giant's profit plunged on investment losses.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Alibaba said its fiscal fourth-quarter net income fell 86% over the year to 3.27 billion Chinese yuan ($453 million). Adjusted earnings for the quarter ended March were CNY10.14 ($1.40) per <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/adrvsads.asp">ADS</a>. Both were below forecasts. A 7% increase in revenue at CNY221.9 billion ($30.73 billion) beat estimates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The company blamed the profit decline primarily on “a net loss from our investments in publicly-traded companies during the quarter, compared to a net gain in the same quarter last year, due to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mark-to-market-losses.asp">mark-to-market</a> changes.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Alibaba’s revenue got a boost from its core Taobao and Tmall Chinese online shopping business, which posted a 4% increase in sales to CNY93.22 billion ($12.91 billion). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> In addition, the company announced that the board has approved a special two-part dividend made up of an annual regular cash dividend of $0.125 per ordinary share or $1.00 per ADS, and a one-time extraordinary dividend of $0.0825 per ordinary share or $0.66 per ADS.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Alibaba ADRs were down 7.3% to $78.42 as of 12:15 p.m. ET.<br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Alibaba Group Holding's ADRs sank Tuesday after the Chinese tech giant posted an 86% plunge in fiscal fourth-quarter net income on the back of investment losses. * Both quarterly net income and earnings per share were below forecasts. * Revenue beat estimates as its core Taobao and Tmall online shopping businesses posted a 4% sales gain. [American depositary receipts (ADRs)](https://www.investopedia.com/terms/a/adr.asp) of Alibaba Group Holding ([BABA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA)) sank as the Chinese e-commerce giant's profit plunged on investment losses. Alibaba said its fiscal fourth-quarter net income fell 86% over the year to 3.27 billion Chinese yuan ($453 million). Adjusted earnings for the quarter ended March were CNY10.14 ($1.40) per [ADS](https://www.investopedia.com/ask/answers/06/adrvsads.asp). Both were below forecasts. A 7% increase in revenue at CNY221.9 billion ($30.73 billion) beat estimates. The company blamed the profit decline primarily on “a net loss from our investments in publicly-traded companies during the quarter, compared to a net gain in the same quarter last year, due to the [mark-to-market](https://www.investopedia.com/terms/m/mark-to-market-losses.asp) changes.” Alibaba’s revenue got a boost from its core Taobao and Tmall Chinese online shopping business, which posted a 4% increase in sales to CNY93.22 billion ($12.91 billion). In addition, the company announced that the board has approved a special two-part dividend made up of an annual regular cash dividend of $0.125 per ordinary share or $1.00 per ADS, and a one-time extraordinary dividend of $0.0825 per ordinary share or $0.66 per ADS.  Alibaba ADRs were down 7.3% to $78.42 as of 12:15 p.m. ET. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Alibaba Group Holding's ADRs sank Tuesday after the Chinese tech giant posted an 86% plunge in fiscal fourth-quarter net income on the back of investment losses.Both quarterly net income and earnings per share were below forecasts.Revenue beat estimates as its core Taobao and Tmall online shopping businesses posted a 4% sales gain. American depositary receipts (ADRs) of Alibaba Group Holding (BABA) sank as the Chinese e-commerce giant's profit plunged on investment losses. Alibaba said its fiscal fourth-quarter net income fell 86% over the year to 3.27 billion Chinese yuan ($453 million). Adjusted earnings for the quarter ended March were CNY10.14 ($1.40) per ADS. Both were below forecasts. A 7% increase in revenue at CNY221.9 billion ($30.73 billion) beat estimates. The company blamed the profit decline primarily on “a net loss from our investments in publicly-traded companies during the quarter, compared to a net gain in the same quarter last year, due to the mark-to-market changes.” Alibaba’s revenue got a boost from its core Taobao and Tmall Chinese online shopping business, which posted a 4% increase in sales to CNY93.22 billion ($12.91 billion). In addition, the company announced that the board has approved a special two-part dividend made up of an annual regular cash dividend of $0.125 per ordinary share or $1.00 per ADS, and a one-time extraordinary dividend of $0.0825 per ordinary share or $0.66 per ADS.  Alibaba ADRs were down 7.3% to $78.42 as of 12:15 p.m. ET. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/best-online-stock-trading-classes-5089249

Best Online Stock Trading Classes

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> An increasing number of people are turning to stock trading as a way to supplement their income, and those who are the most committed can do quite well financially.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> However, the learning curve for becoming a successful stock trader can be very steep. It's possible to learn stock trading theory by reading a book, but gaining the practical knowledge, skills, and confidence to trade with your own money requires more extensive training with real-time support. That's what a high-quality online stock trading course can offer.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> We examined over 15 of the most popular stock trading classes, and rated them on important criteria like cost, access to instructors and a trading community, availability of free course materials, and unique features. Below you'll see our picks for the best stock trading classes online; they offer the most value for your money, with comprehensive education covering beginner to advanced skills. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The Best Online Stock Trading Classes of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.investorsunderground.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Investors Underground</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Beginners:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19974&amp;type=3&amp;subid=0" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Udemy</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Value:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bullishbears.com/referral.html?p=DotdashPM&amp;w=bostc" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Bullish Bears</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Technical Analysis:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187" rel="nofollow noopener sponsored nocaes" target="_blank"> Skillshare</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Day Traders:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bearbulltraders.com/ref/dotdash" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Bear Bull Traders</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Live Training:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bullsonwallstreet.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Bulls on Wall Street</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for University Education:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks" rel="nofollow noskim noopener nocaes" target="_blank"> Coursera</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Emerging/Alternative Markets:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bit.ly/3VgYyKH" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Financial Edge</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Investopedia offers its own stock trading class as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://academy.investopedia.com/products/financial-modeling" rel="noopener noreferrer">Investopedia Academy</a>.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="false" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Online Stock Trading Classes</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Online Stock Trading Classes" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Online Stock Trading Classes</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Investors Underground" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Investors Underground" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-investors-underground" rel="nocaes"> <span class="link__wrapper">Investors Underground</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Udemy" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Udemy" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-beginners-udemy" rel="nocaes"> <span class="link__wrapper">Udemy</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bullish Bears" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bullish Bears" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-value-bullish-bears" rel="nocaes"> <span class="link__wrapper">Bullish Bears</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Skillshare" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Skillshare" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-technical-analysis-skillshare" rel="nocaes"> <span class="link__wrapper">Skillshare</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bear Bull Traders" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bear Bull Traders" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-day-traders-bear-bull-traders" rel="nocaes"> <span class="link__wrapper">Bear Bull Traders</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bulls on Wall Street" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bulls on Wall Street" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-live-training-bulls-on-wall-street" rel="nocaes"> <span class="link__wrapper">Bulls on Wall Street</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Coursera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Coursera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-university-education-coursera" rel="nocaes"> <span class="link__wrapper">Coursera</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Financial Edge" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-7"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Financial Edge" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-emergingalternative-markets-financial-edge" rel="nocaes"> <span class="link__wrapper">Financial Edge</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (5)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Classes" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-stock-trading-classes" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Classes</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-41a4de83-7780-4b6f-a5d7-aa134ab2ba67" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">FAQ</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-investors-underground"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Investors Underground</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 301px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Investors Underground" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/bZs6oawWYOcY4ob9xaXxTOVMp8M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Investors-Underground-logo-091519fd6607492e81fa40405bb830e1.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Investors Underground" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/bZs6oawWYOcY4ob9xaXxTOVMp8M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Investors-Underground-logo-091519fd6607492e81fa40405bb830e1.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investors Underground</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Cost:</strong> $997+</li><li><strong>Trial:</strong> No</li><li><strong>Live trade room:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Investors Underground" data-retailer-type="other" data-tracking-container="true" href="https://www.investorsunderground.com/" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Investors Underground (IU) has the most complete offering by far. With a clear educational path at a fairly reasonable price, it's our choice as the best overall stock trading course. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Well-established with a solid reputation</p></li> <li><p>Large and active chat room</p></li> <li><p>Access to mentors, including the founder</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Pricing is on the high end</p></li> <li><p>Trading courses sold separately from the primary subscription for around $1,000</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> IU's Textbook Trading course was one of the first of its kind designed for those with only basic knowledge of trading. Although it starts out with the basics, it quickly moves to more advanced topics, including the application of trading tools and actionable trading setups. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> From there, students move right into the Tandem Trader, a 12-hour advanced day trading course. What's unique about this course is that in addition to the standard educational content used in advanced classes, Tandem Trader includes screenshots of live trades made by Michaud along with his tick-by-tick commentary, showing students how it feels to trade right alongside a top trader. It's one thing to learn trading theory; it's entirely different to see trading setups play out in real-time.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Following that, you'll take the Swing Trading course, featuring over six hours of content on swing trading methodology and strategy. You'll learn the foundations of swing trading, along with advanced technical analysis, how to analyze long and short-chart patterns, and how to identify key price levels. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> You can purchase courses individually or combined with a monthly, quarterly, or annual paid membership. Adding trading courses to the monthly subscription ($297 per month) or quarterly subscription ($697 per quarter) will cost you an additional $1,000. And with an annual subscription ($1,897 annually), IU's trading courses will cost $800, for a total investment of $2,697 in your first year of Investors Underground. The yearly subscription is the best value for up-and-coming traders who want to learn and practice at their own pace. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-beginners-udemy"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Beginners</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Udemy</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-12" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Udemy" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/8dbpotteHiGNruoH2cV6L8LuOX4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-5e77f26dd6714418853c5f2d15dd22a5.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Udemy" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/8dbpotteHiGNruoH2cV6L8LuOX4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-5e77f26dd6714418853c5f2d15dd22a5.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Udemy</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> <li><strong>Cost:</strong> $49.99</li><li><strong>Trial:</strong> Yes</li><li><strong>Live trade room:</strong> No</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-14"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Udemy" data-retailer-type="other" data-tracking-container="true" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19974&amp;type=3&amp;subid=0" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> Udemy offers a wide range of beginner stock trading courses at remarkably low prices, making it our choice as the best course provider for newbies. Its affordable prices make Udemy an attractive choice for anyone who wants to see if stock trading is for them without committing too much. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-18"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Low prices</p></li> <li><p>Comprehensive courses</p></li> <li><p>Extensive course selection</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No opportunity for practical application</p></li> <li><p>No chat rooms</p></li> <li><p>No coaching</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> For those brand new to stock investing, Udemy offers <a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19974&amp;type=3&amp;subid=0" rel="sponsored nofollow">Stock Market from Scratch for Complete Beginners</a>. Regularly priced at $49.99, the course includes six sections with 51 lectures for a total of 6.5 hours of instruction. There is often a steep discount available. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> With that foundation of knowledge, you can move up to <a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19980&amp;type=3&amp;subid=0" rel="sponsored nofollow">The Complete Foundation Stock Trading Course</a>, available for $179.99 with steep discounts again available. The course takes you further up the learning curve to better understand how the stock market works, how orders are placed, and how to perform risk management, along with an introduction to chart analysis.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> Then, for a deeper dive into stock trading, you could take the <a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19975&amp;type=3&amp;subid=0" rel="sponsored nofollow">Complete Day Trading Course</a>, which focuses on the skill of technical analysis. Students learn how to trade more than 16 chart patterns and understand performance indicators. For $129.99, you receive 10 hours of on-demand video, 11 downloadable resources, and full lifetime access. Like Udemy's other courses, you can usually catch a large promotional discount. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> All courses are taught using pre-recorded video lessons that include expert instruction with demonstrations of trading techniques. The downside of Udemy's courses is that there are no opportunities for practical application or live instruction, although you may be able to ask questions of the instructor. For more, see <a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&amp;offerid=624447.19963&amp;type=3&amp;subid=0" rel="sponsored nofollow">Udemy's full selection of stock trading classes</a>.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-value-bullish-bears"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Value</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Bullish Bears</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-24" style="--imgWidth: 309px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Bullish Bears" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/FG_pPtgV_5z59YgIQZlrBOAwAYY=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Bullish Bears" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/FG_pPtgV_5z59YgIQZlrBOAwAYY=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Bullish Bears</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> <li><strong>Cost: </strong>Free courses; $47/month or $247/year membership</li><li><strong>Trial: </strong>No</li><li><strong>Live trade room:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-26"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Bullish Bears" data-retailer-type="other" data-tracking-container="true" href="https://bullishbears.com/referral.html?p=DotdashPM&amp;w=bostc" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> With a variety of courses available without a membership and affordable membership fees, Bullish Bears is our pick as the online stock trading course with the best value. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-30"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Courses on a variety of topics, available without a membership</p></li> <li><p>Affordable monthly and annual memberships</p></li> <li><p>Membership comes with live trade room access, live trading advice, trade alerts, and more</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No free trial</p></li> <li><p>No refunds</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> If you want a lot for your money, consider a subscription to Bullish Bears. For $47 per month or $247 per year, you’ll get access to a variety of teaching tools, including: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> <li>Courses on 10 topics, like day trading, options, candlesticks, and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/td-ameritrade-review-4587925">ThinkorSwim</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/interactive-brokers-review-4587904">Interactive Brokers</a> platforms</li> <li>Access to live trade rooms and real-time instruction</li> <li>Live trade streaming video and replays</li> <li>Trade alerts and watch lists</li> <li>Access to a custom-built Discord chat with bots and trading tools</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> Bullish Bears offers a comprehensive package, from courses you can complete on your own time to community-based lessons and trade room experiences. The classes can help you get started or master certain topics, and they include a paper simulator so you can put your ideas into practice risk-free. But many students will get a lot out of the live trade room and streaming video as well—it’s one thing to learn about trading, but it can be much more valuable to see it done in front of you. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> If you choose the annual membership, you’ll get all that for only about $21 per month, a great price for access to classes, experienced trading mentors, and a trade room. If you’d rather not spring for a membership, you can still take all of Bullish Bears’ courses for free. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-technical-analysis-skillshare"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Technical Analysis</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Skillshare</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-36" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Skillshare" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/na3wAdA5K9yvhFN7jl6I1upjhUI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/skillshare-76fc2827678e451ebd1641bededc1ae3.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Skillshare" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/na3wAdA5K9yvhFN7jl6I1upjhUI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/skillshare-76fc2827678e451ebd1641bededc1ae3.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>Skillshare</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> <li><strong>Cost: </strong>$167.88 per year</li><li><strong>Trial: </strong>1-month free trial</li><li><strong>Live trade room:</strong> No</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-38"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Skillshare" data-retailer-type="skimlinks" data-tracking-container="true" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187" id="button_1-0-3" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> Many classes include technical analysis as part of their offering, but you’ll find several highly rated Skillshare courses that focus on this skill alone. You must pay to become a member of Skillshare, but that membership comes with access to the full catalog of Skillshare courses; you can try it for a month for free to see if it’s a good fit. These combined benefits make Skillshare our pick as the best online stock trading course for technical analysis. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-42"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Nearly 7 hours of content</p></li> <li><p>Learn about a wide variety of chart patterns</p></li> <li><p>High ratings from students</p></li> <li><p>One affordable membership includes access to hundreds of classes</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No trade room or live instructor</p></li> <li><p>Can’t buy individual classes</p></li> <li><p>Must maintain Skillshare membership to access course</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> Skillshare's top technical analysis course, titled <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187" rel="sponsored nofollow">Technical Analysis Day Trading / Swing Trading Strategies for Stocks Crypto Forex Commodities Options</a>, assumes a bit of starting knowledge but begins with an introduction to common terminology. You’ll learn about the instructor’s trading philosophy (“trade like a casino”), before getting into how to understand order books and set up your trading platform. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> From there, you’ll dive into the details of technical indicators, support and resistance levels, and common chart patterns to use for day trading. The class finishes up with discussions of more advanced topics, like relative strength indicators and Fibonacci analysis. The strategies taught are meant to be applicable to day trading and swing trading in all kinds of markets (stocks, options, crypto, etc.). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> If you finish up that class and want another angle on technical analysis, consider <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FStock-Trading-BitcoinCryptocurrency-Trading-Course-Technical-Analysis-Beginner-to-Pro%2F1837400768" rel="sponsored nofollow">Stock Trading &amp; Bitcoin/Cryptocurrency Trading Course | Technical Analysis: Beginner to Pro</a>. Or browse the <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fbrowse%2Fstock-trading" rel="sponsored nofollow">full selection of Skillshare’s stock trading courses here</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> You can discuss the class material with other students, and in some cases with the instructor. Skillshare courses are available online and by mobile app; members can download videos to watch offline, but only through the mobile app.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-day-traders-bear-bull-traders"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Day Traders</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Bear Bull Traders</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-48" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Bear Bull Traders" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/SMG05Gfyq7a8OM07lt8P6idUomw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BearBullTraders-6a3dc27cbbb448669eb94bfb5a6693f7.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Bear Bull Traders" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/SMG05Gfyq7a8OM07lt8P6idUomw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BearBullTraders-6a3dc27cbbb448669eb94bfb5a6693f7.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Bear Bull Traders</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> <li><strong>Cost:</strong> $99+ monthly</li><li><strong>Trial:</strong> $39 for 7-day trial</li><li><strong>Live trade room:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Bear Bull Traders" data-retailer-type="other" data-tracking-container="true" href="https://bearbulltraders.com/ref/dotdash" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> The Bear Bull Traders learning platform includes a variety of resources for day trading and is offered at very reasonable prices, making it a great value as well as our pick as the best for day traders. There are less expensive stock trading courses, but if you want to ensure you have access to all the learning resources you'll need to succeed, it makes sense to pay just a little bit more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-54"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Extensive library of videos and high-level trading tutorials</p></li> <li><p>Access to professional trading simulator</p></li> <li><p>Helpful trader community with support from chat room monitors</p></li> <li><p>Designated chat rooms for various forms of trading</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Webinars are only available to annual subscribers</p></li> <li><p>7-day trial membership is not free</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> Since its founding in 2016, the Bear Bull Traders online community has become one of the more popular among active day traders. Besides its vast library of educational resources, Bear Bull Traders provides members with ongoing support through member meetups and its crew of chat room monitors. Members can access the trade simulator for about $100 per month to hone their skills with paper trading before going live with their own money at stake.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Chat rooms and active discussion forums are some of the best learning experiences a stock trading course can offer. Bear Bull Traders has designated chat rooms for day trading, swing trading, options, forex, and trading psychology. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> More importantly, members have access to experienced mentors, including founder Andrew Aziz. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> Bear Bull Traders offers a two-tiered membership, Basic or Elite. Both the Basic plan ($99 per month) and Elite plan ($199 per month) are cancellable at any time. If you're ready for a longer commitment, you can save by purchasing an Elite Annual subscription for a yearly payment of $1,199. Basic membership gets you access to the live chat rooms and the basic lessons, while the Elite membership adds webinars, mentorship, and access to the trading psychology team. BBT also offers a seven-day trial membership for $39. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-live-training-bulls-on-wall-street"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Live Training</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Bulls on Wall Street</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-60" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Bulls on Wall Street" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/31w2O4gdT0GrDRP0H7ZB6ZZTtug=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bulls-On-Wall-Street-logo-e23863a5ea8b4115a89d4ad0b292d58b.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Bulls on Wall Street" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/31w2O4gdT0GrDRP0H7ZB6ZZTtug=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bulls-On-Wall-Street-logo-e23863a5ea8b4115a89d4ad0b292d58b.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p>Bulls on Wall Street</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> <li><strong>Cost:</strong> $199/month or $1,499/year</li><li><strong>Trial:</strong> No</li><li><strong>Live trade room:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-62"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Bulls on Wall Street" data-retailer-type="other" data-tracking-container="true" href="https://bullsonwallstreet.com/" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64"> Bulls on Wall Street's training boot camp is unique in the industry. It's a bit different now than when it launched, but it still offers comprehensive personalized support for members, making it the best stock trading course for live training. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-66"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Established company with a solid reputation</p></li> <li><p>Personalized training</p></li> <li><p>Access to trading simulator with mentor feedback</p></li> <li><p>Reasonably priced subscription options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No trial membership available</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> Established in 2008, Bulls on Wall Street is one of the older stock trading course providers. Its founder, Kunal Desai, has been an active day trader since 1999. Desai intended to make this trading course a more personalized experience for members, and the Accelerated Trading Course has become the cornerstone of his offering. A Bulls Vision subscription costs $199 per month or $1,499 annually. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> The boot camp classes, which were once live, are now accessible on demand. Students will attend live market recaps with Desai three times a week, plus Sunday "market huddles." You'll go over Desai's weekly trades, discuss the state of the market, and find potential good stocks for next week.<br> </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> Students can also join the Bulls Vision day trading chatroom, featuring Desai's live cam feed so you can watch him trade, have actionable trade ideas, and access live market recaps and advanced platform tutorials. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> The annual subscription includes all of the above plus a trading toolkit course book, live event access, and a personalized strategic account executive. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-for-university-education-coursera"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for University Education</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Coursera</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-72" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Coursera" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/xEvrapUJD5nBdQkWCJ775b8WDAY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Coursera-013c3ba7712a4505a58b1aec9f389306.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Coursera" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/xEvrapUJD5nBdQkWCJ775b8WDAY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Coursera-013c3ba7712a4505a58b1aec9f389306.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p>Coursera</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> <li><strong>Cost:</strong> Free</li><li><strong>Trial:</strong> One free learning program with Coursera subscription</li><li><strong>Live trade room:</strong> No</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-74"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Coursera" data-retailer-type="other" data-tracking-container="true" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks" id="button_1-0-6" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> Coursera’s <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks" rel="sponsored nofollow">Stocks and Bonds class</a> is available for free; it just requires a basic Coursera membership at no cost. (Coursera’s paid membership has a free trial as well.) It is presented by the University of Michigan and is taught by Professor Gautam Kaul, a highly-rated instructor, making it our pick as the best online stock trading course for university education </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-78"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Highly rated course and instructor</p></li> <li><p>High-level analysis of markets, pricing, and valuation</p></li> <li><p>Part of a multi-course specialization track</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Relatively little video instruction</p></li> <li><p>No instructor interaction</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-80"> The course is meant for beginners, but it requires some basic understanding of algebra. It applies the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timevalueofmoney.asp">Time Value of Money</a> (TVM) concept to understand stocks and bonds. TVM is a fundamental idea in finance. It states that a particular sum of money is worth more now than it’ll be worth in the future, due to its earning potential in the meantime.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-81"> Stocks and Bonds will take about 10 hours to complete. It’s designed to be taken over four weeks, but you can reset the deadlines to learn at your own pace. It consists of a few hours of video, along with some reading materials and quizzes.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> The first week will introduce some common vocabulary and discuss how bonds are valued. In the next week, you’ll look at real market data to understand how bonds are priced, and you’ll submit your first assignment. In the following two weeks, you’ll go through the same process with stocks, learning how stocks affect company operations and submitting a final assignment. When you finish up you’ll be awarded a certificate of completion. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-83"> Stocks and Bonds is part of a four-month specialization track, the <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Fspecializations%2Ffoundational-finance" rel="sponsored nofollow">Foundational Finance for Strategic Decision Making Specialization</a>, which is designed to provide a deep understanding of personal finance. Coursera offers a variety of <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Fcourses%3Fquery%3Dstock%2520trading" rel="sponsored nofollow">free and paid finance classes</a> from prestigious universities. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-best-for-emergingalternative-markets-financial-edge"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Emerging/Alternative Markets</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Financial Edge</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-84" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Financial Edge" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/aEUjBpPcm4mK4gtzp_tkBDnciFI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Financial-Edge-logo-11d2a411b63644689eacfcfd4d186873.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-7" width="1500"/> <noscript> <img alt="Financial Edge" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/aEUjBpPcm4mK4gtzp_tkBDnciFI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Financial-Edge-logo-11d2a411b63644689eacfcfd4d186873.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-7"> <span class="figure-article-caption-owner"><p>Financial Edge</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-85"> <li><strong>Cost:</strong> $99</li><li><strong>Trial:</strong> No</li><li><strong>Live trade room:</strong> No</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-86"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-7"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Financial Edge" data-retailer-type="other" data-tracking-container="true" href="https://bit.ly/3VgYyKH" id="button_1-0-7" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-88"> Financial is our pick as the best for emerging/alternative markets because it offers lifetime access to education on both topics. Additionally, students can reach out with questions and receive help directly from instructors. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-90"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Direct instructor help</p></li> <li><p>CPD-certified course</p></li> <li><p>Lifetime access</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No practical exercises</p></li> <li><p>Somewhat short</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-92"> Financial Edge’s Traditional &amp; Alternative Investments class is relatively short, at 2.5 hours, but it gets straight to the point.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-93"> Emerging markets are typically considered to be those of countries with rapidly expanding or improving economies, which generally have high rewards and high risks. Alternative investments are those that don’t fit into conventional categories of equity, income, and cash. This course will teach you how to think about both. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-94"> You’ll start with a few sessions on the basics, like understanding equity, valuation, and financial statements, before learning about different market sectors (industrials and financials). The class then discusses how emerging markets and alternative investments fit in before getting into some of the main investment strategies—hedge funds, private equity, and venture capital.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-95"> When you’re through with the course, you should have a firm grasp of how to trade in emerging markets. And whether or not you plan to work in a hedge fund, you’ll see how they and other alternative investment strategies influence the world and the markets. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-96"> It’s not the cheapest course, at $99, but you’ll get direct help from the instructor and lifetime access to the class materials. The Traditional and Alternative Investments course is CPD-certified (Continuing Professional Development) by The CPD Certification Service; some employers and organizations track CPD points, and this class will count.<span class="ql-inline-citation" data-cite="1"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> All of the stock trading classes reviewed here are worthy of consideration by traders of all levels of experience—from neophyte to advanced. However, Investors Underground is the best overall, with more complete course offerings than its competitors. It also has a solid reputation in the industry and reasonable pricing for its extensive offerings. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-stock-trading-classes"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Compare the Best Stock Trading Classes </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-3"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Company</th> <th>Cost</th> <th>Trial</th> <th>Live Trade Room</th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.investorsunderground.com/" rel="sponsored nofollow">Investors Underground</a> <b>Best Overall</b></td> <td>$997+</td> <td>No</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.udemy.com/topic/stock-trading?deal_code=UDEAFFIP22&amp;utm_source=aff-campaign&amp;utm_medium=udemyads&amp;utm_term=Content&amp;utm_content=Content&amp;utm_campaign=a5a1T000000LZB3QAO_._Dotdash_US_CustomOffer_Oct2022" rel="sponsored nofollow">Udemy</a> <b>Best for Beginners</b></td> <td>$49.99</td> <td>Yes</td> <td>No</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bullishbears.com/referral.html?p=DotdashPM&amp;w=bostc" rel="sponsored nofollow">Bullish Bears</a> <b>Best Value</b></td> <td>Free courses; $47/month or $247/year membership</td> <td>No</td> <td>Yes</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187&amp;subid1=5089249&amp;subid2=n8c0115e4ab654daa90e327d0a9cbf14315" rel="sponsored nofollow">Skillshare</a> <b>Best for Technical Analysis</b></td> <td>$167.88/year</td> <td>1-month free trial</td> <td>No</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bearbulltraders.com/ref/dotdash" rel="sponsored nofollow">Bear Bull Traders</a> <b>Best for Day Traders</b></td> <td>$99+ monthly</td> <td>$39 for 7-day trial</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bullsonwallstreet.com/" rel="sponsored nofollow">Bulls on Wall Street</a> <b>Best for Live Training</b></td> <td>$199/month or $1,499/year</td> <td>No</td> <td>Yes</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks&amp;subid1=5089249&amp;subid2=nb0ec2c7bab174779bf6ad7d0819d57da15" rel="sponsored nofollow">Coursera</a> <b>Best for University Education</b></td> <td>Free</td> <td>Yes (for paid service)</td> <td>No</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bit.ly/3VgYyKH" rel="sponsored nofollow">Financial Edge</a> <b>Best for Emerging/Alternative Markets</b></td> <td>$99</td> <td>No</td> <td>No</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-4"> <span class="heading-toc" id="toc-faq-41a4de83-7780-4b6f-a5d7-aa134ab2ba67"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Are Online Stock Trading Classes?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Stock trading courses typically offer a full range of educational and research capabilities to help novice traders develop their skills and knowledge while enabling more advanced traders to up their game. Many of the top stock trading courses offer structured classes with either video or online instruction. </p><p>A significant learning component of these courses is the chat room, which provides all students and members with access to a large community of traders to exchange ideas. The best courses also provide opportunities for practical application through trading simulators that mimic a real trading environment using fake money.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Who Should Take Stock Trading Classes?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Anyone interested in making money in the stock market could benefit from a stock trading class. While it's possible to learn the ins and outs of stock trading on your own—through books, videos, and podcasts available online—a good stock trading course provides a more structured learning path, with the opportunity to interact with expert traders and apply your skills and knowledge without risking your own money. These courses can also help develop discipline and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading-psychology.asp">proper trading mindset</a>, which are critical to successful trading. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">How Much Do Stock Trading Classes Cost?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Learning how to trade stocks can be free if you utilize free training and resources through some of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-online-brokers-4587872">top online brokerage companies</a>. However, if you’re looking to take a course, costs can vary depending on the scope of the class. </p><p>If you just want theory and a thorough explanation of the methodology and strategies, you can pay as little as $110 for a comprehensive video course. If you want deeper immersion into the art and science of trading, you might pay between $100 and $300 per month for a subscription to course materials, webinars, and chat room access. For more hands-on training or mentoring, you could easily pay as much as $300 to $500 per month. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">How Long Does It Take to Learn to Trade Stocks?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>The amount of time it takes to learn to trade stocks depends on the individual. If you can commit 100% to a good stock trading course, you should be able to get up and running within a few weeks of starting the course. If you're learning in your spare time, you should expect to commit at least 40 hours to structured learning, which you might have to spread over a couple of months. The keys are to learn at a comfortable pace and to use a stock trading course that provides constant feedback on your learning progress. That can be achieved by using a professional trading simulator, like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-use-the-investopedia-simulator-5221184">Investopedia's stock trading simulator</a>. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> We reviewed over 15 of the most trusted platforms and compared them against a specific set of criteria to choose the best stock trading courses. In addition to the types of classes they offer, we considered factors such as cost, access to instructors or mentors, access to a trading community, the extent of learning resources, availability of free courses or materials, and any unique features that added value to the services.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="The Best Online Stock Trading Classes of 2024" class="primary-image__image mntl-primary-image--blurry" height="2700" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/vT5NJ2F0krKU0JxpAfF5Lw7ef9E=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png" srcset="https://www.investopedia.com/thmb/BtsSYz2Wpy_vui1fBLtfjXKTMPA=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPUAABAKEBgRGRkRGRoSGxoTGxwUHCEZIiUrPiYrPyYsPz0wJi01UC42UC42UT01Vkc4L0g1JVZEUFRUXkZTd0lWeltQbFtRbV1Ub2hpdWF1jGN1jWR2jWZ2jWp9k2Z9pEaDi3qBhH2EhXGCl3GCmHaGnHqLoHqLoXyMoXmis6gwLpoxV5wyWKQ2XqU2XrU/ZqpBXuedduyhaZqNjYaWqoiZrIuarprW0hAKEBAKEBAKEBAKEBAKEBAKEBAKEBAKEBAKECwAAAAACgAHAEUITwBpfCBQA4BBCAZmZHgQAQSLFis0ONggQoKCEQVSCADggMSCBAgQVLBw4cCBBiUYEDBhEIABAyc42PAQYgCMAC5QdMAgI8aLFi1UTKDgIiAAOw==')" width="4000"/> <noscript> <img alt="The Best Online Stock Trading Classes of 2024" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/vT5NJ2F0krKU0JxpAfF5Lw7ef9E=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png" srcset="https://www.investopedia.com/thmb/BtsSYz2Wpy_vui1fBLtfjXKTMPA=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Zoe Hansen</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>The CPD Certification Service. 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An increasing number of people are turning to stock trading as a way to supplement their income, and those who are the most committed can do quite well financially.  However, the learning curve for becoming a successful stock trader can be very steep. It's possible to learn stock trading theory by reading a book, but gaining the practical knowledge, skills, and confidence to trade with your own money requires more extensive training with real-time support. That's what a high-quality online stock trading course can offer.  We examined over 15 of the most popular stock trading classes, and rated them on important criteria like cost, access to instructors and a trading community, availability of free course materials, and unique features. Below you'll see our picks for the best stock trading classes online; they offer the most value for your money, with comprehensive education covering beginner to advanced skills. ## The Best Online Stock Trading Classes of 2024 * **Best Overall:** [Investors Underground](https://www.investorsunderground.com/) * **Best for Beginners:** [Udemy](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19974&type=3&subid=0) * **Best Value:** [Bullish Bears](https://bullishbears.com/referral.html?p=DotdashPM&w=bostc) * **Best for Technical Analysis:** [Skillshare](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187) * **Best for Day Traders:** [Bear Bull Traders](https://bearbulltraders.com/ref/dotdash) * **Best for Live Training:** [Bulls on Wall Street](https://bullsonwallstreet.com/) * **Best for University Education:** [Coursera](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks) * **Best for Emerging/Alternative Markets:** [Financial Edge](https://bit.ly/3VgYyKH) Investopedia offers its own stock trading class as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the [Investopedia Academy](https://academy.investopedia.com/products/financial-modeling). Best Online Stock Trading Classes Expand Best Online Stock Trading Classes * [Our Top Picks](#summary-list) * [Investors Underground](#toc-best-overall-investors-underground) * [Udemy](#toc-best-for-beginners-udemy) * [Bullish Bears](#toc-best-value-bullish-bears) * [Skillshare](#toc-best-for-technical-analysis-skillshare) * [Bear Bull Traders](#toc-best-for-day-traders-bear-bull-traders) * [Bulls on Wall Street](#toc-best-for-live-training-bulls-on-wall-street) * [Coursera](#toc-best-for-university-education-coursera) * [Financial Edge](#toc-best-for-emergingalternative-markets-financial-edge) * See More (5) * [Final Verdict](#toc-final-verdict) * [Compare Classes](#toc-compare-the-best-stock-trading-classes) * [FAQ](#toc-faq-41a4de83-7780-4b6f-a5d7-aa134ab2ba67) * [Methodology](#toc-methodology) ### Best Overall : Investors Underground --- ![Investors Underground]() :fill(white):max_bytes(150000):strip_icc()/Investors-Underground-logo-091519fd6607492e81fa40405bb830e1.jpg) Investors Underground * **Cost:** $997+ * **Trial:** No * **Live trade room:** Yes [Sign Up Now](https://www.investorsunderground.com/) Why We Chose It Investors Underground (IU) has the most complete offering by far. With a clear educational path at a fairly reasonable price, it's our choice as the best overall stock trading course. Pros & Cons Pros * Well-established with a solid reputation * Large and active chat room * Access to mentors, including the founder Cons * Pricing is on the high end * Trading courses sold separately from the primary subscription for around $1,000 Overview IU's Textbook Trading course was one of the first of its kind designed for those with only basic knowledge of trading. Although it starts out with the basics, it quickly moves to more advanced topics, including the application of trading tools and actionable trading setups. From there, students move right into the Tandem Trader, a 12-hour advanced day trading course. What's unique about this course is that in addition to the standard educational content used in advanced classes, Tandem Trader includes screenshots of live trades made by Michaud along with his tick-by-tick commentary, showing students how it feels to trade right alongside a top trader. It's one thing to learn trading theory; it's entirely different to see trading setups play out in real-time.  Following that, you'll take the Swing Trading course, featuring over six hours of content on swing trading methodology and strategy. You'll learn the foundations of swing trading, along with advanced technical analysis, how to analyze long and short-chart patterns, and how to identify key price levels. You can purchase courses individually or combined with a monthly, quarterly, or annual paid membership. Adding trading courses to the monthly subscription ($297 per month) or quarterly subscription ($697 per quarter) will cost you an additional $1,000. And with an annual subscription ($1,897 annually), IU's trading courses will cost $800, for a total investment of $2,697 in your first year of Investors Underground. The yearly subscription is the best value for up-and-coming traders who want to learn and practice at their own pace. ### Best for Beginners : Udemy --- ![Udemy]() :fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-5e77f26dd6714418853c5f2d15dd22a5.jpg) Udemy * **Cost:** $49.99 * **Trial:** Yes * **Live trade room:** No [Sign Up Now](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19974&type=3&subid=0) Why We Chose It Udemy offers a wide range of beginner stock trading courses at remarkably low prices, making it our choice as the best course provider for newbies. Its affordable prices make Udemy an attractive choice for anyone who wants to see if stock trading is for them without committing too much. Pros & Cons Pros * Low prices * Comprehensive courses * Extensive course selection Cons * No opportunity for practical application * No chat rooms * No coaching Overview For those brand new to stock investing, Udemy offers [Stock Market from Scratch for Complete Beginners](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19974&type=3&subid=0). Regularly priced at $49.99, the course includes six sections with 51 lectures for a total of 6.5 hours of instruction. There is often a steep discount available. With that foundation of knowledge, you can move up to [The Complete Foundation Stock Trading Course](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19980&type=3&subid=0), available for $179.99 with steep discounts again available. The course takes you further up the learning curve to better understand how the stock market works, how orders are placed, and how to perform risk management, along with an introduction to chart analysis.  Then, for a deeper dive into stock trading, you could take the [Complete Day Trading Course](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19975&type=3&subid=0), which focuses on the skill of technical analysis. Students learn how to trade more than 16 chart patterns and understand performance indicators. For $129.99, you receive 10 hours of on-demand video, 11 downloadable resources, and full lifetime access. Like Udemy's other courses, you can usually catch a large promotional discount. All courses are taught using pre-recorded video lessons that include expert instruction with demonstrations of trading techniques. The downside of Udemy's courses is that there are no opportunities for practical application or live instruction, although you may be able to ask questions of the instructor. For more, see [Udemy's full selection of stock trading classes](https://click.linksynergy.com/fs-bin/click?id=Q*Sg3glZ/fs&offerid=624447.19963&type=3&subid=0). ### Best Value : Bullish Bears --- ![Bullish Bears]() :fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg)  Bullish Bears * **Cost:** Free courses; $47/month or $247/year membership * **Trial:** No * **Live trade room:** Yes [Sign Up Now](https://bullishbears.com/referral.html?p=DotdashPM&w=bostc) Why We Chose It With a variety of courses available without a membership and affordable membership fees, Bullish Bears is our pick as the online stock trading course with the best value. Pros & Cons Pros * Courses on a variety of topics, available without a membership * Affordable monthly and annual memberships * Membership comes with live trade room access, live trading advice, trade alerts, and more Cons * No free trial * No refunds Overview If you want a lot for your money, consider a subscription to Bullish Bears. For $47 per month or $247 per year, you’ll get access to a variety of teaching tools, including: * Courses on 10 topics, like day trading, options, candlesticks, and the [ThinkorSwim](https://www.investopedia.com/td-ameritrade-review-4587925) and [Interactive Brokers](https://www.investopedia.com/interactive-brokers-review-4587904) platforms * Access to live trade rooms and real-time instruction * Live trade streaming video and replays * Trade alerts and watch lists * Access to a custom-built Discord chat with bots and trading tools Bullish Bears offers a comprehensive package, from courses you can complete on your own time to community-based lessons and trade room experiences. The classes can help you get started or master certain topics, and they include a paper simulator so you can put your ideas into practice risk-free. But many students will get a lot out of the live trade room and streaming video as well—it’s one thing to learn about trading, but it can be much more valuable to see it done in front of you. If you choose the annual membership, you’ll get all that for only about $21 per month, a great price for access to classes, experienced trading mentors, and a trade room. If you’d rather not spring for a membership, you can still take all of Bullish Bears’ courses for free. ### Best for Technical Analysis : Skillshare --- ![Skillshare]() :fill(white):max_bytes(150000):strip_icc()/skillshare-76fc2827678e451ebd1641bededc1ae3.png) Skillshare * **Cost:** $167.88 per year * **Trial:** 1-month free trial * **Live trade room:** No [Sign Up Now](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187) Why We Chose It Many classes include technical analysis as part of their offering, but you’ll find several highly rated Skillshare courses that focus on this skill alone. You must pay to become a member of Skillshare, but that membership comes with access to the full catalog of Skillshare courses; you can try it for a month for free to see if it’s a good fit. These combined benefits make Skillshare our pick as the best online stock trading course for technical analysis. Pros & Cons Pros * Nearly 7 hours of content * Learn about a wide variety of chart patterns * High ratings from students * One affordable membership includes access to hundreds of classes Cons * No trade room or live instructor * Can’t buy individual classes * Must maintain Skillshare membership to access course Overview Skillshare's top technical analysis course, titled [Technical Analysis Day Trading / Swing Trading Strategies for Stocks Crypto Forex Commodities Options](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187), assumes a bit of starting knowledge but begins with an introduction to common terminology. You’ll learn about the instructor’s trading philosophy (“trade like a casino”), before getting into how to understand order books and set up your trading platform. From there, you’ll dive into the details of technical indicators, support and resistance levels, and common chart patterns to use for day trading. The class finishes up with discussions of more advanced topics, like relative strength indicators and Fibonacci analysis. The strategies taught are meant to be applicable to day trading and swing trading in all kinds of markets (stocks, options, crypto, etc.). If you finish up that class and want another angle on technical analysis, consider [Stock Trading & Bitcoin/Cryptocurrency Trading Course | Technical Analysis: Beginner to Pro](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FStock-Trading-BitcoinCryptocurrency-Trading-Course-Technical-Analysis-Beginner-to-Pro%2F1837400768). Or browse the [full selection of Skillshare’s stock trading courses here](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fbrowse%2Fstock-trading). You can discuss the class material with other students, and in some cases with the instructor. Skillshare courses are available online and by mobile app; members can download videos to watch offline, but only through the mobile app.  ### Best for Day Traders : Bear Bull Traders --- ![Bear Bull Traders]() :fill(white):max_bytes(150000):strip_icc()/BearBullTraders-6a3dc27cbbb448669eb94bfb5a6693f7.jpg)  Bear Bull Traders * **Cost:** $99+ monthly * **Trial:** $39 for 7-day trial * **Live trade room:** Yes [Sign Up Now](https://bearbulltraders.com/ref/dotdash) Why We Chose It The Bear Bull Traders learning platform includes a variety of resources for day trading and is offered at very reasonable prices, making it a great value as well as our pick as the best for day traders. There are less expensive stock trading courses, but if you want to ensure you have access to all the learning resources you'll need to succeed, it makes sense to pay just a little bit more. Pros & Cons Pros * Extensive library of videos and high-level trading tutorials * Access to professional trading simulator * Helpful trader community with support from chat room monitors * Designated chat rooms for various forms of trading Cons * Webinars are only available to annual subscribers * 7-day trial membership is not free Overview Since its founding in 2016, the Bear Bull Traders online community has become one of the more popular among active day traders. Besides its vast library of educational resources, Bear Bull Traders provides members with ongoing support through member meetups and its crew of chat room monitors. Members can access the trade simulator for about $100 per month to hone their skills with paper trading before going live with their own money at stake.  Chat rooms and active discussion forums are some of the best learning experiences a stock trading course can offer. Bear Bull Traders has designated chat rooms for day trading, swing trading, options, forex, and trading psychology. More importantly, members have access to experienced mentors, including founder Andrew Aziz. Bear Bull Traders offers a two-tiered membership, Basic or Elite. Both the Basic plan ($99 per month) and Elite plan ($199 per month) are cancellable at any time. If you're ready for a longer commitment, you can save by purchasing an Elite Annual subscription for a yearly payment of $1,199. Basic membership gets you access to the live chat rooms and the basic lessons, while the Elite membership adds webinars, mentorship, and access to the trading psychology team. BBT also offers a seven-day trial membership for $39. ### Best for Live Training : Bulls on Wall Street --- ![Bulls on Wall Street]() :fill(white):max_bytes(150000):strip_icc()/Bulls-On-Wall-Street-logo-e23863a5ea8b4115a89d4ad0b292d58b.jpg) Bulls on Wall Street * **Cost:** $199/month or $1,499/year * **Trial:** No * **Live trade room:** Yes [Sign Up Now](https://bullsonwallstreet.com/) Why We Chose It Bulls on Wall Street's training boot camp is unique in the industry. It's a bit different now than when it launched, but it still offers comprehensive personalized support for members, making it the best stock trading course for live training. Pros & Cons Pros * Established company with a solid reputation * Personalized training * Access to trading simulator with mentor feedback * Reasonably priced subscription options Cons * No trial membership available Overview Established in 2008, Bulls on Wall Street is one of the older stock trading course providers. Its founder, Kunal Desai, has been an active day trader since 1999. Desai intended to make this trading course a more personalized experience for members, and the Accelerated Trading Course has become the cornerstone of his offering. A Bulls Vision subscription costs $199 per month or $1,499 annually. The boot camp classes, which were once live, are now accessible on demand. Students will attend live market recaps with Desai three times a week, plus Sunday "market huddles." You'll go over Desai's weekly trades, discuss the state of the market, and find potential good stocks for next week. Students can also join the Bulls Vision day trading chatroom, featuring Desai's live cam feed so you can watch him trade, have actionable trade ideas, and access live market recaps and advanced platform tutorials. The annual subscription includes all of the above plus a trading toolkit course book, live event access, and a personalized strategic account executive. ### Best for University Education : Coursera --- ![Coursera]() :fill(white):max_bytes(150000):strip_icc()/Coursera-013c3ba7712a4505a58b1aec9f389306.jpg) Coursera * **Cost:** Free * **Trial:** One free learning program with Coursera subscription * **Live trade room:** No [Sign Up Now](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks) Why We Chose It Coursera’s [Stocks and Bonds class](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks) is available for free; it just requires a basic Coursera membership at no cost. (Coursera’s paid membership has a free trial as well.) It is presented by the University of Michigan and is taught by Professor Gautam Kaul, a highly-rated instructor, making it our pick as the best online stock trading course for university education Pros & Cons Pros * Highly rated course and instructor * High-level analysis of markets, pricing, and valuation * Part of a multi-course specialization track Cons * Relatively little video instruction * No instructor interaction Overview The course is meant for beginners, but it requires some basic understanding of algebra. It applies the [Time Value of Money](https://www.investopedia.com/terms/t/timevalueofmoney.asp) (TVM) concept to understand stocks and bonds. TVM is a fundamental idea in finance. It states that a particular sum of money is worth more now than it’ll be worth in the future, due to its earning potential in the meantime.  Stocks and Bonds will take about 10 hours to complete. It’s designed to be taken over four weeks, but you can reset the deadlines to learn at your own pace. It consists of a few hours of video, along with some reading materials and quizzes.  The first week will introduce some common vocabulary and discuss how bonds are valued. In the next week, you’ll look at real market data to understand how bonds are priced, and you’ll submit your first assignment. In the following two weeks, you’ll go through the same process with stocks, learning how stocks affect company operations and submitting a final assignment. When you finish up you’ll be awarded a certificate of completion. Stocks and Bonds is part of a four-month specialization track, the [Foundational Finance for Strategic Decision Making Specialization](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Fspecializations%2Ffoundational-finance), which is designed to provide a deep understanding of personal finance. Coursera offers a variety of [free and paid finance classes](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Fcourses%3Fquery%3Dstock%2520trading) from prestigious universities. ### Best for Emerging/Alternative Markets : Financial Edge --- ![Financial Edge]() :fill(white):max_bytes(150000):strip_icc()/Financial-Edge-logo-11d2a411b63644689eacfcfd4d186873.jpg) Financial Edge * **Cost:** $99 * **Trial:** No * **Live trade room:** No [Sign Up Now](https://bit.ly/3VgYyKH) Why We Chose It Financial is our pick as the best for emerging/alternative markets because it offers lifetime access to education on both topics. Additionally, students can reach out with questions and receive help directly from instructors. Pros & Cons Pros * Direct instructor help * CPD-certified course * Lifetime access Cons * No practical exercises * Somewhat short Overview Financial Edge’s Traditional & Alternative Investments class is relatively short, at 2.5 hours, but it gets straight to the point.  Emerging markets are typically considered to be those of countries with rapidly expanding or improving economies, which generally have high rewards and high risks. Alternative investments are those that don’t fit into conventional categories of equity, income, and cash. This course will teach you how to think about both. You’ll start with a few sessions on the basics, like understanding equity, valuation, and financial statements, before learning about different market sectors (industrials and financials). The class then discusses how emerging markets and alternative investments fit in before getting into some of the main investment strategies—hedge funds, private equity, and venture capital.  When you’re through with the course, you should have a firm grasp of how to trade in emerging markets. And whether or not you plan to work in a hedge fund, you’ll see how they and other alternative investment strategies influence the world and the markets. It’s not the cheapest course, at $99, but you’ll get direct help from the instructor and lifetime access to the class materials. The Traditional and Alternative Investments course is CPD-certified (Continuing Professional Development) by The CPD Certification Service; some employers and organizations track CPD points, and this class will count. ## Final Verdict All of the stock trading classes reviewed here are worthy of consideration by traders of all levels of experience—from neophyte to advanced. However, Investors Underground is the best overall, with more complete course offerings than its competitors. It also has a solid reputation in the industry and reasonable pricing for its extensive offerings. ## Compare the Best Stock Trading Classes | Company | Cost | Trial | Live Trade Room | | --- | --- | --- | --- | | [Investors Underground](https://www.investorsunderground.com/) **Best Overall** | $997+ | No | Yes | | [Udemy](https://www.udemy.com/topic/stock-trading?deal_code=UDEAFFIP22&utm_source=aff-campaign&utm_medium=udemyads&utm_term=Content&utm_content=Content&utm_campaign=a5a1T000000LZB3QAO_._Dotdash_US_CustomOffer_Oct2022) **Best for Beginners** | $49.99 | Yes | No | | [Bullish Bears](https://bullishbears.com/referral.html?p=DotdashPM&w=bostc) **Best Value** | Free courses; $47/month or $247/year membership | No | Yes | | [Skillshare](https://skillshare.eqcm.net/c/2104074/1423124/4650?u=https%3A%2F%2Fwww.skillshare.com%2Fen%2Fclasses%2FTechnical-Analysis-Day-Trading-Swing-Trading-Strategies-For-Stocks-Crypto-Forex-Commodities-Options%2F403807187&subid1=5089249&subid2=n8c0115e4ab654daa90e327d0a9cbf14315) **Best for Technical Analysis** | $167.88/year | 1-month free trial | No | | [Bear Bull Traders](https://bearbulltraders.com/ref/dotdash) **Best for Day Traders** | $99+ monthly | $39 for 7-day trial | Yes | | [Bulls on Wall Street](https://bullsonwallstreet.com/) **Best for Live Training** | $199/month or $1,499/year | No | Yes | | [Coursera](https://imp.i384100.net/c/2104074/1347618/14726?u=https%3A%2F%2Fwww.coursera.org%2Flearn%2Fbonds-and-stocks&subid1=5089249&subid2=nb0ec2c7bab174779bf6ad7d0819d57da15) **Best for University Education** | Free | Yes (for paid service) | No | | [Financial Edge](https://bit.ly/3VgYyKH) **Best for Emerging/Alternative Markets** | $99 | No | No | ## Frequently Asked Questions * ### What Are Online Stock Trading Classes? Stock trading courses typically offer a full range of educational and research capabilities to help novice traders develop their skills and knowledge while enabling more advanced traders to up their game. Many of the top stock trading courses offer structured classes with either video or online instruction.  A significant learning component of these courses is the chat room, which provides all students and members with access to a large community of traders to exchange ideas. The best courses also provide opportunities for practical application through trading simulators that mimic a real trading environment using fake money. * ### Who Should Take Stock Trading Classes? Anyone interested in making money in the stock market could benefit from a stock trading class. While it's possible to learn the ins and outs of stock trading on your own—through books, videos, and podcasts available online—a good stock trading course provides a more structured learning path, with the opportunity to interact with expert traders and apply your skills and knowledge without risking your own money. These courses can also help develop discipline and the [proper trading mindset](https://www.investopedia.com/terms/t/trading-psychology.asp), which are critical to successful trading. * ### How Much Do Stock Trading Classes Cost? Learning how to trade stocks can be free if you utilize free training and resources through some of the [top online brokerage companies](https://www.investopedia.com/best-online-brokers-4587872). However, if you’re looking to take a course, costs can vary depending on the scope of the class.  If you just want theory and a thorough explanation of the methodology and strategies, you can pay as little as $110 for a comprehensive video course. If you want deeper immersion into the art and science of trading, you might pay between $100 and $300 per month for a subscription to course materials, webinars, and chat room access. For more hands-on training or mentoring, you could easily pay as much as $300 to $500 per month. * ### How Long Does It Take to Learn to Trade Stocks? The amount of time it takes to learn to trade stocks depends on the individual. If you can commit 100% to a good stock trading course, you should be able to get up and running within a few weeks of starting the course. If you're learning in your spare time, you should expect to commit at least 40 hours to structured learning, which you might have to spread over a couple of months. The keys are to learn at a comfortable pace and to use a stock trading course that provides constant feedback on your learning progress. That can be achieved by using a professional trading simulator, like [Investopedia's stock trading simulator](https://www.investopedia.com/how-to-use-the-investopedia-simulator-5221184). ## Methodology We reviewed over 15 of the most trusted platforms and compared them against a specific set of criteria to choose the best stock trading courses. In addition to the types of classes they offer, we considered factors such as cost, access to instructors or mentors, access to a trading community, the extent of learning resources, availability of free courses or materials, and any unique features that added value to the services.  :max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png) :max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png) Investopedia / Zoe Hansen Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. The CPD Certification Service. "[About us](https://cpduk.co.uk/about)." 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An increasing number of people are turning to stock trading as a way to supplement their income, and those who are the most committed can do quite well financially.  However, the learning curve for becoming a successful stock trader can be very steep. It's possible to learn stock trading theory by reading a book, but gaining the practical knowledge, skills, and confidence to trade with your own money requires more extensive training with real-time support. That's what a high-quality online stock trading course can offer.  We examined over 15 of the most popular stock trading classes, and rated them on important criteria like cost, access to instructors and a trading community, availability of free course materials, and unique features. Below you'll see our picks for the best stock trading classes online; they offer the most value for your money, with comprehensive education covering beginner to advanced skills. The Best Online Stock Trading Classes of 2024 Best Overall: Investors Underground Best for Beginners: Udemy Best Value: Bullish Bears Best for Technical Analysis: Skillshare Best for Day Traders: Bear Bull Traders Best for Live Training: Bulls on Wall Street Best for University Education: Coursera Best for Emerging/Alternative Markets: Financial Edge Investopedia offers its own stock trading class as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the Investopedia Academy. Best Online Stock Trading Classes Expand Best Online Stock Trading Classes Our Top Picks Investors Underground Udemy Bullish Bears Skillshare Bear Bull Traders Bulls on Wall Street Coursera Financial Edge See More (5) Final Verdict Compare Classes FAQ Methodology Best Overall : Investors Underground Investors Underground Cost: $997+Trial: NoLive trade room: Yes Sign Up Now Why We Chose It Investors Underground (IU) has the most complete offering by far. With a clear educational path at a fairly reasonable price, it's our choice as the best overall stock trading course. Pros & Cons Pros Well-established with a solid reputation Large and active chat room Access to mentors, including the founder Cons Pricing is on the high end Trading courses sold separately from the primary subscription for around $1,000 Overview IU's Textbook Trading course was one of the first of its kind designed for those with only basic knowledge of trading. Although it starts out with the basics, it quickly moves to more advanced topics, including the application of trading tools and actionable trading setups. From there, students move right into the Tandem Trader, a 12-hour advanced day trading course. What's unique about this course is that in addition to the standard educational content used in advanced classes, Tandem Trader includes screenshots of live trades made by Michaud along with his tick-by-tick commentary, showing students how it feels to trade right alongside a top trader. It's one thing to learn trading theory; it's entirely different to see trading setups play out in real-time.  Following that, you'll take the Swing Trading course, featuring over six hours of content on swing trading methodology and strategy. You'll learn the foundations of swing trading, along with advanced technical analysis, how to analyze long and short-chart patterns, and how to identify key price levels. You can purchase courses individually or combined with a monthly, quarterly, or annual paid membership. Adding trading courses to the monthly subscription ($297 per month) or quarterly subscription ($697 per quarter) will cost you an additional $1,000. And with an annual subscription ($1,897 annually), IU's trading courses will cost $800, for a total investment of $2,697 in your first year of Investors Underground. The yearly subscription is the best value for up-and-coming traders who want to learn and practice at their own pace. Best for Beginners : Udemy Udemy Cost: $49.99Trial: YesLive trade room: No Sign Up Now Why We Chose It Udemy offers a wide range of beginner stock trading courses at remarkably low prices, making it our choice as the best course provider for newbies. Its affordable prices make Udemy an attractive choice for anyone who wants to see if stock trading is for them without committing too much. Pros & Cons Pros Low prices Comprehensive courses Extensive course selection Cons No opportunity for practical application No chat rooms No coaching Overview For those brand new to stock investing, Udemy offers Stock Market from Scratch for Complete Beginners. Regularly priced at $49.99, the course includes six sections with 51 lectures for a total of 6.5 hours of instruction. There is often a steep discount available. With that foundation of knowledge, you can move up to The Complete Foundation Stock Trading Course, available for $179.99 with steep discounts again available. The course takes you further up the learning curve to better understand how the stock market works, how orders are placed, and how to perform risk management, along with an introduction to chart analysis.  Then, for a deeper dive into stock trading, you could take the Complete Day Trading Course, which focuses on the skill of technical analysis. Students learn how to trade more than 16 chart patterns and understand performance indicators. For $129.99, you receive 10 hours of on-demand video, 11 downloadable resources, and full lifetime access. Like Udemy's other courses, you can usually catch a large promotional discount. All courses are taught using pre-recorded video lessons that include expert instruction with demonstrations of trading techniques. The downside of Udemy's courses is that there are no opportunities for practical application or live instruction, although you may be able to ask questions of the instructor. For more, see Udemy's full selection of stock trading classes. Best Value : Bullish Bears  Bullish Bears Cost: Free courses; $47/month or $247/year membershipTrial: NoLive trade room: Yes Sign Up Now Why We Chose It With a variety of courses available without a membership and affordable membership fees, Bullish Bears is our pick as the online stock trading course with the best value. Pros & Cons Pros Courses on a variety of topics, available without a membership Affordable monthly and annual memberships Membership comes with live trade room access, live trading advice, trade alerts, and more Cons No free trial No refunds Overview If you want a lot for your money, consider a subscription to Bullish Bears. For $47 per month or $247 per year, you’ll get access to a variety of teaching tools, including: Courses on 10 topics, like day trading, options, candlesticks, and the ThinkorSwim and Interactive Brokers platforms Access to live trade rooms and real-time instruction Live trade streaming video and replays Trade alerts and watch lists Access to a custom-built Discord chat with bots and trading tools Bullish Bears offers a comprehensive package, from courses you can complete on your own time to community-based lessons and trade room experiences. The classes can help you get started or master certain topics, and they include a paper simulator so you can put your ideas into practice risk-free. But many students will get a lot out of the live trade room and streaming video as well—it’s one thing to learn about trading, but it can be much more valuable to see it done in front of you. If you choose the annual membership, you’ll get all that for only about $21 per month, a great price for access to classes, experienced trading mentors, and a trade room. If you’d rather not spring for a membership, you can still take all of Bullish Bears’ courses for free. Best for Technical Analysis : Skillshare Skillshare Cost: $167.88 per yearTrial: 1-month free trialLive trade room: No Sign Up Now Why We Chose It Many classes include technical analysis as part of their offering, but you’ll find several highly rated Skillshare courses that focus on this skill alone. You must pay to become a member of Skillshare, but that membership comes with access to the full catalog of Skillshare courses; you can try it for a month for free to see if it’s a good fit. These combined benefits make Skillshare our pick as the best online stock trading course for technical analysis. Pros & Cons Pros Nearly 7 hours of content Learn about a wide variety of chart patterns High ratings from students One affordable membership includes access to hundreds of classes Cons No trade room or live instructor Can’t buy individual classes Must maintain Skillshare membership to access course Overview Skillshare's top technical analysis course, titled Technical Analysis Day Trading / Swing Trading Strategies for Stocks Crypto Forex Commodities Options, assumes a bit of starting knowledge but begins with an introduction to common terminology. You’ll learn about the instructor’s trading philosophy (“trade like a casino”), before getting into how to understand order books and set up your trading platform. From there, you’ll dive into the details of technical indicators, support and resistance levels, and common chart patterns to use for day trading. The class finishes up with discussions of more advanced topics, like relative strength indicators and Fibonacci analysis. The strategies taught are meant to be applicable to day trading and swing trading in all kinds of markets (stocks, options, crypto, etc.). If you finish up that class and want another angle on technical analysis, consider Stock Trading & Bitcoin/Cryptocurrency Trading Course | Technical Analysis: Beginner to Pro. Or browse the full selection of Skillshare’s stock trading courses here. You can discuss the class material with other students, and in some cases with the instructor. Skillshare courses are available online and by mobile app; members can download videos to watch offline, but only through the mobile app.  Best for Day Traders : Bear Bull Traders  Bear Bull Traders Cost: $99+ monthlyTrial: $39 for 7-day trialLive trade room: Yes Sign Up Now Why We Chose It The Bear Bull Traders learning platform includes a variety of resources for day trading and is offered at very reasonable prices, making it a great value as well as our pick as the best for day traders. There are less expensive stock trading courses, but if you want to ensure you have access to all the learning resources you'll need to succeed, it makes sense to pay just a little bit more. Pros & Cons Pros Extensive library of videos and high-level trading tutorials Access to professional trading simulator Helpful trader community with support from chat room monitors Designated chat rooms for various forms of trading Cons Webinars are only available to annual subscribers 7-day trial membership is not free Overview Since its founding in 2016, the Bear Bull Traders online community has become one of the more popular among active day traders. Besides its vast library of educational resources, Bear Bull Traders provides members with ongoing support through member meetups and its crew of chat room monitors. Members can access the trade simulator for about $100 per month to hone their skills with paper trading before going live with their own money at stake.  Chat rooms and active discussion forums are some of the best learning experiences a stock trading course can offer. Bear Bull Traders has designated chat rooms for day trading, swing trading, options, forex, and trading psychology. More importantly, members have access to experienced mentors, including founder Andrew Aziz. Bear Bull Traders offers a two-tiered membership, Basic or Elite. Both the Basic plan ($99 per month) and Elite plan ($199 per month) are cancellable at any time. If you're ready for a longer commitment, you can save by purchasing an Elite Annual subscription for a yearly payment of $1,199. Basic membership gets you access to the live chat rooms and the basic lessons, while the Elite membership adds webinars, mentorship, and access to the trading psychology team. BBT also offers a seven-day trial membership for $39. Best for Live Training : Bulls on Wall Street Bulls on Wall Street Cost: $199/month or $1,499/yearTrial: NoLive trade room: Yes Sign Up Now Why We Chose It Bulls on Wall Street's training boot camp is unique in the industry. It's a bit different now than when it launched, but it still offers comprehensive personalized support for members, making it the best stock trading course for live training. Pros & Cons Pros Established company with a solid reputation Personalized training Access to trading simulator with mentor feedback Reasonably priced subscription options Cons No trial membership available Overview Established in 2008, Bulls on Wall Street is one of the older stock trading course providers. Its founder, Kunal Desai, has been an active day trader since 1999. Desai intended to make this trading course a more personalized experience for members, and the Accelerated Trading Course has become the cornerstone of his offering. A Bulls Vision subscription costs $199 per month or $1,499 annually. The boot camp classes, which were once live, are now accessible on demand. Students will attend live market recaps with Desai three times a week, plus Sunday "market huddles." You'll go over Desai's weekly trades, discuss the state of the market, and find potential good stocks for next week. Students can also join the Bulls Vision day trading chatroom, featuring Desai's live cam feed so you can watch him trade, have actionable trade ideas, and access live market recaps and advanced platform tutorials. The annual subscription includes all of the above plus a trading toolkit course book, live event access, and a personalized strategic account executive. Best for University Education : Coursera Coursera Cost: FreeTrial: One free learning program with Coursera subscriptionLive trade room: No Sign Up Now Why We Chose It Coursera’s Stocks and Bonds class is available for free; it just requires a basic Coursera membership at no cost. (Coursera’s paid membership has a free trial as well.) It is presented by the University of Michigan and is taught by Professor Gautam Kaul, a highly-rated instructor, making it our pick as the best online stock trading course for university education Pros & Cons Pros Highly rated course and instructor High-level analysis of markets, pricing, and valuation Part of a multi-course specialization track Cons Relatively little video instruction No instructor interaction Overview The course is meant for beginners, but it requires some basic understanding of algebra. It applies the Time Value of Money (TVM) concept to understand stocks and bonds. TVM is a fundamental idea in finance. It states that a particular sum of money is worth more now than it’ll be worth in the future, due to its earning potential in the meantime.  Stocks and Bonds will take about 10 hours to complete. It’s designed to be taken over four weeks, but you can reset the deadlines to learn at your own pace. It consists of a few hours of video, along with some reading materials and quizzes.  The first week will introduce some common vocabulary and discuss how bonds are valued. In the next week, you’ll look at real market data to understand how bonds are priced, and you’ll submit your first assignment. In the following two weeks, you’ll go through the same process with stocks, learning how stocks affect company operations and submitting a final assignment. When you finish up you’ll be awarded a certificate of completion. Stocks and Bonds is part of a four-month specialization track, the Foundational Finance for Strategic Decision Making Specialization, which is designed to provide a deep understanding of personal finance. Coursera offers a variety of free and paid finance classes from prestigious universities. Best for Emerging/Alternative Markets : Financial Edge Financial Edge Cost: $99Trial: NoLive trade room: No Sign Up Now Why We Chose It Financial is our pick as the best for emerging/alternative markets because it offers lifetime access to education on both topics. Additionally, students can reach out with questions and receive help directly from instructors. Pros & Cons Pros Direct instructor help CPD-certified course Lifetime access Cons No practical exercises Somewhat short Overview Financial Edge’s Traditional & Alternative Investments class is relatively short, at 2.5 hours, but it gets straight to the point.  Emerging markets are typically considered to be those of countries with rapidly expanding or improving economies, which generally have high rewards and high risks. Alternative investments are those that don’t fit into conventional categories of equity, income, and cash. This course will teach you how to think about both. You’ll start with a few sessions on the basics, like understanding equity, valuation, and financial statements, before learning about different market sectors (industrials and financials). The class then discusses how emerging markets and alternative investments fit in before getting into some of the main investment strategies—hedge funds, private equity, and venture capital.  When you’re through with the course, you should have a firm grasp of how to trade in emerging markets. And whether or not you plan to work in a hedge fund, you’ll see how they and other alternative investment strategies influence the world and the markets. It’s not the cheapest course, at $99, but you’ll get direct help from the instructor and lifetime access to the class materials. The Traditional and Alternative Investments course is CPD-certified (Continuing Professional Development) by The CPD Certification Service; some employers and organizations track CPD points, and this class will count. Final Verdict All of the stock trading classes reviewed here are worthy of consideration by traders of all levels of experience—from neophyte to advanced. However, Investors Underground is the best overall, with more complete course offerings than its competitors. It also has a solid reputation in the industry and reasonable pricing for its extensive offerings. Compare the Best Stock Trading Classes Company Cost Trial Live Trade Room Investors Underground Best Overall $997+ No Yes Udemy Best for Beginners $49.99 Yes No Bullish Bears Best Value Free courses; $47/month or $247/year membership No Yes Skillshare Best for Technical Analysis $167.88/year 1-month free trial No Bear Bull Traders Best for Day Traders $99+ monthly $39 for 7-day trial Yes Bulls on Wall Street Best for Live Training $199/month or $1,499/year No Yes Coursera Best for University Education Free Yes (for paid service) No Financial Edge Best for Emerging/Alternative Markets $99 No No Frequently Asked Questions What Are Online Stock Trading Classes? Stock trading courses typically offer a full range of educational and research capabilities to help novice traders develop their skills and knowledge while enabling more advanced traders to up their game. Many of the top stock trading courses offer structured classes with either video or online instruction. A significant learning component of these courses is the chat room, which provides all students and members with access to a large community of traders to exchange ideas. The best courses also provide opportunities for practical application through trading simulators that mimic a real trading environment using fake money. Who Should Take Stock Trading Classes? Anyone interested in making money in the stock market could benefit from a stock trading class. While it's possible to learn the ins and outs of stock trading on your own—through books, videos, and podcasts available online—a good stock trading course provides a more structured learning path, with the opportunity to interact with expert traders and apply your skills and knowledge without risking your own money. These courses can also help develop discipline and the proper trading mindset, which are critical to successful trading.  How Much Do Stock Trading Classes Cost? Learning how to trade stocks can be free if you utilize free training and resources through some of the top online brokerage companies. However, if you’re looking to take a course, costs can vary depending on the scope of the class. If you just want theory and a thorough explanation of the methodology and strategies, you can pay as little as $110 for a comprehensive video course. If you want deeper immersion into the art and science of trading, you might pay between $100 and $300 per month for a subscription to course materials, webinars, and chat room access. For more hands-on training or mentoring, you could easily pay as much as $300 to $500 per month.  How Long Does It Take to Learn to Trade Stocks? The amount of time it takes to learn to trade stocks depends on the individual. If you can commit 100% to a good stock trading course, you should be able to get up and running within a few weeks of starting the course. If you're learning in your spare time, you should expect to commit at least 40 hours to structured learning, which you might have to spread over a couple of months. The keys are to learn at a comfortable pace and to use a stock trading course that provides constant feedback on your learning progress. That can be achieved by using a professional trading simulator, like Investopedia's stock trading simulator.  Methodology We reviewed over 15 of the most trusted platforms and compared them against a specific set of criteria to choose the best stock trading courses. In addition to the types of classes they offer, we considered factors such as cost, access to instructors or mentors, access to a trading community, the extent of learning resources, availability of free courses or materials, and any unique features that added value to the services.  Investopedia / Zoe Hansen Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. The CPD Certification Service. "About us."  Related Articles Best Investing Courses Best Online Excel Courses for May 2024 Best Day Trading Courses Best Stock Screeners for May 2024 Best Options Trading Courses The 5 Best Online Real Estate Schools for May 2024 Related Terms What Is a Bloomberg Terminal? Functions, Costs, and Alternatives A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. more Entrepreneur: What It Means to Be One and How to Get Started Entrepreneurs create new businesses, taking on all the risks and rewards of their company. Learn about entrepreneurship and the challenges facing entrepreneurs. more Day Trader: Definition, Techniques, Strategies, and Risks Day traders execute short and long trades to capitalize on intraday market price action, which result from temporary supply and demand inefficiencies. more What Is a Trading Platform? Definition, Examples, and Features A trading platform is software with which investors and traders can open, close, and manage market positions through a financial intermediary. more Currency Trading Platform: Meaning, Example, Pros And Cons A currency or forex trading platform is a type of trading platform used to help currency traders with forex trading analysis and trade execution. more Passive Income: What It Is and Ideas for 2024 Passive income is earnings from a rental property, limited partnership, or other enterprise in which a person is not actively involved. more

https://www.investopedia.com/articles/investing/052413/what-type-trader-are-you.asp

What Type of Trader Are You?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> You know that the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockmarket.asp">stock market</a> provides an opportunity to make money, but you aren’t quite sure how investors know when to buy and sell. Or maybe you’ve heard terms like “noise trader” or “arbitrage trader,” and you want to know more about them. Either way, an overview of some of the most common types of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading-strategy.asp">trading strategies</a> will provide insight into the trading terminology and strategies used by different investors attempting to build wealth in the markets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Understanding these strategies can help you find one that best matches your personality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Types of traders include the fundamental trader, noise trader, and market timer.</li><li>Each type of trader appeals to investors differently and is based on varying strategies.</li><li>Understanding your own style of trading can help make better-investing decisions.</li></ul></div></div></div> <span class="heading-toc" id="toc-fundamental-trader"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Fundamental Trader </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Fundamental trading is a method by which a trader focuses on company-specific events to determine which stock to buy and when to buy it. To put this in perspective, consider a hypothetical trip to a shopping mall. In the mall, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentalanalysis.asp">fundamental analyst</a> would go to each store, study the product that was being sold, and then decide whether to buy it or not. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> While trading on fundamentals can be viewed from both short-term and long-term perspectives, fundamental analysis is often more closely associated with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/08/passive-active-investing.asp">the buy-and-hold strategy of investing</a> than it is with short-term trading. With that noted, the definition of “short term” is an important consideration. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Some trading strategies are based on split-second decisions and others are based on trends or factors that play out over the course of a day, the fundamentals may not change for months or even years. At the shorter end of the spectrum, for example, the release of a firm’s quarterly financial statements can provide insight into whether or not the firm is improving its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-health.asp">financial health</a> or position in the marketplace. Changes (or lack of changes) can serve as signals to trade. Of course, a press release announcing bad news could change the fundamentals in an instant. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Fundamental trading has a real appeal to many investors because it is based on logic and facts. Of course, unearthing and interpreting those facts is a time-consuming, research-intensive effort. Another challenge comes in the form of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-market.asp">financial markets</a> themselves, which do not always behave in logical ways (especially in the short term) despite reams of data suggesting that they should. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-noise-trader"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Noise Trader </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Noise trading refers to a style of investing in which decisions to buy and sell are made without the use of fundamental data specific to the company that issued the securities that are being bought or sold. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/noisetrader.asp">Noise traders</a> generally make short-term trades to profit from various economic trends. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> While <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a> of statistics generated by market activity, such as past prices and volume, provides some insight into patterns that can suggest future market activity and direction, noise traders often have poor timing and overreact to both good and bad news. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Even though <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/06/marketnoise.asp">that description may not sound very flattering,</a> in reality, most people are considered to be noise traders, as very few make investment decisions solely using fundamental analysis. To put this style in perspective, let’s revisit our earlier analogy about a trip to the mall. Unlike the fundamental analyst, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intrinsicvalue.asp">intrinsic value</a> of the products in the store, the technical analyst's decision would be based on the patterns or the activity of people going into each store. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Technical analysis, like other strategies that involve data analysis, can be time-consuming and may require quick reactions to take advantage of perceived opportunities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-sentiment-trader"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Sentiment Trader </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Sentiment traders seek to identify and participate in trends. They do not attempt to outguess the market by finding great securities. Instead, they attempt to identify securities that are moving with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/momentum_investing.asp">momentum</a> of the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Sentiment traders combine aspects of both fundamental and technical analysis in an effort to identify and participate in market movements. There are a variety of sentiment trading approaches, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/swingtrading.asp">swing traders</a> that seek to catch momentous price movements while avoiding idle times and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/contrarian.asp">contrarian</a> traders that try to use indicators of excessive positive or negative sentiment as indications of a potential reversal in sentiment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Trading costs, market volatility, and difficulty in accurately predicting market sentiment are some of the key challenges facing sentiment traders. While professional traders have more experience, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp">leverage</a>, information, and lower commissions, their trading strategies are restricted by the specific securities they are trading. For this reason, large financial institutions and professional traders may choose to trade currencies or other financial instruments rather than stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Success as a sentiment trader often requires early mornings studying trends and identifying potential securities for purchase or sale. Analysis of this nature can be time-consuming, and trading strategies may require quick timing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <span class="heading-toc" id="toc-market-timer"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Market Timer </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Market timers try to guess which direction (up or down) a security will move to profit from that movement. They generally look to technical indicators or economic data to predict the direction of the movement. Some investors, especially academics, do not believe that it is possible to predict the direction of market movements accurately. Others, particularly those engaged in short-term trading, take the exact opposite stance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/07/market_timing.asp">long-term track record of market timers</a> suggests that achieving success is a challenge. Most investors will find that they are not able to dedicate enough time to this endeavor to achieve a reliable level of success. For these investors, long-term strategies are often more satisfying and lucrative. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Of course, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/daytrader.asp">day traders</a> would argue that <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/markettiming.asp">market timing</a> could be a profitable strategy, such as when trading technology shares in a bull market. Investors who purchased and flipped real estate during a market boom would also argue that market timing could be profitable. Just keep in mind that it’s not always easy to tell when to get out of the market, as investors that got burned in the tech-wreck crash and real estate bust can attest. While short-term profits are certainly possible, over the long term, there is little evidence to suggest that this strategy has merit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_41-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_42-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You could be more than one type of trader or none of these, depending on your personality.</p></div></div></div> <span class="heading-toc" id="toc-arbitrage-trader"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Arbitrage Trader </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Arbitrage traders simultaneously purchase and sell assets in an effort to profit from price differences of identical or similar financial instruments, on different markets or in different forms. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/arbitrage.asp">Arbitrage</a> exists as a result of market inefficiencies—it provides a mechanism to ensure prices do not deviate substantially from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fairvalue.asp">fair value</a> for long periods of time. This type of trading is often associated with hedge funds, and it can be a fairly easy way to make money when it works. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> For example, if a security trades on multiple exchanges and is less expensive on one exchange, it can be bought on the first exchange at the lower price and sold on the other exchange at a higher price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> It sounds simple enough, but given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/11/automated-trading-systems.asp">trading systems</a> set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly, and the opportunity is often eliminated in a matter of seconds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> So maybe none of these trading strategies seem to be a good fit for your personality? There are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/11/four-types-of-active-traders.asp">a host of other strategies to consider</a>, and with just a little research, you may be able to find a strategy that is a perfect fit for you. Or perhaps, proximity to your investment goals rather than company-specific factors or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market_indicators.asp">market indicators</a> is the primary factor driving your buy/sell decisions. That’s okay. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Some people engage in trading to try and achieve their financial goals. Others just buy, hold, and wait for time to pass and asset values to rise. Either way, knowing your personal style and strategy will help give you the peace of mind and fortitude to remain comfortable with your chosen path when market volatility or hot trends make headlines and cause investors to question their investment decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> <em>Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.</em> </p></div>

You know that the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) provides an opportunity to make money, but you aren’t quite sure how investors know when to buy and sell. Or maybe you’ve heard terms like “noise trader” or “arbitrage trader,” and you want to know more about them. Either way, an overview of some of the most common types of [trading strategies](https://www.investopedia.com/terms/t/trading-strategy.asp) will provide insight into the trading terminology and strategies used by different investors attempting to build wealth in the markets. Understanding these strategies can help you find one that best matches your personality. ### Key Takeaways * Types of traders include the fundamental trader, noise trader, and market timer. * Each type of trader appeals to investors differently and is based on varying strategies. * Understanding your own style of trading can help make better-investing decisions. ## Fundamental Trader Fundamental trading is a method by which a trader focuses on company-specific events to determine which stock to buy and when to buy it. To put this in perspective, consider a hypothetical trip to a shopping mall. In the mall, a [fundamental analyst](https://www.investopedia.com/terms/f/fundamentalanalysis.asp) would go to each store, study the product that was being sold, and then decide whether to buy it or not. While trading on fundamentals can be viewed from both short-term and long-term perspectives, fundamental analysis is often more closely associated with [the buy-and-hold strategy of investing](https://www.investopedia.com/articles/stocks/08/passive-active-investing.asp) than it is with short-term trading. With that noted, the definition of “short term” is an important consideration. Some trading strategies are based on split-second decisions and others are based on trends or factors that play out over the course of a day, the fundamentals may not change for months or even years. At the shorter end of the spectrum, for example, the release of a firm’s quarterly financial statements can provide insight into whether or not the firm is improving its [financial health](https://www.investopedia.com/terms/f/financial-health.asp) or position in the marketplace. Changes (or lack of changes) can serve as signals to trade. Of course, a press release announcing bad news could change the fundamentals in an instant. Fundamental trading has a real appeal to many investors because it is based on logic and facts. Of course, unearthing and interpreting those facts is a time-consuming, research-intensive effort. Another challenge comes in the form of the [financial markets](https://www.investopedia.com/terms/f/financial-market.asp) themselves, which do not always behave in logical ways (especially in the short term) despite reams of data suggesting that they should. ## Noise Trader Noise trading refers to a style of investing in which decisions to buy and sell are made without the use of fundamental data specific to the company that issued the securities that are being bought or sold. [Noise traders](https://www.investopedia.com/terms/n/noisetrader.asp) generally make short-term trades to profit from various economic trends. While [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) of statistics generated by market activity, such as past prices and volume, provides some insight into patterns that can suggest future market activity and direction, noise traders often have poor timing and overreact to both good and bad news. Even though [that description may not sound very flattering,](https://www.investopedia.com/articles/trading/06/marketnoise.asp) in reality, most people are considered to be noise traders, as very few make investment decisions solely using fundamental analysis. To put this style in perspective, let’s revisit our earlier analogy about a trip to the mall. Unlike the fundamental analyst, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the [intrinsic value](https://www.investopedia.com/terms/i/intrinsicvalue.asp) of the products in the store, the technical analyst's decision would be based on the patterns or the activity of people going into each store. Technical analysis, like other strategies that involve data analysis, can be time-consuming and may require quick reactions to take advantage of perceived opportunities. ## Sentiment Trader Sentiment traders seek to identify and participate in trends. They do not attempt to outguess the market by finding great securities. Instead, they attempt to identify securities that are moving with the [momentum](https://www.investopedia.com/terms/m/momentum_investing.asp) of the market. Sentiment traders combine aspects of both fundamental and technical analysis in an effort to identify and participate in market movements. There are a variety of sentiment trading approaches, including [swing traders](https://www.investopedia.com/terms/s/swingtrading.asp) that seek to catch momentous price movements while avoiding idle times and [contrarian](https://www.investopedia.com/terms/c/contrarian.asp) traders that try to use indicators of excessive positive or negative sentiment as indications of a potential reversal in sentiment. Trading costs, market volatility, and difficulty in accurately predicting market sentiment are some of the key challenges facing sentiment traders. While professional traders have more experience, [leverage](https://www.investopedia.com/terms/l/leverage.asp), information, and lower commissions, their trading strategies are restricted by the specific securities they are trading. For this reason, large financial institutions and professional traders may choose to trade currencies or other financial instruments rather than stocks. Success as a sentiment trader often requires early mornings studying trends and identifying potential securities for purchase or sale. Analysis of this nature can be time-consuming, and trading strategies may require quick timing. ## Market Timer Market timers try to guess which direction (up or down) a security will move to profit from that movement. They generally look to technical indicators or economic data to predict the direction of the movement. Some investors, especially academics, do not believe that it is possible to predict the direction of market movements accurately. Others, particularly those engaged in short-term trading, take the exact opposite stance. The [long-term track record of market timers](https://www.investopedia.com/articles/trading/07/market_timing.asp) suggests that achieving success is a challenge. Most investors will find that they are not able to dedicate enough time to this endeavor to achieve a reliable level of success. For these investors, long-term strategies are often more satisfying and lucrative. Of course, [day traders](https://www.investopedia.com/terms/d/daytrader.asp) would argue that [market timing](https://www.investopedia.com/terms/m/markettiming.asp) could be a profitable strategy, such as when trading technology shares in a bull market. Investors who purchased and flipped real estate during a market boom would also argue that market timing could be profitable. Just keep in mind that it’s not always easy to tell when to get out of the market, as investors that got burned in the tech-wreck crash and real estate bust can attest. While short-term profits are certainly possible, over the long term, there is little evidence to suggest that this strategy has merit. ### You could be more than one type of trader or none of these, depending on your personality. ## Arbitrage Trader Arbitrage traders simultaneously purchase and sell assets in an effort to profit from price differences of identical or similar financial instruments, on different markets or in different forms. [Arbitrage](https://www.investopedia.com/terms/a/arbitrage.asp) exists as a result of market inefficiencies—it provides a mechanism to ensure prices do not deviate substantially from [fair value](https://www.investopedia.com/terms/f/fairvalue.asp) for long periods of time. This type of trading is often associated with hedge funds, and it can be a fairly easy way to make money when it works. For example, if a security trades on multiple exchanges and is less expensive on one exchange, it can be bought on the first exchange at the lower price and sold on the other exchange at a higher price. It sounds simple enough, but given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized [trading systems](https://www.investopedia.com/articles/trading/11/automated-trading-systems.asp) set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly, and the opportunity is often eliminated in a matter of seconds. ## The Bottom Line So maybe none of these trading strategies seem to be a good fit for your personality? There are [a host of other strategies to consider](https://www.investopedia.com/articles/active-trading/11/four-types-of-active-traders.asp), and with just a little research, you may be able to find a strategy that is a perfect fit for you. Or perhaps, proximity to your investment goals rather than company-specific factors or [market indicators](https://www.investopedia.com/terms/m/market_indicators.asp) is the primary factor driving your buy/sell decisions. That’s okay. Some people engage in trading to try and achieve their financial goals. Others just buy, hold, and wait for time to pass and asset values to rise. Either way, knowing your personal style and strategy will help give you the peace of mind and fortitude to remain comfortable with your chosen path when market volatility or hot trends make headlines and cause investors to question their investment decisions. *Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.*

You know that the stock market provides an opportunity to make money, but you aren’t quite sure how investors know when to buy and sell. Or maybe you’ve heard terms like “noise trader” or “arbitrage trader,” and you want to know more about them. Either way, an overview of some of the most common types of trading strategies will provide insight into the trading terminology and strategies used by different investors attempting to build wealth in the markets. Understanding these strategies can help you find one that best matches your personality. Key Takeaways Types of traders include the fundamental trader, noise trader, and market timer.Each type of trader appeals to investors differently and is based on varying strategies.Understanding your own style of trading can help make better-investing decisions. Fundamental Trader Fundamental trading is a method by which a trader focuses on company-specific events to determine which stock to buy and when to buy it. To put this in perspective, consider a hypothetical trip to a shopping mall. In the mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. While trading on fundamentals can be viewed from both short-term and long-term perspectives, fundamental analysis is often more closely associated with the buy-and-hold strategy of investing than it is with short-term trading. With that noted, the definition of “short term” is an important consideration. Some trading strategies are based on split-second decisions and others are based on trends or factors that play out over the course of a day, the fundamentals may not change for months or even years. At the shorter end of the spectrum, for example, the release of a firm’s quarterly financial statements can provide insight into whether or not the firm is improving its financial health or position in the marketplace. Changes (or lack of changes) can serve as signals to trade. Of course, a press release announcing bad news could change the fundamentals in an instant. Fundamental trading has a real appeal to many investors because it is based on logic and facts. Of course, unearthing and interpreting those facts is a time-consuming, research-intensive effort. Another challenge comes in the form of the financial markets themselves, which do not always behave in logical ways (especially in the short term) despite reams of data suggesting that they should. Noise Trader Noise trading refers to a style of investing in which decisions to buy and sell are made without the use of fundamental data specific to the company that issued the securities that are being bought or sold. Noise traders generally make short-term trades to profit from various economic trends. While technical analysis of statistics generated by market activity, such as past prices and volume, provides some insight into patterns that can suggest future market activity and direction, noise traders often have poor timing and overreact to both good and bad news. Even though that description may not sound very flattering, in reality, most people are considered to be noise traders, as very few make investment decisions solely using fundamental analysis. To put this style in perspective, let’s revisit our earlier analogy about a trip to the mall. Unlike the fundamental analyst, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, the technical analyst's decision would be based on the patterns or the activity of people going into each store. Technical analysis, like other strategies that involve data analysis, can be time-consuming and may require quick reactions to take advantage of perceived opportunities. Sentiment Trader Sentiment traders seek to identify and participate in trends. They do not attempt to outguess the market by finding great securities. Instead, they attempt to identify securities that are moving with the momentum of the market. Sentiment traders combine aspects of both fundamental and technical analysis in an effort to identify and participate in market movements. There are a variety of sentiment trading approaches, including swing traders that seek to catch momentous price movements while avoiding idle times and contrarian traders that try to use indicators of excessive positive or negative sentiment as indications of a potential reversal in sentiment. Trading costs, market volatility, and difficulty in accurately predicting market sentiment are some of the key challenges facing sentiment traders. While professional traders have more experience, leverage, information, and lower commissions, their trading strategies are restricted by the specific securities they are trading. For this reason, large financial institutions and professional traders may choose to trade currencies or other financial instruments rather than stocks. Success as a sentiment trader often requires early mornings studying trends and identifying potential securities for purchase or sale. Analysis of this nature can be time-consuming, and trading strategies may require quick timing. Market Timer Market timers try to guess which direction (up or down) a security will move to profit from that movement. They generally look to technical indicators or economic data to predict the direction of the movement. Some investors, especially academics, do not believe that it is possible to predict the direction of market movements accurately. Others, particularly those engaged in short-term trading, take the exact opposite stance. The long-term track record of market timers suggests that achieving success is a challenge. Most investors will find that they are not able to dedicate enough time to this endeavor to achieve a reliable level of success. For these investors, long-term strategies are often more satisfying and lucrative. Of course, day traders would argue that market timing could be a profitable strategy, such as when trading technology shares in a bull market. Investors who purchased and flipped real estate during a market boom would also argue that market timing could be profitable. Just keep in mind that it’s not always easy to tell when to get out of the market, as investors that got burned in the tech-wreck crash and real estate bust can attest. While short-term profits are certainly possible, over the long term, there is little evidence to suggest that this strategy has merit. You could be more than one type of trader or none of these, depending on your personality. Arbitrage Trader Arbitrage traders simultaneously purchase and sell assets in an effort to profit from price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies—it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. This type of trading is often associated with hedge funds, and it can be a fairly easy way to make money when it works. For example, if a security trades on multiple exchanges and is less expensive on one exchange, it can be bought on the first exchange at the lower price and sold on the other exchange at a higher price. It sounds simple enough, but given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly, and the opportunity is often eliminated in a matter of seconds. The Bottom Line So maybe none of these trading strategies seem to be a good fit for your personality? There are a host of other strategies to consider, and with just a little research, you may be able to find a strategy that is a perfect fit for you. Or perhaps, proximity to your investment goals rather than company-specific factors or market indicators is the primary factor driving your buy/sell decisions. That’s okay. Some people engage in trading to try and achieve their financial goals. Others just buy, hold, and wait for time to pass and asset values to rise. Either way, knowing your personal style and strategy will help give you the peace of mind and fortitude to remain comfortable with your chosen path when market volatility or hot trends make headlines and cause investors to question their investment decisions. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.

https://www.investopedia.com/articles/investing/070815/how-currencyhedged-etfs-work.asp

How Currency-Hedged ETFs Work

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> When you invest in foreign companies, not only are you betting on the success of that asset, but you're also making a bet about the fluctuations of the foreign currency market. A currency-hedged ETF is an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded fund</a> that tracks the values of overseas securities, without exposing the investors to excess currency risk. It does this by holding <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forwardcontract.asp">forward contracts</a> for the base currency as part of its portfolio, which gives a payoff if the currency price increases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A currency-hedged ETF provides exposure to foreign equities while reducing exposure to exchange rate risk. </li><li>Currency-hedged ETFs work by holding currency-forward contracts that provide a payout if the exchange rate moves against the investor. </li><li>Currency-hedged ETFs may be a good investment in countries that are susceptible to high inflation, or even hyperinflation.</li></ul></div></div></div> <span class="heading-toc" id="toc-foreign-exchange-domestic-dealings"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Foreign Exchange, Domestic Dealings </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Take BlackRock's (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=blk">BLK</a>) <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ishares.asp">iShares</a>, which assembles and maintains over 800 ETFs; one of the largest rosters in the industry. Those funds include several currency-hedged ones, each denominated in a particular currency (or basket) and packaged to American investors, or at least to investors who normally transact in U.S. dollars.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> But why would an investor <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedge</a> ETF investments? Aren’t ETFs broad enough to avoid uniformity in the first place? ETFs offer <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a>, but a standard ETF that invests in foreign markets won’t do a thing to protect you against currency fluctuations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Currency-hedged ETFs protect you against exchange rate hits. Or, if you’re a glass-half-full kind of person, help you take advantage of potential gains in other currencies vis-à-vis the U.S. dollar. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/strongweakdollar.asp">strong dollar</a> can hurt your international exposure, as it takes correspondingly more Swiss francs or Norwegian kroner to equal the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/purchasingpower.asp">purchasing power</a> of a greenback. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-never-worry-about-hyperinflation-again"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Never Worry About Hyperinflation Again </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The concept is simple. In some cases, a currency-hedged ETF can be nothing more than an existing ETF—same components, same proportions, same <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratio</a>—but denominated in something other than U.S. dollars. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The fundamental difference is that the currency-hedged ETF contains positions in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currencyforward.asp">currency forwards</a>, which are essentially <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurescontract.asp">futures contracts</a> on currencies. Forwards allow you to lock in the price of a currency today, regardless of eventual fluctuations. Currency forwards don’t fit the strict definition of futures contracts, because they don’t trade on exchanges. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-hedge-a-little-or-a-lot"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Hedge a Little or a Lot </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Generalizing, currency-hedged ETFs come in two varieties: single-currency and multiple-currency. Single-currency-hedged ETFs are the more common of the two. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Take iShares’ MSCI Japan ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ewj">EWJ</a>), for instance. The unhedged ETF had a one-year return of 24.31% as of March 31, 2024, while the hedged version of the fund returned 48.37%. Not coincidentally, the U.S. dollar gained 9.8% versus the yen over approximately the same period.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> In retrospect, if you had to buy one or the other, the hedged fund seems like the obvious choice; the yen depreciated significantly in 2023. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Make sure to pay attention to the expense ratio of ETFs, which is the cost you're paying to invest in them. Expense ratios reduce your returns so it's important to take them into consideration when comparing ETFs.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> If one firm’s yen-denominated hedged ETF outpaces its non-hedged counterpart, it’s reasonable to assume that other yen-denominated ETFs will, too. Take WisdomTree Investment’s Japan-hedged equity fund (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=dxj">DXJ</a>). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/holdings.asp">holdings</a> as of Dec. 31, 2023, are your standard Japanese multinationals: Toyota, Mitsubishi UFJ Financial, Mizuho, and Nintendo, for example. In 2023, the fund’s <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value</a> (NAV) increased 35.6%. If you’d invested in a non-hedged fund of a similar constitution, your returns would be less due to the drop in the yen's value in 2023.<span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> As for multiple-currency-hedging ETFs, in practice, they focus either on a particular region (e.g. Europe, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emergingmarketeconomy.asp">emerging markets</a>), or a certain size of the company (e.g. small-cap). Should the involved currencies fall enough against the U.S. dollar, the composition of the funds becomes less important. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> In fact, if the appropriate currencies are in play, a small-cap non-hedged ETF assembled by an adept manager can end up being worth considerably less to your portfolio than a currency-hedged ETF of ordinary composition. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_34-0"><span class="heading-toc" id="toc-how-many-currency-hedged-etfs-are-there"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Currency-Hedged ETFs Are There?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are 29 currency-hedged equities ETFs traded in the U.S. as listed on VettaVi's ETF Database as of April 5, 2024. The individual assets managed by these funds range from $6.4 billion to $10 million.<span class="ql-inline-citation" data-cite="6"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_36-0"><span class="heading-toc" id="toc-are-currency-hedged-etfs-a-good-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Currency-Hedged ETFs a Good Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The effectiveness of currency-hedged ETFs may vary, depending on global economic conditions and exchange rate fluctuations. According to Morningstar, the costs of holding trading currency-forward contracts can reduce the tax efficiency of these ETFs. They also have higher management fees to account for the additional costs of executing the hedging strategy.<span class="ql-inline-citation" data-cite="7"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-what-are-the-drawbacks-of-currency-hedged-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Drawbacks of Currency-Hedged ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Currency-hedged ETFs reduce their exposure to exchange rate risk by investing in currency forward contracts, in addition to the usual basket of foreign securities. These contracts must be traded frequently, increasing the management costs and tax liabilities of the fund.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> You’re not going to get rich off predicting movements between and among currencies. Well, you could, but you’d have to start with an awfully large leveraged bankroll. On the other hand, if you are looking at currency-hedged ETFs as a way to stave off real-dollar losses, you have plenty of options. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> With more such ETFs available to the individual investor, and firms thus forced to compete on price, there’s never been a better time to not only expose yourself to international markets but reduce price movement risks while doing so. </p></div>

When you invest in foreign companies, not only are you betting on the success of that asset, but you're also making a bet about the fluctuations of the foreign currency market. A currency-hedged ETF is an [exchange-traded fund](https://www.investopedia.com/terms/e/etf.asp) that tracks the values of overseas securities, without exposing the investors to excess currency risk. It does this by holding [forward contracts](https://www.investopedia.com/terms/f/forwardcontract.asp) for the base currency as part of its portfolio, which gives a payoff if the currency price increases. ### Key Takeaways * A currency-hedged ETF provides exposure to foreign equities while reducing exposure to exchange rate risk. * Currency-hedged ETFs work by holding currency-forward contracts that provide a payout if the exchange rate moves against the investor. * Currency-hedged ETFs may be a good investment in countries that are susceptible to high inflation, or even hyperinflation. ## Foreign Exchange, Domestic Dealings Take BlackRock's ([BLK](https://www.investopedia.com/markets/quote?tvwidgetsymbol=blk)) [iShares](https://www.investopedia.com/terms/i/ishares.asp), which assembles and maintains over 800 ETFs; one of the largest rosters in the industry. Those funds include several currency-hedged ones, each denominated in a particular currency (or basket) and packaged to American investors, or at least to investors who normally transact in U.S. dollars. But why would an investor [hedge](https://www.investopedia.com/terms/h/hedge.asp) ETF investments? Aren’t ETFs broad enough to avoid uniformity in the first place? ETFs offer [diversification](https://www.investopedia.com/terms/d/diversification.asp), but a standard ETF that invests in foreign markets won’t do a thing to protect you against currency fluctuations. Currency-hedged ETFs protect you against exchange rate hits. Or, if you’re a glass-half-full kind of person, help you take advantage of potential gains in other currencies vis-à-vis the U.S. dollar. A [strong dollar](https://www.investopedia.com/ask/answers/06/strongweakdollar.asp) can hurt your international exposure, as it takes correspondingly more Swiss francs or Norwegian kroner to equal the [purchasing power](https://www.investopedia.com/terms/p/purchasingpower.asp) of a greenback. ## Never Worry About Hyperinflation Again The concept is simple. In some cases, a currency-hedged ETF can be nothing more than an existing ETF—same components, same proportions, same [expense ratio](https://www.investopedia.com/terms/e/expenseratio.asp)—but denominated in something other than U.S. dollars. The fundamental difference is that the currency-hedged ETF contains positions in [currency forwards](https://www.investopedia.com/terms/c/currencyforward.asp), which are essentially [futures contracts](https://www.investopedia.com/terms/f/futurescontract.asp) on currencies. Forwards allow you to lock in the price of a currency today, regardless of eventual fluctuations. Currency forwards don’t fit the strict definition of futures contracts, because they don’t trade on exchanges. ## Hedge a Little or a Lot Generalizing, currency-hedged ETFs come in two varieties: single-currency and multiple-currency. Single-currency-hedged ETFs are the more common of the two. Take iShares’ MSCI Japan ETF ([EWJ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ewj)), for instance. The unhedged ETF had a one-year return of 24.31% as of March 31, 2024, while the hedged version of the fund returned 48.37%. Not coincidentally, the U.S. dollar gained 9.8% versus the yen over approximately the same period. In retrospect, if you had to buy one or the other, the hedged fund seems like the obvious choice; the yen depreciated significantly in 2023. ### Make sure to pay attention to the expense ratio of ETFs, which is the cost you're paying to invest in them. Expense ratios reduce your returns so it's important to take them into consideration when comparing ETFs. If one firm’s yen-denominated hedged ETF outpaces its non-hedged counterpart, it’s reasonable to assume that other yen-denominated ETFs will, too. Take WisdomTree Investment’s Japan-hedged equity fund ([DXJ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=dxj)). Its [holdings](https://www.investopedia.com/terms/h/holdings.asp) as of Dec. 31, 2023, are your standard Japanese multinationals: Toyota, Mitsubishi UFJ Financial, Mizuho, and Nintendo, for example. In 2023, the fund’s [net asset value](https://www.investopedia.com/terms/n/nav.asp) (NAV) increased 35.6%. If you’d invested in a non-hedged fund of a similar constitution, your returns would be less due to the drop in the yen's value in 2023. As for multiple-currency-hedging ETFs, in practice, they focus either on a particular region (e.g. Europe, [emerging markets](https://www.investopedia.com/terms/e/emergingmarketeconomy.asp)), or a certain size of the company (e.g. small-cap). Should the involved currencies fall enough against the U.S. dollar, the composition of the funds becomes less important. In fact, if the appropriate currencies are in play, a small-cap non-hedged ETF assembled by an adept manager can end up being worth considerably less to your portfolio than a currency-hedged ETF of ordinary composition. ## How Many Currency-Hedged ETFs Are There? There are 29 currency-hedged equities ETFs traded in the U.S. as listed on VettaVi's ETF Database as of April 5, 2024. The individual assets managed by these funds range from $6.4 billion to $10 million. ## Are Currency-Hedged ETFs a Good Investment? The effectiveness of currency-hedged ETFs may vary, depending on global economic conditions and exchange rate fluctuations. According to Morningstar, the costs of holding trading currency-forward contracts can reduce the tax efficiency of these ETFs. They also have higher management fees to account for the additional costs of executing the hedging strategy. ## What Are the Drawbacks of Currency-Hedged ETFs? Currency-hedged ETFs reduce their exposure to exchange rate risk by investing in currency forward contracts, in addition to the usual basket of foreign securities. These contracts must be traded frequently, increasing the management costs and tax liabilities of the fund. ## The Bottom Line You’re not going to get rich off predicting movements between and among currencies. Well, you could, but you’d have to start with an awfully large leveraged bankroll. On the other hand, if you are looking at currency-hedged ETFs as a way to stave off real-dollar losses, you have plenty of options. With more such ETFs available to the individual investor, and firms thus forced to compete on price, there’s never been a better time to not only expose yourself to international markets but reduce price movement risks while doing so.

When you invest in foreign companies, not only are you betting on the success of that asset, but you're also making a bet about the fluctuations of the foreign currency market. A currency-hedged ETF is an exchange-traded fund that tracks the values of overseas securities, without exposing the investors to excess currency risk. It does this by holding forward contracts for the base currency as part of its portfolio, which gives a payoff if the currency price increases. Key Takeaways A currency-hedged ETF provides exposure to foreign equities while reducing exposure to exchange rate risk. Currency-hedged ETFs work by holding currency-forward contracts that provide a payout if the exchange rate moves against the investor. Currency-hedged ETFs may be a good investment in countries that are susceptible to high inflation, or even hyperinflation. Foreign Exchange, Domestic Dealings Take BlackRock's (BLK) iShares, which assembles and maintains over 800 ETFs; one of the largest rosters in the industry. Those funds include several currency-hedged ones, each denominated in a particular currency (or basket) and packaged to American investors, or at least to investors who normally transact in U.S. dollars. But why would an investor hedge ETF investments? Aren’t ETFs broad enough to avoid uniformity in the first place? ETFs offer diversification, but a standard ETF that invests in foreign markets won’t do a thing to protect you against currency fluctuations. Currency-hedged ETFs protect you against exchange rate hits. Or, if you’re a glass-half-full kind of person, help you take advantage of potential gains in other currencies vis-à-vis the U.S. dollar. A strong dollar can hurt your international exposure, as it takes correspondingly more Swiss francs or Norwegian kroner to equal the purchasing power of a greenback. Never Worry About Hyperinflation Again The concept is simple. In some cases, a currency-hedged ETF can be nothing more than an existing ETF—same components, same proportions, same expense ratio—but denominated in something other than U.S. dollars. The fundamental difference is that the currency-hedged ETF contains positions in currency forwards, which are essentially futures contracts on currencies. Forwards allow you to lock in the price of a currency today, regardless of eventual fluctuations. Currency forwards don’t fit the strict definition of futures contracts, because they don’t trade on exchanges. Hedge a Little or a Lot Generalizing, currency-hedged ETFs come in two varieties: single-currency and multiple-currency. Single-currency-hedged ETFs are the more common of the two. Take iShares’ MSCI Japan ETF (EWJ), for instance. The unhedged ETF had a one-year return of 24.31% as of March 31, 2024, while the hedged version of the fund returned 48.37%. Not coincidentally, the U.S. dollar gained 9.8% versus the yen over approximately the same period. In retrospect, if you had to buy one or the other, the hedged fund seems like the obvious choice; the yen depreciated significantly in 2023. Make sure to pay attention to the expense ratio of ETFs, which is the cost you're paying to invest in them. Expense ratios reduce your returns so it's important to take them into consideration when comparing ETFs. If one firm’s yen-denominated hedged ETF outpaces its non-hedged counterpart, it’s reasonable to assume that other yen-denominated ETFs will, too. Take WisdomTree Investment’s Japan-hedged equity fund (DXJ). Its holdings as of Dec. 31, 2023, are your standard Japanese multinationals: Toyota, Mitsubishi UFJ Financial, Mizuho, and Nintendo, for example. In 2023, the fund’s net asset value (NAV) increased 35.6%. If you’d invested in a non-hedged fund of a similar constitution, your returns would be less due to the drop in the yen's value in 2023. As for multiple-currency-hedging ETFs, in practice, they focus either on a particular region (e.g. Europe, emerging markets), or a certain size of the company (e.g. small-cap). Should the involved currencies fall enough against the U.S. dollar, the composition of the funds becomes less important. In fact, if the appropriate currencies are in play, a small-cap non-hedged ETF assembled by an adept manager can end up being worth considerably less to your portfolio than a currency-hedged ETF of ordinary composition. How Many Currency-Hedged ETFs Are There? There are 29 currency-hedged equities ETFs traded in the U.S. as listed on VettaVi's ETF Database as of April 5, 2024. The individual assets managed by these funds range from $6.4 billion to $10 million. Are Currency-Hedged ETFs a Good Investment? The effectiveness of currency-hedged ETFs may vary, depending on global economic conditions and exchange rate fluctuations. According to Morningstar, the costs of holding trading currency-forward contracts can reduce the tax efficiency of these ETFs. They also have higher management fees to account for the additional costs of executing the hedging strategy. What Are the Drawbacks of Currency-Hedged ETFs? Currency-hedged ETFs reduce their exposure to exchange rate risk by investing in currency forward contracts, in addition to the usual basket of foreign securities. These contracts must be traded frequently, increasing the management costs and tax liabilities of the fund. The Bottom Line You’re not going to get rich off predicting movements between and among currencies. Well, you could, but you’d have to start with an awfully large leveraged bankroll. On the other hand, if you are looking at currency-hedged ETFs as a way to stave off real-dollar losses, you have plenty of options. With more such ETFs available to the individual investor, and firms thus forced to compete on price, there’s never been a better time to not only expose yourself to international markets but reduce price movement risks while doing so.

https://www.investopedia.com/terms/t/tax-relief.asp

What Is Tax Relief? How It Works, Types, and Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-tax-relief"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Tax Relief? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Tax relief refers to any government program or policy designed to help individuals and businesses reduce their tax burdens or resolve their tax-related debts. Tax relief may be in the form of universal tax cuts, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/catalog-of-federal-domestic-assistance-cfda.asp">targeted programs that benefit specific groups</a> of taxpayers, or initiatives that bolster particular goals of the government. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> For example, the child tax credit gives a tax break to parents of minor children, while the tax credit for green improvements (e.g., energy-efficient windows) furthers the goal of U.S. energy independence and cleaner air.<span class="ql-inline-citation" data-cite="29"></span><span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Various types of tax relief can help you lower your tax bill or settle tax-related debts.</li><li>Tax deductions let you deduct certain expenses (such as home mortgage interest) from your taxable income, thereby lowering the amount of tax you owe.<span class="ql-inline-citation" data-cite="46"></span></li><li>Tax credits directly reduce your tax bill and may provide a refund even if you don't owe any tax.<span class="ql-inline-citation" data-cite="46"></span></li><li>The IRS Fresh Start program helps individuals and businesses settle back taxes and avoid tax liens.</li></ul></div></div></div> <span class="heading-toc" id="toc-tax-relief-basics"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Tax Relief Basics </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Tax relief programs and initiatives help taxpayers reduce their tax bills through tax deductions, credits, and exclusions. Other programs help taxpayers who are behind on their taxes settle their tax-related debts, potentially avoiding liens in the process. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Government policy goals are often the catalyst for amending the federal tax code. For example, in response to concerns about the general lack of retirement savings in the U.S., Congress created incentives to encourage people to save for retirement in tax-advantaged savings accounts—such as IRAs and 401(k)s.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Tax relief is also available for people affected by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0311/the-financial-effects-of-a-natural-disaster.aspx">natural disasters</a>. For example, the IRS has historically made tax relief announcements to help individuals and businesses affected by severe storms, tornados, flooding, hurricanes, straight-line winds, wildfires, and drought. The relief typically comes in the form of filing and payment extensions, penalty and interest waivers, and deductions for casualty and theft losses sustained due to federally declared disasters.<span class="ql-inline-citation" data-cite="2"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You can't deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and reduce the loss by your anticipated reimbursement.<span class="ql-inline-citation" data-cite="14"></span></p></div></div></div> <span class="heading-toc" id="toc-tax-deductions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Tax Deductions </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-deduction.asp">tax deduction</a> reduces your taxable income for the year, thereby lowering your tax bill. Taxpayers can take the standard deduction or itemize their deductions on Schedule A of Form 1040 or 1040-SR. (You can't do both.)<span class="ql-inline-citation" data-cite="46"></span><span class="ql-inline-citation" data-cite="32"></span> In addition, there are a number of tax deductions a taxpayer can take independent of the standard deduction or itemized deduction. Each type is discussed more below. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Standard Deduction </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The standard deduction amount is based on your filing status, age, and whether you are disabled or claimed as a dependent on someone else's income tax return. Here are the standard deduction amounts for the 2023 and 2024 tax years.<span class="ql-inline-citation" data-cite="56"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_23-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Standard Deductions for 2023 and 2024</th> </tr> <tr> <th> Filing Status</th> <th>2023 Standard Deduction</th> <th>2024 Standard Deduction</th> </tr> </thead> <tbody data-check="0"> <tr> <td>Single</td> <td>$13,850</td> <td>$14,600</td> </tr> <tr> <td>Married Filing Separately</td> <td>$13,850</td> <td>$14,600</td> </tr> <tr> <td>Head of Household</td> <td>$20,800</td> <td>$21,900</td> </tr> <tr> <td>Married Filing Jointly</td> <td>$27,700</td> <td>$29,200</td> </tr> <tr> <td>Surviving Spouses</td> <td>$27,700</td> <td>$29,200</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> You can take an extra deduction if you are at least age 65 or legally blind by the end of the tax year. For tax year 2023, this "additional standard deduction" is $1,500 ($1,850 if filing as single or head of household) if you are 65 or older <em>or </em>blind. The amount doubles if you are 65 or older <em>and</em><strong> </strong>blind. The additional standard deduction for 2024 is $1,550 ($1,950 if single or head of household).<span class="ql-inline-citation" data-cite="17"></span><span class="ql-inline-citation" data-cite="49"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> If another taxpayer can claim you as a dependent, your standard deduction for tax year 2023 is limited to the greater of $1,250 or your earned income plus $400 (the total can't be more than the basic standard deduction for your filing status). For 2024, the standard deduction for a dependent increases to $1,300 or the individual's earned income plus $450.<span class="ql-inline-citation" data-cite="57"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-subheading__text"> Itemized Deductions </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Itemized deductions are expenses that can be subtracted from your adjusted gross income to lower your taxable income—and tax bill. You can itemize your deductions only if you don't claim the standard deduction. It makes financial sense to itemize if the total amount you can deduct is greater than the standard deduction for your filing status. Common itemized deductions include:<span class="ql-inline-citation" data-cite="35"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/home-mortgage-interest.asp">Mortgage interest</a> and discount points on the first $750,000 of secured mortgage debt (or $1 million if you bought the home before Dec. 16, 2017)</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/041315/tips-charitable-contributions-limits-and-taxes.asp">Charitable donations</a></li> <li>Unreimbursed <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/081615/20-medical-expenses-you-didnt-know-you-could-deduct.asp">medical and dental</a> expenses</li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/salt-5180146">State and local taxes (SALT)</a></li> <li>Certain gambling losses</li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-interest-expense.asp">Investment interest expenses</a><span class="ql-inline-citation" data-cite="44"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> Other Deductions </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Beyond the standard deduction and itemized deductions, there are other deductions taxpayers can take. For example, taxpayers who have paid interest on qualifying student loans may be able to deduct up to $2,500 from their taxable income. This deduction can be taken whether the taxpayer takes the standard deduction or itemized deduction.<span class="ql-inline-citation" data-cite="53"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Another deduction is the educator expense deduction designed to support teachers and eligible educators. This deduction allows educators to deduct up to $250 of unreimbursed expenses incurred for classroom supplies.<span class="ql-inline-citation" data-cite="54"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Last, the health savings account (HSA) deduction offers a tax advantage for individuals with a high-deductible health plan. Contributions made to an HSA are tax-deductible, reducing taxable income and providing a way for individuals to save for qualified medical expenses.<span class="ql-inline-citation" data-cite="55"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_41-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_42-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Tax relief often targets specific taxpayers, such as those facing unexpected costs due to a hurricane or a wildfire.</p></div></div></div> <span class="heading-toc" id="toc-tax-credits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Tax Credits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> A tax credit is another form of tax relief. Unlike tax deductions, which lower your taxable income, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0312/tax-credits-that-can-get-you-a-refund.aspx">tax credits</a> directly reduce the amount of tax you owe.<span class="ql-inline-citation" data-cite="46"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Here's an example. Say a taxpayer takes the standard deduction, and their tax bill amounts to $3,000. If the person is also eligible for a $1,000 tax credit, their final tax bill would be $2,000. By comparison, with a $1,000 tax deduction, someone in the 22% tax bracket would save just $220. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_48-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_49-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Tax credits are more favorable than tax deductions because they reduce the amount of tax you owe, not just your taxable income.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> This type of tax relief is often described as a tax incentive because it reimburses taxpayers for expenditures the government deems worthwhile. For example, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/american-opportunity-tax-credit.asp">American opportunity tax credit (AOTC)</a> and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lifelearningcredit.asp">lifetime learning credit (LLC)</a> programs give tax credits to people who enroll in post-secondary education programs.<span class="ql-inline-citation" data-cite="37"></span><span class="ql-inline-citation" data-cite="36"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Other popular tax credits include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnedincomecredit.asp">Earned income tax credit (EITC)</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/childtaxcredit.asp">Child tax credit</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/saverstaxcredit.asp">Saver's tax credit</a></li> <li>Health Insurance Marketplace<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/premium-tax-credit-2021-definition-5115090"> premium tax credit</a><span class="ql-inline-citation" data-cite="46"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <span class="heading-toc" id="toc-tax-exclusions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> Tax Exclusions </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> While tax deductions are amounts you deduct from your income, tax exclusions set aside certain types of income as non-taxable. As such, tax exclusions reduce your taxable income—and your tax bill. For example, you can generally exclude from your income any child support payments, life insurance death benefits, and municipal bond income you receive.<span class="ql-inline-citation" data-cite="47"></span><span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> A common tax exclusion is the one for employer-sponsored health insurance. Health insurance premiums your employer pays are exempt from federal income and payroll taxes, and the portion of premiums you pay is generally excluded from your taxable income. The exclusion of premiums lowers your tax bill, effectively reducing your after-tax cost of health insurance coverage.<span class="ql-inline-citation" data-cite="38"></span><span class="ql-inline-citation" data-cite="50"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_61-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_62-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>If you earned income overseas, you might be eligible for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreign-earned-income-exclusion.asp">foreign earned income exclusion</a> and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreign-housing-exclusion-deduction.asp">foreign housing exclusion</a>. To qualify, you must be a U.S. citizen or resident alien who is a resident of a foreign country for an uninterrupted period that includes the entire tax year.<span class="ql-inline-citation" data-cite="20"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Another popular tax exclusion pertains to selling a house. If you have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/taxes/capital-gains-tax-101/">capital gain</a> from the sale of your main home, you can <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp">exclude up to $250,000</a> ($500,000 if married filing jointly) of that gain from your income. To qualify, you must have owned and lived in the home for at least two out of the previous five years, and you must not have excluded the gain from the sale of another home within the last two years.<span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> In some cases, income excluded for tax purposes is not recorded on the return. In other cases, it is recorded in one section of the return and then deducted in another area. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-tax-debt-relief"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> Tax Debt Relief </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> The IRS <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/taxes/12/start-over-with-irs.asp">Fresh Start</a> program helps taxpayers catch up on back taxes and avoid tax liens, levies, wage garnishments, and jail time. Launched in 2011, the program is a group of changes to the U.S. tax code that streamlines the collection process and makes it possible to settle your tax debt for less than the total amount you owe. Individuals and businesses are eligible for the program.<span class="ql-inline-citation" data-cite="31"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> Here are four Fresh Start options for taxpayers behind on their tax payments: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> <li><strong>Offer in compromise:</strong> This federal program helps you settle your IRS tax debt for less than the full amount you owe. The program is available to taxpayers who owe more money than they could reasonably pay at once—or if doing so would create a financial hardship.<span class="ql-inline-citation" data-cite="22"></span></li><li><strong>Currently not collectible (CNC):</strong> Under the CNC program, the IRS determines that your gross monthly income is too low to reasonably pay what you owe without triggering financial hardship. Collection is halted on your debt, and the IRS won't levy your bank accounts, garnish your wages, or seize your assets. Instead, you defer making payments until you're financially ready to pay.<span class="ql-inline-citation" data-cite="39"></span></li><li><strong>Installment agreement:</strong> An IRS installment agreement lets you pay the taxes you owe by making regular monthly payments over a specific, extended timeframe. Interest and penalties may continue accruing until you pay your balance in full.<span class="ql-inline-citation" data-cite="40"></span></li><li><strong>Penalty abatement:</strong> The IRS may reduce or remove penalties from your balance, but you must first prove that you had a legitimate reason for not paying your taxes on time. Reasonable cause includes fire, natural disasters, and other disturbances; the death, serious illness, or incapacitation of the taxpayer or a member of their immediate family; or an inability to obtain tax-related records. Note that the IRS states that "a lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time." <span class="ql-inline-citation" data-cite="24"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Keep in mind that, while helpful, the Fresh Start program isn't necessarily easy to navigate, and deciding which avenue to pursue can be tricky. If you have significant tax debt, consider working with a tax professional who can make sure you apply to the appropriate program and guide you through the process.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-what-is-the-difference-between-a-tax-credit-and-a-tax-deduction"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between a Tax Credit and a Tax Deduction?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Tax credits lower the amount of tax you owe, while tax deductions reduce your taxable income. Both save you money on your tax bill, but credits provide the most substantial savings.<span class="ql-inline-citation" data-cite="46"></span></p><p>For example, a $1,000 tax credit lowers your tax bill by that same $1,000. Meanwhile, a $1,000 tax deduction lowers your taxable income by that amount. So, if you fall into the 24% tax bracket, a $1,000 deduction would shave $240 off of your tax bill.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-what-is-the-standard-deduction-for-2023-and-2024"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Standard Deduction for 2023 and 2024?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For 2023, the standard deduction is $13,850 for single and married filing separately taxpayers, $20,800 for heads of household, and $27,700 for married filing jointly filers and surviving spouses.<span class="ql-inline-citation" data-cite="48"></span> Each of these amounts increase for 2024. In 2024, the standard deduction for single and married filing separate taxpayers is $14,600, while the standard deduction for heads of household is $21,900. In 2024, the standard deduction for married filing joint filers or surviving spouses is $29,200.<span class="ql-inline-citation" data-cite="56"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_80-0"><span class="heading-toc" id="toc-what-is-the-annual-gift-exclusion-for-2023-and-2024"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Annual Gift Exclusion for 2023 and 2024?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The annual exclusion for gifts is $17,000 for 2023 and $18,000 for 2024. That means you can give up to $17,000 (or $18,000) tax-free to as many people as you wish without using any of your lifetime gift and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/estate-tax-exemption-2021-definition-5114715">estate tax exemption</a>.<span class="ql-inline-citation" data-cite="56"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_82-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> Tax relief constitutes government programs or policies that help lessen the burden of taxes for individuals. These are usually done through tax deductions, credits, and exclusions. When filing your taxes, make sure you take advantage of all of these options so that you don't end up paying more taxes than you need to. When in doubt, consult with a tax professional or financial advisor. </p></div>

## What Is Tax Relief? Tax relief refers to any government program or policy designed to help individuals and businesses reduce their tax burdens or resolve their tax-related debts. Tax relief may be in the form of universal tax cuts, [targeted programs that benefit specific groups](https://www.investopedia.com/terms/c/catalog-of-federal-domestic-assistance-cfda.asp) of taxpayers, or initiatives that bolster particular goals of the government. For example, the child tax credit gives a tax break to parents of minor children, while the tax credit for green improvements (e.g., energy-efficient windows) furthers the goal of U.S. energy independence and cleaner air. ### Key Takeaways * Various types of tax relief can help you lower your tax bill or settle tax-related debts. * Tax deductions let you deduct certain expenses (such as home mortgage interest) from your taxable income, thereby lowering the amount of tax you owe. * Tax credits directly reduce your tax bill and may provide a refund even if you don't owe any tax. * The IRS Fresh Start program helps individuals and businesses settle back taxes and avoid tax liens. ## Tax Relief Basics Tax relief programs and initiatives help taxpayers reduce their tax bills through tax deductions, credits, and exclusions. Other programs help taxpayers who are behind on their taxes settle their tax-related debts, potentially avoiding liens in the process. Government policy goals are often the catalyst for amending the federal tax code. For example, in response to concerns about the general lack of retirement savings in the U.S., Congress created incentives to encourage people to save for retirement in tax-advantaged savings accounts—such as IRAs and 401(k)s. Tax relief is also available for people affected by [natural disasters](https://www.investopedia.com/financial-edge/0311/the-financial-effects-of-a-natural-disaster.aspx). For example, the IRS has historically made tax relief announcements to help individuals and businesses affected by severe storms, tornados, flooding, hurricanes, straight-line winds, wildfires, and drought. The relief typically comes in the form of filing and payment extensions, penalty and interest waivers, and deductions for casualty and theft losses sustained due to federally declared disasters. ### You can't deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and reduce the loss by your anticipated reimbursement. ## Tax Deductions A [tax deduction](https://www.investopedia.com/terms/t/tax-deduction.asp) reduces your taxable income for the year, thereby lowering your tax bill. Taxpayers can take the standard deduction or itemize their deductions on Schedule A of Form 1040 or 1040-SR. (You can't do both.) In addition, there are a number of tax deductions a taxpayer can take independent of the standard deduction or itemized deduction. Each type is discussed more below. ### Standard Deduction The standard deduction amount is based on your filing status, age, and whether you are disabled or claimed as a dependent on someone else's income tax return. Here are the standard deduction amounts for the 2023 and 2024 tax years. | Standard Deductions for 2023 and 2024 | | | | --- | --- | --- | | Filing Status | 2023 Standard Deduction | 2024 Standard Deduction | | Single | $13,850 | $14,600 | | Married Filing Separately | $13,850 | $14,600 | | Head of Household | $20,800 | $21,900 | | Married Filing Jointly | $27,700 | $29,200 | | Surviving Spouses | $27,700 | $29,200 | You can take an extra deduction if you are at least age 65 or legally blind by the end of the tax year. For tax year 2023, this "additional standard deduction" is $1,500 ($1,850 if filing as single or head of household) if you are 65 or older *or* blind. The amount doubles if you are 65 or older *and*blind. The additional standard deduction for 2024 is $1,550 ($1,950 if single or head of household). If another taxpayer can claim you as a dependent, your standard deduction for tax year 2023 is limited to the greater of $1,250 or your earned income plus $400 (the total can't be more than the basic standard deduction for your filing status). For 2024, the standard deduction for a dependent increases to $1,300 or the individual's earned income plus $450. ### Itemized Deductions Itemized deductions are expenses that can be subtracted from your adjusted gross income to lower your taxable income—and tax bill. You can itemize your deductions only if you don't claim the standard deduction. It makes financial sense to itemize if the total amount you can deduct is greater than the standard deduction for your filing status. Common itemized deductions include: * [Mortgage interest](https://www.investopedia.com/terms/home-mortgage-interest.asp) and discount points on the first $750,000 of secured mortgage debt (or $1 million if you bought the home before Dec. 16, 2017) * [Charitable donations](https://www.investopedia.com/articles/personal-finance/041315/tips-charitable-contributions-limits-and-taxes.asp) * Unreimbursed [medical and dental](https://www.investopedia.com/articles/personal-finance/081615/20-medical-expenses-you-didnt-know-you-could-deduct.asp) expenses * [State and local taxes (SALT)](https://www.investopedia.com/salt-5180146) * Certain gambling losses * [Investment interest expenses](https://www.investopedia.com/terms/i/investment-interest-expense.asp) ### Other Deductions Beyond the standard deduction and itemized deductions, there are other deductions taxpayers can take. For example, taxpayers who have paid interest on qualifying student loans may be able to deduct up to $2,500 from their taxable income. This deduction can be taken whether the taxpayer takes the standard deduction or itemized deduction. Another deduction is the educator expense deduction designed to support teachers and eligible educators. This deduction allows educators to deduct up to $250 of unreimbursed expenses incurred for classroom supplies. Last, the health savings account (HSA) deduction offers a tax advantage for individuals with a high-deductible health plan. Contributions made to an HSA are tax-deductible, reducing taxable income and providing a way for individuals to save for qualified medical expenses. ### Tax relief often targets specific taxpayers, such as those facing unexpected costs due to a hurricane or a wildfire. ## Tax Credits A tax credit is another form of tax relief. Unlike tax deductions, which lower your taxable income, [tax credits](https://www.investopedia.com/financial-edge/0312/tax-credits-that-can-get-you-a-refund.aspx) directly reduce the amount of tax you owe. Here's an example. Say a taxpayer takes the standard deduction, and their tax bill amounts to $3,000. If the person is also eligible for a $1,000 tax credit, their final tax bill would be $2,000. By comparison, with a $1,000 tax deduction, someone in the 22% tax bracket would save just $220. ### Tax credits are more favorable than tax deductions because they reduce the amount of tax you owe, not just your taxable income. This type of tax relief is often described as a tax incentive because it reimburses taxpayers for expenditures the government deems worthwhile. For example, the [American opportunity tax credit (AOTC)](https://www.investopedia.com/terms/a/american-opportunity-tax-credit.asp) and the [lifetime learning credit (LLC)](https://www.investopedia.com/terms/l/lifelearningcredit.asp) programs give tax credits to people who enroll in post-secondary education programs. Other popular tax credits include: * [Earned income tax credit (EITC)](https://www.investopedia.com/terms/e/earnedincomecredit.asp) * [Child tax credit](https://www.investopedia.com/terms/c/childtaxcredit.asp) * [Saver's tax credit](https://www.investopedia.com/terms/s/saverstaxcredit.asp) * Health Insurance Marketplace [premium tax credit](https://www.investopedia.com/premium-tax-credit-2021-definition-5115090) ## Tax Exclusions While tax deductions are amounts you deduct from your income, tax exclusions set aside certain types of income as non-taxable. As such, tax exclusions reduce your taxable income—and your tax bill. For example, you can generally exclude from your income any child support payments, life insurance death benefits, and municipal bond income you receive. A common tax exclusion is the one for employer-sponsored health insurance. Health insurance premiums your employer pays are exempt from federal income and payroll taxes, and the portion of premiums you pay is generally excluded from your taxable income. The exclusion of premiums lowers your tax bill, effectively reducing your after-tax cost of health insurance coverage. ### If you earned income overseas, you might be eligible for the [foreign earned income exclusion](https://www.investopedia.com/terms/f/foreign-earned-income-exclusion.asp) and the [foreign housing exclusion](https://www.investopedia.com/terms/f/foreign-housing-exclusion-deduction.asp). To qualify, you must be a U.S. citizen or resident alien who is a resident of a foreign country for an uninterrupted period that includes the entire tax year. Another popular tax exclusion pertains to selling a house. If you have a [capital gain](https://www.investopedia.com/taxes/capital-gains-tax-101/) from the sale of your main home, you can [exclude up to $250,000](https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp) ($500,000 if married filing jointly) of that gain from your income. To qualify, you must have owned and lived in the home for at least two out of the previous five years, and you must not have excluded the gain from the sale of another home within the last two years. In some cases, income excluded for tax purposes is not recorded on the return. In other cases, it is recorded in one section of the return and then deducted in another area. ## Tax Debt Relief The IRS [Fresh Start](https://www.investopedia.com/articles/taxes/12/start-over-with-irs.asp) program helps taxpayers catch up on back taxes and avoid tax liens, levies, wage garnishments, and jail time. Launched in 2011, the program is a group of changes to the U.S. tax code that streamlines the collection process and makes it possible to settle your tax debt for less than the total amount you owe. Individuals and businesses are eligible for the program. Here are four Fresh Start options for taxpayers behind on their tax payments: * **Offer in compromise:** This federal program helps you settle your IRS tax debt for less than the full amount you owe. The program is available to taxpayers who owe more money than they could reasonably pay at once—or if doing so would create a financial hardship. * **Currently not collectible (CNC):** Under the CNC program, the IRS determines that your gross monthly income is too low to reasonably pay what you owe without triggering financial hardship. Collection is halted on your debt, and the IRS won't levy your bank accounts, garnish your wages, or seize your assets. Instead, you defer making payments until you're financially ready to pay. * **Installment agreement:** An IRS installment agreement lets you pay the taxes you owe by making regular monthly payments over a specific, extended timeframe. Interest and penalties may continue accruing until you pay your balance in full. * **Penalty abatement:** The IRS may reduce or remove penalties from your balance, but you must first prove that you had a legitimate reason for not paying your taxes on time. Reasonable cause includes fire, natural disasters, and other disturbances; the death, serious illness, or incapacitation of the taxpayer or a member of their immediate family; or an inability to obtain tax-related records. Note that the IRS states that "a lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time." Keep in mind that, while helpful, the Fresh Start program isn't necessarily easy to navigate, and deciding which avenue to pursue can be tricky. If you have significant tax debt, consider working with a tax professional who can make sure you apply to the appropriate program and guide you through the process. ## What Is the Difference Between a Tax Credit and a Tax Deduction? Tax credits lower the amount of tax you owe, while tax deductions reduce your taxable income. Both save you money on your tax bill, but credits provide the most substantial savings. For example, a $1,000 tax credit lowers your tax bill by that same $1,000. Meanwhile, a $1,000 tax deduction lowers your taxable income by that amount. So, if you fall into the 24% tax bracket, a $1,000 deduction would shave $240 off of your tax bill. ## What Is the Standard Deduction for 2023 and 2024? For 2023, the standard deduction is $13,850 for single and married filing separately taxpayers, $20,800 for heads of household, and $27,700 for married filing jointly filers and surviving spouses. Each of these amounts increase for 2024. In 2024, the standard deduction for single and married filing separate taxpayers is $14,600, while the standard deduction for heads of household is $21,900. In 2024, the standard deduction for married filing joint filers or surviving spouses is $29,200. ## What Is the Annual Gift Exclusion for 2023 and 2024? The annual exclusion for gifts is $17,000 for 2023 and $18,000 for 2024. That means you can give up to $17,000 (or $18,000) tax-free to as many people as you wish without using any of your lifetime gift and [estate tax exemption](https://www.investopedia.com/estate-tax-exemption-2021-definition-5114715). ## The Bottom Line Tax relief constitutes government programs or policies that help lessen the burden of taxes for individuals. These are usually done through tax deductions, credits, and exclusions. When filing your taxes, make sure you take advantage of all of these options so that you don't end up paying more taxes than you need to. When in doubt, consult with a tax professional or financial advisor.

What Is Tax Relief? Tax relief refers to any government program or policy designed to help individuals and businesses reduce their tax burdens or resolve their tax-related debts. Tax relief may be in the form of universal tax cuts, targeted programs that benefit specific groups of taxpayers, or initiatives that bolster particular goals of the government. For example, the child tax credit gives a tax break to parents of minor children, while the tax credit for green improvements (e.g., energy-efficient windows) furthers the goal of U.S. energy independence and cleaner air. Key Takeaways Various types of tax relief can help you lower your tax bill or settle tax-related debts.Tax deductions let you deduct certain expenses (such as home mortgage interest) from your taxable income, thereby lowering the amount of tax you owe.Tax credits directly reduce your tax bill and may provide a refund even if you don't owe any tax.The IRS Fresh Start program helps individuals and businesses settle back taxes and avoid tax liens. Tax Relief Basics Tax relief programs and initiatives help taxpayers reduce their tax bills through tax deductions, credits, and exclusions. Other programs help taxpayers who are behind on their taxes settle their tax-related debts, potentially avoiding liens in the process. Government policy goals are often the catalyst for amending the federal tax code. For example, in response to concerns about the general lack of retirement savings in the U.S., Congress created incentives to encourage people to save for retirement in tax-advantaged savings accounts—such as IRAs and 401(k)s. Tax relief is also available for people affected by natural disasters. For example, the IRS has historically made tax relief announcements to help individuals and businesses affected by severe storms, tornados, flooding, hurricanes, straight-line winds, wildfires, and drought. The relief typically comes in the form of filing and payment extensions, penalty and interest waivers, and deductions for casualty and theft losses sustained due to federally declared disasters. You can't deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and reduce the loss by your anticipated reimbursement. Tax Deductions A tax deduction reduces your taxable income for the year, thereby lowering your tax bill. Taxpayers can take the standard deduction or itemize their deductions on Schedule A of Form 1040 or 1040-SR. (You can't do both.) In addition, there are a number of tax deductions a taxpayer can take independent of the standard deduction or itemized deduction. Each type is discussed more below. Standard Deduction The standard deduction amount is based on your filing status, age, and whether you are disabled or claimed as a dependent on someone else's income tax return. Here are the standard deduction amounts for the 2023 and 2024 tax years. Standard Deductions for 2023 and 2024  Filing Status 2023 Standard Deduction 2024 Standard Deduction Single $13,850 $14,600 Married Filing Separately $13,850 $14,600 Head of Household $20,800 $21,900 Married Filing Jointly $27,700 $29,200 Surviving Spouses $27,700 $29,200 You can take an extra deduction if you are at least age 65 or legally blind by the end of the tax year. For tax year 2023, this "additional standard deduction" is $1,500 ($1,850 if filing as single or head of household) if you are 65 or older or blind. The amount doubles if you are 65 or older and blind. The additional standard deduction for 2024 is $1,550 ($1,950 if single or head of household). If another taxpayer can claim you as a dependent, your standard deduction for tax year 2023 is limited to the greater of $1,250 or your earned income plus $400 (the total can't be more than the basic standard deduction for your filing status). For 2024, the standard deduction for a dependent increases to $1,300 or the individual's earned income plus $450. Itemized Deductions Itemized deductions are expenses that can be subtracted from your adjusted gross income to lower your taxable income—and tax bill. You can itemize your deductions only if you don't claim the standard deduction. It makes financial sense to itemize if the total amount you can deduct is greater than the standard deduction for your filing status. Common itemized deductions include: Mortgage interest and discount points on the first $750,000 of secured mortgage debt (or $1 million if you bought the home before Dec. 16, 2017) Charitable donations Unreimbursed medical and dental expenses State and local taxes (SALT) Certain gambling losses Investment interest expenses Other Deductions Beyond the standard deduction and itemized deductions, there are other deductions taxpayers can take. For example, taxpayers who have paid interest on qualifying student loans may be able to deduct up to $2,500 from their taxable income. This deduction can be taken whether the taxpayer takes the standard deduction or itemized deduction. Another deduction is the educator expense deduction designed to support teachers and eligible educators. This deduction allows educators to deduct up to $250 of unreimbursed expenses incurred for classroom supplies. Last, the health savings account (HSA) deduction offers a tax advantage for individuals with a high-deductible health plan. Contributions made to an HSA are tax-deductible, reducing taxable income and providing a way for individuals to save for qualified medical expenses. Tax relief often targets specific taxpayers, such as those facing unexpected costs due to a hurricane or a wildfire. Tax Credits A tax credit is another form of tax relief. Unlike tax deductions, which lower your taxable income, tax credits directly reduce the amount of tax you owe. Here's an example. Say a taxpayer takes the standard deduction, and their tax bill amounts to $3,000. If the person is also eligible for a $1,000 tax credit, their final tax bill would be $2,000. By comparison, with a $1,000 tax deduction, someone in the 22% tax bracket would save just $220. Tax credits are more favorable than tax deductions because they reduce the amount of tax you owe, not just your taxable income. This type of tax relief is often described as a tax incentive because it reimburses taxpayers for expenditures the government deems worthwhile. For example, the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC) programs give tax credits to people who enroll in post-secondary education programs. Other popular tax credits include: Earned income tax credit (EITC) Child tax credit Saver's tax credit Health Insurance Marketplace premium tax credit Tax Exclusions While tax deductions are amounts you deduct from your income, tax exclusions set aside certain types of income as non-taxable. As such, tax exclusions reduce your taxable income—and your tax bill. For example, you can generally exclude from your income any child support payments, life insurance death benefits, and municipal bond income you receive. A common tax exclusion is the one for employer-sponsored health insurance. Health insurance premiums your employer pays are exempt from federal income and payroll taxes, and the portion of premiums you pay is generally excluded from your taxable income. The exclusion of premiums lowers your tax bill, effectively reducing your after-tax cost of health insurance coverage. If you earned income overseas, you might be eligible for the foreign earned income exclusion and the foreign housing exclusion. To qualify, you must be a U.S. citizen or resident alien who is a resident of a foreign country for an uninterrupted period that includes the entire tax year. Another popular tax exclusion pertains to selling a house. If you have a capital gain from the sale of your main home, you can exclude up to $250,000 ($500,000 if married filing jointly) of that gain from your income. To qualify, you must have owned and lived in the home for at least two out of the previous five years, and you must not have excluded the gain from the sale of another home within the last two years. In some cases, income excluded for tax purposes is not recorded on the return. In other cases, it is recorded in one section of the return and then deducted in another area. Tax Debt Relief The IRS Fresh Start program helps taxpayers catch up on back taxes and avoid tax liens, levies, wage garnishments, and jail time. Launched in 2011, the program is a group of changes to the U.S. tax code that streamlines the collection process and makes it possible to settle your tax debt for less than the total amount you owe. Individuals and businesses are eligible for the program. Here are four Fresh Start options for taxpayers behind on their tax payments: Offer in compromise: This federal program helps you settle your IRS tax debt for less than the full amount you owe. The program is available to taxpayers who owe more money than they could reasonably pay at once—or if doing so would create a financial hardship.Currently not collectible (CNC): Under the CNC program, the IRS determines that your gross monthly income is too low to reasonably pay what you owe without triggering financial hardship. Collection is halted on your debt, and the IRS won't levy your bank accounts, garnish your wages, or seize your assets. Instead, you defer making payments until you're financially ready to pay.Installment agreement: An IRS installment agreement lets you pay the taxes you owe by making regular monthly payments over a specific, extended timeframe. Interest and penalties may continue accruing until you pay your balance in full.Penalty abatement: The IRS may reduce or remove penalties from your balance, but you must first prove that you had a legitimate reason for not paying your taxes on time. Reasonable cause includes fire, natural disasters, and other disturbances; the death, serious illness, or incapacitation of the taxpayer or a member of their immediate family; or an inability to obtain tax-related records. Note that the IRS states that "a lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time." Keep in mind that, while helpful, the Fresh Start program isn't necessarily easy to navigate, and deciding which avenue to pursue can be tricky. If you have significant tax debt, consider working with a tax professional who can make sure you apply to the appropriate program and guide you through the process. What Is the Difference Between a Tax Credit and a Tax Deduction? Tax credits lower the amount of tax you owe, while tax deductions reduce your taxable income. Both save you money on your tax bill, but credits provide the most substantial savings.For example, a $1,000 tax credit lowers your tax bill by that same $1,000. Meanwhile, a $1,000 tax deduction lowers your taxable income by that amount. So, if you fall into the 24% tax bracket, a $1,000 deduction would shave $240 off of your tax bill. What Is the Standard Deduction for 2023 and 2024? For 2023, the standard deduction is $13,850 for single and married filing separately taxpayers, $20,800 for heads of household, and $27,700 for married filing jointly filers and surviving spouses. Each of these amounts increase for 2024. In 2024, the standard deduction for single and married filing separate taxpayers is $14,600, while the standard deduction for heads of household is $21,900. In 2024, the standard deduction for married filing joint filers or surviving spouses is $29,200. What Is the Annual Gift Exclusion for 2023 and 2024? The annual exclusion for gifts is $17,000 for 2023 and $18,000 for 2024. That means you can give up to $17,000 (or $18,000) tax-free to as many people as you wish without using any of your lifetime gift and estate tax exemption. The Bottom Line Tax relief constitutes government programs or policies that help lessen the burden of taxes for individuals. These are usually done through tax deductions, credits, and exclusions. When filing your taxes, make sure you take advantage of all of these options so that you don't end up paying more taxes than you need to. When in doubt, consult with a tax professional or financial advisor.

https://www.investopedia.com/investing-lessons-learned-from-the-pandemic-5200463

Investing Lessons Learned from the Pandemic

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> On Sept. 21, 2021, Investopedia teamed with a fellow member of the Dotdash Meredith publishing family, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.verywellhealth.com/" rel="nofollow">Verywell</a>, in hosting a unique virtual conference titled “Your Money, Your Health.” The investing-oriented panel discussions during that conference included “Investing Through the Pandemic: How the Pandemic Has Changed Investor Behavior and Impacted Global Markets” and “Healing the Economic Scars of the Pandemic.” Among the topics that were addressed in those sessions were investing lessons from the pandemic, in addition to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-future-of-fiscal-policy-5199281">the future of fiscal policy</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Financial experts who participated in these sessions included <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.schwab.com/schwab-experts/liz-ann-sonders" rel="nofollow">Liz Ann Sonders</a>, chief investment strategist at Charles Schwab &amp; Co. Inc., and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.chicagobooth.edu/research/igm/events-forums/us-monetary-policy-forum/ethan-harris">Ethan Harris</a>, head of global economics research at Bank of America Merrill Lynch Global Research. Below, we offer key excepts from their most recent research notes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Large numbers of new, inexperienced investors are trading stocks.</li><li>How they will respond in the next bear market is a key concern.</li><li>Their ability to choose stocks wisely is disputed by Warren Buffett.</li><li>The Federal Reserve’s easy-money policy has burdened many savers and investors with negative real returns, creating a de facto tax on their wealth.</li></ul></div></div></div> <span class="heading-toc" id="toc-from-liz-ann-sonders"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> From Liz Ann Sonders </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market_breadth.asp">Breadth</a> in the S&amp;P 500 remains fresher than either the Nasdaq or Russell 2000, but it’s also been deteriorating. Generally, market breadth indicators highlight the percentage of stocks in an index trading above <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/movingaverage.asp">moving averages</a>; or the number of stocks rising relative to the number that are falling—often incorporating volume statistics as well. An analogy often used to explain why breadth matters comes from the battlefield. When the generals are on the front line, but the soldiers are lagging behind, the force is less powerful than when the soldiers are on the front line alongside the generals.”<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> “[T]he percentage of S&amp;P 500 stocks trading above their 50-day moving averages peaked in April, troughed in June, improved until recently, but has come under pressure again. The same can’t be said for the Nasdaq and Russell 2000, which both peaked in early February, since which time they’ve generally been descending. Relative to their 200-day moving averages (DMA), all three indexes have been generally trending lower since April.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-from-ethan-harris"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> From Ethan Harris </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> “Turning first to the U.S., two developments have made us very cautious on the near-term outlook. First, the U.S. has in effect hit a big supply-side speedbump. Supply shortages remain at severe levels, and job openings continue to set new records. The second development is the COVID surge. The economic impact of the [D]elta wave is already visible in the data. Retail sales (ex-autos) fell by 0.4% in July. Moreover, meaningful weakening in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/methodology-city-economic-recovery-tracker-5091550">Homebase small business</a> and <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/042416/adp-who-are-adps-main-competitors.asp">UKG</a> high-frequency data points to risks of a weak August payroll print. As a result, Head of U.S. Economics Michelle Meyer and team have cut 3Q GDP growth to 4.5% from 7.0% and overall 2021 growth to 5.9% from 6.2%. However, looking ahead to next year, the team continues to be much more bullish than the consensus due to very strong demand fundamentals and the prospect of additional fiscal stimulus.”<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> "China is also entering a soft patch, but with a bit different timing and causes. ... While recent setbacks in the U.S. and China have disrupted the global recovery, it is important to note that we expect the slowdowns in both countries to be short-lived. In the U.S., we think gradually-easing supply constraints and an improving COVID situation in the fall will allow for strong growth of 6.0% in 4Q. Economic activity is also likely to pick up in China as policy eases. Of course, much will depend on how COVID plays out: [I]n particular, the size and timing of a potential winter wave will be crucial.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-warren-buffett-on-stock-picking"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Warren Buffett on Stock Picking </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> During the Berkshire Hathaway Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=brk.a">BRK.A</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.B">BRK.B</a>) 2021 annual meeting of shareholders on May 1, Chairman and CEO <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/01/071801.asp">Warren Buffett</a> repeated his long-standing suggestion that the average investor lacks the ability to pick individual stocks well and, thus, should invest instead in an S&amp;P 500 index fund. To illustrate the difficulty in picking long-term winners, he presented lists of the top 20 largest companies in the world by <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/market-capitalization-defined/">market capitalization</a> in 1989 and today. None of the top 20 in 1989 are still among the top 20 today. Also, the largest company by market cap today, Apple Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=aapl">AAPL</a>) at over $2 trillion, is more than 20 times more valuable than the largest company in 1989.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> “Be aboard the ship,” Buffett advised. “You couldn’t help but do well if you have a diversified group of U.S. equities.” In a swipe against active trading, he commented that making “30 to 40 trades a day” is not a wise way to invest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-surge-in-retail-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Surge in Retail Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Buffett’s comments come amid a surge in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retailinvestor.asp">retail investing</a>, with estimates indicating that more than 10 million new investors have entered the market during the first half of 2021, about the same number recorded in the entire prior year. This has fueled explosive growth at brokerage firms such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp">Robinhood Markets Inc.</a> (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HOOD">HOOD</a>) and has encouraged, among others, payments processor <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/tech/021017/square.asp">Square Inc.</a> (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SQ">SQ</a>) to enter this booming industry. Digital payments platform <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-paypal-makes-money-5094794">PayPal Holdings Inc.</a> (<a class="pseudoStyle" data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PYPL">PYPL</a>) also has created a stir with its progress toward offering brokerage services.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> It remains to be seen whether this represents a constructive democratization of investing, as proponents claim, or a destructive speculative binge, as critics warn. A related unknown is how all these new investors will respond to the next major market pullback. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> In 2020, as the COVID-19 crisis broke, a brief but sharp <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bearmarket.asp">bear market</a> was triggered that saw the S&amp;P 500 Index plummet by 35.4% from its intraday high on Feb. 19, 2020, to its intraday low on March 23, 2020. By August 2020, nearly all of the lost ground had been regained.<span class="ql-inline-citation" data-cite="5"></span> Still, this sharp decline tested the mettle of many experienced investors, let alone that of neophytes with no prior experience of similar downdrafts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-fed-policy-burdens-savers-with-negative-returns"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Fed Policy Burdens Savers with Negative Returns </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Meanwhile, the Federal Reserve (Fed) continues to keep interest rates at historically low levels, to stimulate the economy and prop up asset prices. At the recent Jackson Hole Economic Policy Symposium, Fed Chair Jerome Powell indicated that the central bank “will continue to hold the [current] target range for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalfundsrate.asp">fed funds rate</a>.”<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> While this easy-money policy has propped up stock, bond, and real estate prices to the benefit of some investors, it has been detrimental to other savers and investors who depend on streams of interest and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividend</a> income. As of Aug. 16, 2021, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corp. (FDIC)</a> reported that interest rates on bank deposits ranged on average from 0.03% per annum on interest-paying checking accounts to 0.27% on 60-month <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificates of deposit (CDs)</a>. Yields on U.S. <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/073113/introduction-treasury-securities.asp">Treasury securities</a> with similar maturities ranged from 0.07% to 0.69%.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Given that current measures of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a> are running from 3.6% to 4.2%, as noted by Powell, and that the Fed’s long-term goal is to keep it at about 2%, many savers are thus facing protracted negative real returns (i.e., adjusted for inflation) on their money. This, in turn, represents an effective tax on their wealth. How savers and investors can cope with this reality is another major issue going forward. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

On Sept. 21, 2021, Investopedia teamed with a fellow member of the Dotdash Meredith publishing family, [Verywell](https://www.verywellhealth.com/), in hosting a unique virtual conference titled “Your Money, Your Health.” The investing-oriented panel discussions during that conference included “Investing Through the Pandemic: How the Pandemic Has Changed Investor Behavior and Impacted Global Markets” and “Healing the Economic Scars of the Pandemic.” Among the topics that were addressed in those sessions were investing lessons from the pandemic, in addition to [the future of fiscal policy](https://www.investopedia.com/the-future-of-fiscal-policy-5199281). Financial experts who participated in these sessions included [Liz Ann Sonders](https://www.schwab.com/schwab-experts/liz-ann-sonders), chief investment strategist at Charles Schwab & Co. Inc., and [Ethan Harris](https://www.chicagobooth.edu/research/igm/events-forums/us-monetary-policy-forum/ethan-harris), head of global economics research at Bank of America Merrill Lynch Global Research. Below, we offer key excepts from their most recent research notes. ### Key Takeaways * Large numbers of new, inexperienced investors are trading stocks. * How they will respond in the next bear market is a key concern. * Their ability to choose stocks wisely is disputed by Warren Buffett. * The Federal Reserve’s easy-money policy has burdened many savers and investors with negative real returns, creating a de facto tax on their wealth. ## From Liz Ann Sonders “[Breadth](https://www.investopedia.com/terms/m/market_breadth.asp) in the S&P 500 remains fresher than either the Nasdaq or Russell 2000, but it’s also been deteriorating. Generally, market breadth indicators highlight the percentage of stocks in an index trading above [moving averages](https://www.investopedia.com/terms/m/movingaverage.asp); or the number of stocks rising relative to the number that are falling—often incorporating volume statistics as well. An analogy often used to explain why breadth matters comes from the battlefield. When the generals are on the front line, but the soldiers are lagging behind, the force is less powerful than when the soldiers are on the front line alongside the generals.” “[T]he percentage of S&P 500 stocks trading above their 50-day moving averages peaked in April, troughed in June, improved until recently, but has come under pressure again. The same can’t be said for the Nasdaq and Russell 2000, which both peaked in early February, since which time they’ve generally been descending. Relative to their 200-day moving averages (DMA), all three indexes have been generally trending lower since April.” ## From Ethan Harris “Turning first to the U.S., two developments have made us very cautious on the near-term outlook. First, the U.S. has in effect hit a big supply-side speedbump. Supply shortages remain at severe levels, and job openings continue to set new records. The second development is the COVID surge. The economic impact of the [D]elta wave is already visible in the data. Retail sales (ex-autos) fell by 0.4% in July. Moreover, meaningful weakening in the [Homebase small business](https://www.investopedia.com/methodology-city-economic-recovery-tracker-5091550) and [UKG](https://www.investopedia.com/articles/professionals/042416/adp-who-are-adps-main-competitors.asp) high-frequency data points to risks of a weak August payroll print. As a result, Head of U.S. Economics Michelle Meyer and team have cut 3Q GDP growth to 4.5% from 7.0% and overall 2021 growth to 5.9% from 6.2%. However, looking ahead to next year, the team continues to be much more bullish than the consensus due to very strong demand fundamentals and the prospect of additional fiscal stimulus.” "China is also entering a soft patch, but with a bit different timing and causes. ... While recent setbacks in the U.S. and China have disrupted the global recovery, it is important to note that we expect the slowdowns in both countries to be short-lived. In the U.S., we think gradually-easing supply constraints and an improving COVID situation in the fall will allow for strong growth of 6.0% in 4Q. Economic activity is also likely to pick up in China as policy eases. Of course, much will depend on how COVID plays out: [I]n particular, the size and timing of a potential winter wave will be crucial.” ## Warren Buffett on Stock Picking During the Berkshire Hathaway Inc. ([BRK.A](https://www.investopedia.com/markets/quote?tvwidgetsymbol=brk.a), [BRK.B](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.B)) 2021 annual meeting of shareholders on May 1, Chairman and CEO [Warren Buffett](https://www.investopedia.com/articles/01/071801.asp) repeated his long-standing suggestion that the average investor lacks the ability to pick individual stocks well and, thus, should invest instead in an S&P 500 index fund. To illustrate the difficulty in picking long-term winners, he presented lists of the top 20 largest companies in the world by [market capitalization](https://www.investopedia.com/investing/market-capitalization-defined/) in 1989 and today. None of the top 20 in 1989 are still among the top 20 today. Also, the largest company by market cap today, Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=aapl)) at over $2 trillion, is more than 20 times more valuable than the largest company in 1989. “Be aboard the ship,” Buffett advised. “You couldn’t help but do well if you have a diversified group of U.S. equities.” In a swipe against active trading, he commented that making “30 to 40 trades a day” is not a wise way to invest. ## Surge in Retail Investing Buffett’s comments come amid a surge in [retail investing](https://www.investopedia.com/terms/r/retailinvestor.asp), with estimates indicating that more than 10 million new investors have entered the market during the first half of 2021, about the same number recorded in the entire prior year. This has fueled explosive growth at brokerage firms such as [Robinhood Markets Inc.](https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp) ([HOOD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HOOD)) and has encouraged, among others, payments processor [Square Inc.](https://www.investopedia.com/articles/tech/021017/square.asp) ([SQ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SQ)) to enter this booming industry. Digital payments platform [PayPal Holdings Inc.](https://www.investopedia.com/how-paypal-makes-money-5094794) ([PYPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PYPL)) also has created a stir with its progress toward offering brokerage services. It remains to be seen whether this represents a constructive democratization of investing, as proponents claim, or a destructive speculative binge, as critics warn. A related unknown is how all these new investors will respond to the next major market pullback. In 2020, as the COVID-19 crisis broke, a brief but sharp [bear market](https://www.investopedia.com/terms/b/bearmarket.asp) was triggered that saw the S&P 500 Index plummet by 35.4% from its intraday high on Feb. 19, 2020, to its intraday low on March 23, 2020. By August 2020, nearly all of the lost ground had been regained. Still, this sharp decline tested the mettle of many experienced investors, let alone that of neophytes with no prior experience of similar downdrafts. ## Fed Policy Burdens Savers with Negative Returns Meanwhile, the Federal Reserve (Fed) continues to keep interest rates at historically low levels, to stimulate the economy and prop up asset prices. At the recent Jackson Hole Economic Policy Symposium, Fed Chair Jerome Powell indicated that the central bank “will continue to hold the [current] target range for the [fed funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp).” While this easy-money policy has propped up stock, bond, and real estate prices to the benefit of some investors, it has been detrimental to other savers and investors who depend on streams of interest and [dividend](https://www.investopedia.com/terms/d/dividend.asp) income. As of Aug. 16, 2021, the [Federal Deposit Insurance Corp. (FDIC)](https://www.investopedia.com/terms/f/fdic.asp) reported that interest rates on bank deposits ranged on average from 0.03% per annum on interest-paying checking accounts to 0.27% on 60-month [certificates of deposit (CDs)](https://www.investopedia.com/terms/c/certificateofdeposit.asp). Yields on U.S. [Treasury securities](https://www.investopedia.com/articles/investing/073113/introduction-treasury-securities.asp) with similar maturities ranged from 0.07% to 0.69%. Given that current measures of [inflation](https://www.investopedia.com/terms/i/inflation.asp) are running from 3.6% to 4.2%, as noted by Powell, and that the Fed’s long-term goal is to keep it at about 2%, many savers are thus facing protracted negative real returns (i.e., adjusted for inflation) on their money. This, in turn, represents an effective tax on their wealth. How savers and investors can cope with this reality is another major issue going forward. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

On Sept. 21, 2021, Investopedia teamed with a fellow member of the Dotdash Meredith publishing family, Verywell, in hosting a unique virtual conference titled “Your Money, Your Health.” The investing-oriented panel discussions during that conference included “Investing Through the Pandemic: How the Pandemic Has Changed Investor Behavior and Impacted Global Markets” and “Healing the Economic Scars of the Pandemic.” Among the topics that were addressed in those sessions were investing lessons from the pandemic, in addition to the future of fiscal policy. Financial experts who participated in these sessions included Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. Inc., and Ethan Harris, head of global economics research at Bank of America Merrill Lynch Global Research. Below, we offer key excepts from their most recent research notes. Key Takeaways Large numbers of new, inexperienced investors are trading stocks.How they will respond in the next bear market is a key concern.Their ability to choose stocks wisely is disputed by Warren Buffett.The Federal Reserve’s easy-money policy has burdened many savers and investors with negative real returns, creating a de facto tax on their wealth. From Liz Ann Sonders “Breadth in the S&P 500 remains fresher than either the Nasdaq or Russell 2000, but it’s also been deteriorating. Generally, market breadth indicators highlight the percentage of stocks in an index trading above moving averages; or the number of stocks rising relative to the number that are falling—often incorporating volume statistics as well. An analogy often used to explain why breadth matters comes from the battlefield. When the generals are on the front line, but the soldiers are lagging behind, the force is less powerful than when the soldiers are on the front line alongside the generals.” “[T]he percentage of S&P 500 stocks trading above their 50-day moving averages peaked in April, troughed in June, improved until recently, but has come under pressure again. The same can’t be said for the Nasdaq and Russell 2000, which both peaked in early February, since which time they’ve generally been descending. Relative to their 200-day moving averages (DMA), all three indexes have been generally trending lower since April.” From Ethan Harris “Turning first to the U.S., two developments have made us very cautious on the near-term outlook. First, the U.S. has in effect hit a big supply-side speedbump. Supply shortages remain at severe levels, and job openings continue to set new records. The second development is the COVID surge. The economic impact of the [D]elta wave is already visible in the data. Retail sales (ex-autos) fell by 0.4% in July. Moreover, meaningful weakening in the Homebase small business and UKG high-frequency data points to risks of a weak August payroll print. As a result, Head of U.S. Economics Michelle Meyer and team have cut 3Q GDP growth to 4.5% from 7.0% and overall 2021 growth to 5.9% from 6.2%. However, looking ahead to next year, the team continues to be much more bullish than the consensus due to very strong demand fundamentals and the prospect of additional fiscal stimulus.” "China is also entering a soft patch, but with a bit different timing and causes. ... While recent setbacks in the U.S. and China have disrupted the global recovery, it is important to note that we expect the slowdowns in both countries to be short-lived. In the U.S., we think gradually-easing supply constraints and an improving COVID situation in the fall will allow for strong growth of 6.0% in 4Q. Economic activity is also likely to pick up in China as policy eases. Of course, much will depend on how COVID plays out: [I]n particular, the size and timing of a potential winter wave will be crucial.” Warren Buffett on Stock Picking During the Berkshire Hathaway Inc. (BRK.A, BRK.B) 2021 annual meeting of shareholders on May 1, Chairman and CEO Warren Buffett repeated his long-standing suggestion that the average investor lacks the ability to pick individual stocks well and, thus, should invest instead in an S&P 500 index fund. To illustrate the difficulty in picking long-term winners, he presented lists of the top 20 largest companies in the world by market capitalization in 1989 and today. None of the top 20 in 1989 are still among the top 20 today. Also, the largest company by market cap today, Apple Inc. (AAPL) at over $2 trillion, is more than 20 times more valuable than the largest company in 1989. “Be aboard the ship,” Buffett advised. “You couldn’t help but do well if you have a diversified group of U.S. equities.” In a swipe against active trading, he commented that making “30 to 40 trades a day” is not a wise way to invest. Surge in Retail Investing Buffett’s comments come amid a surge in retail investing, with estimates indicating that more than 10 million new investors have entered the market during the first half of 2021, about the same number recorded in the entire prior year. This has fueled explosive growth at brokerage firms such as Robinhood Markets Inc. (HOOD) and has encouraged, among others, payments processor Square Inc. (SQ) to enter this booming industry. Digital payments platform PayPal Holdings Inc. (PYPL) also has created a stir with its progress toward offering brokerage services. It remains to be seen whether this represents a constructive democratization of investing, as proponents claim, or a destructive speculative binge, as critics warn. A related unknown is how all these new investors will respond to the next major market pullback. In 2020, as the COVID-19 crisis broke, a brief but sharp bear market was triggered that saw the S&P 500 Index plummet by 35.4% from its intraday high on Feb. 19, 2020, to its intraday low on March 23, 2020. By August 2020, nearly all of the lost ground had been regained. Still, this sharp decline tested the mettle of many experienced investors, let alone that of neophytes with no prior experience of similar downdrafts. Fed Policy Burdens Savers with Negative Returns Meanwhile, the Federal Reserve (Fed) continues to keep interest rates at historically low levels, to stimulate the economy and prop up asset prices. At the recent Jackson Hole Economic Policy Symposium, Fed Chair Jerome Powell indicated that the central bank “will continue to hold the [current] target range for the fed funds rate.” While this easy-money policy has propped up stock, bond, and real estate prices to the benefit of some investors, it has been detrimental to other savers and investors who depend on streams of interest and dividend income. As of Aug. 16, 2021, the Federal Deposit Insurance Corp. (FDIC) reported that interest rates on bank deposits ranged on average from 0.03% per annum on interest-paying checking accounts to 0.27% on 60-month certificates of deposit (CDs). Yields on U.S. Treasury securities with similar maturities ranged from 0.07% to 0.69%. Given that current measures of inflation are running from 3.6% to 4.2%, as noted by Powell, and that the Fed’s long-term goal is to keep it at about 2%, many savers are thus facing protracted negative real returns (i.e., adjusted for inflation) on their money. This, in turn, represents an effective tax on their wealth. How savers and investors can cope with this reality is another major issue going forward. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/c/capital-investment.asp

Capital Investment: Types, Example, and How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-capital-investment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Capital Investment? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Capital investment is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Real estate, manufacturing plants, and machinery are among the assets that are purchased as capital investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The capital used may come from a wide range of sources from traditional bank loans to venture capital deals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Capital investment is the expenditure of money to fund a company's long-term growth.</li><li>The term often refers to a company's acquisition of permanent fixed assets such as real estate and equipment.</li><li>Capital assets are reported as non-current assets and most are depreciated.</li><li>The funds for capital investment can come from a number of sources, including cash on hand, though big projects are most often financed through obtaining loans or issuing stock.</li><li>Examples of capital investments are land, buildings, machinery, equipment, or software.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Capital Investment" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/KLBigYos4cokMCNc-LnlAOSd9L4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/KLBigYos4cokMCNc-LnlAOSd9L4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png" data-srcset="https://www.investopedia.com/thmb/rvnFv-OTFeAH-71rz-DaofteOl8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Capital Investment" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/KLBigYos4cokMCNc-LnlAOSd9L4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png" srcset="https://www.investopedia.com/thmb/rvnFv-OTFeAH-71rz-DaofteOl8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Theresa Chiechi</p></span> </figcaption></figure> <span class="heading-toc" id="toc-how-capital-investment-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> How Capital Investment Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <br/>Capital investment is a broad term that can be defined in two distinct ways: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>An individual, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capital group</a> or a financial institution may make a capital investment in a business. The money can be provided as a loan or a share of the profits down the road. In this sense of the word, capital means cash.</li> <li>The executives of a company may make a capital investment in the business. They buy long-term assets such as equipment that will help the company run more efficiently or grow faster. In this sense, capital means physical assets.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> In either case, the money for capital investment must come from somewhere. A new company might seek capital investment from any number of sources, including venture capital firms, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/010416/angel-investing-vs-crowdfunding-how-raise-money-your-startup.asp">angel investors</a>, or traditional financial institutions. When a new company goes public, it is acquiring capital investment on a large scale from many investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> An established company might make a capital investment using its own cash reserves or seek a loan from a bank. It might issue bonds or stock shares in order to finance capital investment. There is no minimum or maximum capital investment. It can range from less than $100,000 in seed financing for a start-up to hundreds of millions of dollars for massive projects undertaken by companies in capital-intensive sectors such as mining, utilities, and infrastructure. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides.</p></div></div></div> <span class="heading-toc" id="toc-capital-investments-for-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Capital Investments for Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> A decision by a business to make a capital investment is a long-term growth strategy. A company plans and implements capital investments in order to ensure future growth. Capital investments generally are made to increase operational capacity, capture a larger share of the market, and generate more revenue. The company may make a capital investment in the form of an equity stake in another company's complementary operations for the same purposes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> In many cases, capital investments are a necessary and normal part of an industry. Consider an oil-drilling company that relies on heavy machinery to extract <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rawmaterials.asp">raw materials</a> to be processed. As opposed to a law firm that will have low-to-no capital investment requirements, capital-intensive businesses usually need specific assets in order to operate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> In addition, there are strategic components for a business to consider when deciding whether or not to invest in a capital asset. For instance, consider how certain heavy machinery such as a company vehicle could be leased. Should the company be willing to incur debt and tie up capital, the company may spend less money in the long-term by incurring a capital investment as opposed to a periodic "rental" expense.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <span class="heading-toc" id="toc-types-of-capital-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Types of Capital Investments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Companies often acquire capital investments for diversification, modernization, or business expansion. This may mean buying capital investments different from existing aspects of its business or capital investments that simply do things better than before. Some specific types of capital investments include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li><strong>Land: </strong>Companies may buy bare land to be used for development or expansion.</li> <li><strong>Buildings: </strong>Companies may buy existing buildings for manufacturing, storage, production, or headquarter operations. </li> <li><strong>Assets Under Development: </strong>Companies may incur spending over time to assemble assets that may be capitalized. For example, a company can build its own building; the accumulation of charges may be considered a capital investment.</li> <li><strong>Furniture and Fixtures: </strong>Though furniture and fixtures may be more temporary in nature, certain aspects of accounting rules result in some overlap between <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ffe.asp">FFE</a> and capital investments. </li> <li><strong>Machines:</strong> Companies that invest in the production elements of making goods are making capital investments. </li> <li><strong>Software Development or Computing Devices: </strong>Companies more frequently invest capital to build software; these costs now commonly qualify for capitalization and amortization over time. </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_32-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_33-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Because land does not deteriorate in a similar manner compared to other capital investments, it is not depreciated.</p></div></div></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-capital-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Capital Investments </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Pros of Capital Investments </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The advantages of capital investments can vary depending on the specific situation. However, most companies embark on capital investments for productivity.  By <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/acceleration-principle.asp">investing in new equipment</a> or technology, companies can improve their efficiency, thus lower costs and increasing output. These types of investments may also improve the quality of goods produced. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Capital investments can also lead to cost savings over time. For example, a new piece of equipment may be more energy-efficient than an older model, which can result in lower utility bills. Similarly, new technology may streamline processes and reduce the need for manual labor. Last, companies may decide the long-term discounted cash flow is favorable when comparing the upfront investment of a capital investment compared to the long-term, ongoing cash outlay of a recurring expense. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> By investing in their long-term assets, companies can also gain a competitive advantage in the market. This can make it more difficult for competitors to catch up and can help the company to maintain its market position over the long term. If a company is willing to take a risk and incur a large investment to strengthen its business, this may create a barrier to entry that competitors can not overcome or compete against. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> Cons of Capital Investment </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The preferred option for capital investment is always a company's own operating cash flow, but that may not be sufficient to cover the anticipated costs. It is more likely the company will resort to outside financing. Therefore, there is usually a little more risk to capital investments. This is especially true for capital investments that are customized or hard to liquidate; once the company has bought the capital investment, it may be hard to exit the investment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. Capital investments tends to reduce earnings growth in the short term, and that never pleases stockholders of a public company. This may be especially true for capital investments that also incur operating costs (i.e. the acquisition of land will be accompanied by a potentially hefty annual property tax assessment). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> In addition, if a company does not have sufficient capital on hand to make a large investment, there are downsides to each of its financing options. Issuing additional stock shares, which is often the funding option for public companies, dilutes the value of its outstanding shares. Existing shareholders generally dislike finding that their stake in the company has been reduced. Alternatively, the total amount of debt a company has on the books is closely watched by stockholders and analysts<em>. </em>The payments on that debt can stifle the company's further growth. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_49-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_50-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>May increase productivity if capital investment is more efficient than prior methods</p></li> <li><p>May result in higher quality manufactured goods</p></li> <li><p>May be cheaper in the long-run when compared against rented or monthly expensed solutions</p></li> <li><p>May create a barrier to entry that yields a competitive advantage</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>May be too expensive for the company to outright purchase on their own.</p></li> <li><p>May limit or restrict short-term profitability of the company</p></li> <li><p>May be accompanied by additional operating expenses</p></li> <li><p>May reduce the liquidity of the company should it be difficult to sell the capital asset</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-accounting-for-capital-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> Accounting for Capital Investments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Accounting practices for capital investments involve recording the cost of the asset, allocating the cost over its useful life, and carrying the investment as the difference between cost and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accumulated-depreciation.asp">accumulated depreciation</a>. The accounting treatment can vary depending on the type of asset, as land is not depreciated but many other capital investments are depreciated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> The cost of the asset should be recorded in the company's accounting records. This can include the purchase price of the asset as well as any additional costs related to the purchase such as installation or transportation costs. Companies may record the fair market value for certain capital investments under certain circumstances, but capital investments must initially be recorded at cost. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> If the asset has a cost that meets the company's capitalization policy, the cost of the asset will be recorded as a capital asset on the balance sheet. This allows the company to spread the cost of the asset over its useful life and to recognize the expense over time. This is the primary difference between the assets mentioned earlier and normal operating costs, as operating costs are expensed in the period they are incurred while capital investment costs are spread over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> The useful life of a capital investment is an estimate of the number of years that the asset will be used by the company. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/021815/what-are-different-ways-calculate-depreciation.asp">depreciation method</a> used will depend on the asset and the company's accounting policies, but commonly used methods include straight-line, declining balance, and sum-of-the-years'-digits. Companies may also record impairments to reduce the value of a capital investment should a loss be incurred. In addition, whereas operating expenses may simply be stopped, companies have a series of entries to post when a capital investment is disposed of. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <span class="heading-toc" id="toc-example-of-capital-investment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> Example of Capital Investment </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> As part of its year-end financial statements, Amazon.com reported the following assets it owned for fiscal year 2021 and 2022.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_64-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:41.8%;"> <img alt="Amazon, Balance Sheet" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/wwxPWznH4LsBfvS0A8GsYVyQflw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/wwxPWznH4LsBfvS0A8GsYVyQflw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG" data-srcset="https://www.investopedia.com/thmb/deGciOa5347QbOlB9xXjs7_AKeI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG 750w" data-tracking-container="true" height="744" id="mntl-sc-block-image_2-0" width="1776"/> <noscript> <img alt="Amazon, Balance Sheet" class="img--noscript universal-image__image" height="744" sizes="750px" src="https://www.investopedia.com/thmb/wwxPWznH4LsBfvS0A8GsYVyQflw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG" srcset="https://www.investopedia.com/thmb/deGciOa5347QbOlB9xXjs7_AKeI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG 750w" width="1776"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-text">Amazon, Balance Sheet.</span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> This format of the balance sheet is standard where assets are reported by liquidity starting with the most liquid assets. Because capital investments are not liquid, they are often reported lower in the list. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> At year-end 2022, Amazon reported a net asset balance of $186.7 billion for property and equipment. This figure is net because capital investments, aside from land, are often depreciated and reported as their cost less any accumulated depreciation. Note that this $186.7 billion is also being excluded from current assets. Because of the long-term nature of capital investments, they are reported as noncurrent assets.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-what-is-an-example-of-a-capital-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is an Example of a Capital Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>When a company buys land, that is often a capital investment. Because of the long-term nature of buying land and the illiquidity of the asset, a company usually needs to raise a lot of capital to buy the asset.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-how-does-a-capital-investment-work"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does a Capital Investment Work?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A capital investment works based on the benefits a company may receive over a long period of time compared to the short-term investment. In theory, a company will pay a large sum of money upfront (or over time). Then, the company will receive a benefit from the asset (potentially even after it has finished paying for it). The idea is a capital investment <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital-investment-analysis.asp">should provide better long-term value</a> compared to a good or service that is being purchased and used in a single accounting period.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-what-is-the-largest-downside-to-a-capital-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Largest Downside to a Capital Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Companies must often make a long-term financial or legal commitment when buying capital investments. This means tying up cash, getting rid of flexibility, and taking a risk that may not pan out. Whereas a company can be more nimble by paying for something smaller, a company aims to leverage a single investment to scale growth or innovate. That growth or innovation may not materialize.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_75-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> Companies may decide to make capital investments as a way to innovate, modernize, and capture a competitive advantage over its competitors. This investment often requires a large sum of money, and the company often receives an illiquid asset such as land, buildings, machinery, or equipment. The accounting treatment for capital investments if often different than operating outlays as capital investments are usually depreciated. </p></div>

## What Is Capital Investment? Capital investment is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Real estate, manufacturing plants, and machinery are among the assets that are purchased as capital investments. The capital used may come from a wide range of sources from traditional bank loans to venture capital deals. ### Key Takeaways * Capital investment is the expenditure of money to fund a company's long-term growth. * The term often refers to a company's acquisition of permanent fixed assets such as real estate and equipment. * Capital assets are reported as non-current assets and most are depreciated. * The funds for capital investment can come from a number of sources, including cash on hand, though big projects are most often financed through obtaining loans or issuing stock. * Examples of capital investments are land, buildings, machinery, equipment, or software. ![Capital Investment]() :max_bytes(150000):strip_icc()/capital-investment.asp-final-f3ff599ea410488aa1f99fd0e5f81f55.png) Investopedia / Theresa Chiechi ## How Capital Investment Works Capital investment is a broad term that can be defined in two distinct ways: * An individual, a [venture capital group](https://www.investopedia.com/terms/v/venturecapital.asp) or a financial institution may make a capital investment in a business. The money can be provided as a loan or a share of the profits down the road. In this sense of the word, capital means cash. * The executives of a company may make a capital investment in the business. They buy long-term assets such as equipment that will help the company run more efficiently or grow faster. In this sense, capital means physical assets. In either case, the money for capital investment must come from somewhere. A new company might seek capital investment from any number of sources, including venture capital firms, [angel investors](https://www.investopedia.com/articles/investing/010416/angel-investing-vs-crowdfunding-how-raise-money-your-startup.asp), or traditional financial institutions. When a new company goes public, it is acquiring capital investment on a large scale from many investors. An established company might make a capital investment using its own cash reserves or seek a loan from a bank. It might issue bonds or stock shares in order to finance capital investment. There is no minimum or maximum capital investment. It can range from less than $100,000 in seed financing for a start-up to hundreds of millions of dollars for massive projects undertaken by companies in capital-intensive sectors such as mining, utilities, and infrastructure. ### Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. ## Capital Investments for Business A decision by a business to make a capital investment is a long-term growth strategy. A company plans and implements capital investments in order to ensure future growth. Capital investments generally are made to increase operational capacity, capture a larger share of the market, and generate more revenue. The company may make a capital investment in the form of an equity stake in another company's complementary operations for the same purposes. In many cases, capital investments are a necessary and normal part of an industry. Consider an oil-drilling company that relies on heavy machinery to extract [raw materials](https://www.investopedia.com/terms/r/rawmaterials.asp) to be processed. As opposed to a law firm that will have low-to-no capital investment requirements, capital-intensive businesses usually need specific assets in order to operate. In addition, there are strategic components for a business to consider when deciding whether or not to invest in a capital asset. For instance, consider how certain heavy machinery such as a company vehicle could be leased. Should the company be willing to incur debt and tie up capital, the company may spend less money in the long-term by incurring a capital investment as opposed to a periodic "rental" expense. ## Types of Capital Investments Companies often acquire capital investments for diversification, modernization, or business expansion. This may mean buying capital investments different from existing aspects of its business or capital investments that simply do things better than before. Some specific types of capital investments include: * **Land:** Companies may buy bare land to be used for development or expansion. * **Buildings:** Companies may buy existing buildings for manufacturing, storage, production, or headquarter operations. * **Assets Under Development:** Companies may incur spending over time to assemble assets that may be capitalized. For example, a company can build its own building; the accumulation of charges may be considered a capital investment. * **Furniture and Fixtures:** Though furniture and fixtures may be more temporary in nature, certain aspects of accounting rules result in some overlap between [FFE](https://www.investopedia.com/terms/f/ffe.asp) and capital investments. * **Machines:** Companies that invest in the production elements of making goods are making capital investments. * **Software Development or Computing Devices:** Companies more frequently invest capital to build software; these costs now commonly qualify for capitalization and amortization over time. ### Because land does not deteriorate in a similar manner compared to other capital investments, it is not depreciated. ## Advantages and Disadvantages of Capital Investments ### Pros of Capital Investments The advantages of capital investments can vary depending on the specific situation. However, most companies embark on capital investments for productivity.  By [investing in new equipment](https://www.investopedia.com/terms/a/acceleration-principle.asp) or technology, companies can improve their efficiency, thus lower costs and increasing output. These types of investments may also improve the quality of goods produced. Capital investments can also lead to cost savings over time. For example, a new piece of equipment may be more energy-efficient than an older model, which can result in lower utility bills. Similarly, new technology may streamline processes and reduce the need for manual labor. Last, companies may decide the long-term discounted cash flow is favorable when comparing the upfront investment of a capital investment compared to the long-term, ongoing cash outlay of a recurring expense. By investing in their long-term assets, companies can also gain a competitive advantage in the market. This can make it more difficult for competitors to catch up and can help the company to maintain its market position over the long term. If a company is willing to take a risk and incur a large investment to strengthen its business, this may create a barrier to entry that competitors can not overcome or compete against. ### Cons of Capital Investment The preferred option for capital investment is always a company's own operating cash flow, but that may not be sufficient to cover the anticipated costs. It is more likely the company will resort to outside financing. Therefore, there is usually a little more risk to capital investments. This is especially true for capital investments that are customized or hard to liquidate; once the company has bought the capital investment, it may be hard to exit the investment. Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. Capital investments tends to reduce earnings growth in the short term, and that never pleases stockholders of a public company. This may be especially true for capital investments that also incur operating costs (i.e. the acquisition of land will be accompanied by a potentially hefty annual property tax assessment). In addition, if a company does not have sufficient capital on hand to make a large investment, there are downsides to each of its financing options. Issuing additional stock shares, which is often the funding option for public companies, dilutes the value of its outstanding shares. Existing shareholders generally dislike finding that their stake in the company has been reduced. Alternatively, the total amount of debt a company has on the books is closely watched by stockholders and analysts*.* The payments on that debt can stifle the company's further growth. Pros * May increase productivity if capital investment is more efficient than prior methods * May result in higher quality manufactured goods * May be cheaper in the long-run when compared against rented or monthly expensed solutions * May create a barrier to entry that yields a competitive advantage Cons * May be too expensive for the company to outright purchase on their own. * May limit or restrict short-term profitability of the company * May be accompanied by additional operating expenses * May reduce the liquidity of the company should it be difficult to sell the capital asset ## Accounting for Capital Investments Accounting practices for capital investments involve recording the cost of the asset, allocating the cost over its useful life, and carrying the investment as the difference between cost and [accumulated depreciation](https://www.investopedia.com/terms/a/accumulated-depreciation.asp). The accounting treatment can vary depending on the type of asset, as land is not depreciated but many other capital investments are depreciated. The cost of the asset should be recorded in the company's accounting records. This can include the purchase price of the asset as well as any additional costs related to the purchase such as installation or transportation costs. Companies may record the fair market value for certain capital investments under certain circumstances, but capital investments must initially be recorded at cost. If the asset has a cost that meets the company's capitalization policy, the cost of the asset will be recorded as a capital asset on the balance sheet. This allows the company to spread the cost of the asset over its useful life and to recognize the expense over time. This is the primary difference between the assets mentioned earlier and normal operating costs, as operating costs are expensed in the period they are incurred while capital investment costs are spread over time. The useful life of a capital investment is an estimate of the number of years that the asset will be used by the company. The [depreciation method](https://www.investopedia.com/ask/answers/021815/what-are-different-ways-calculate-depreciation.asp) used will depend on the asset and the company's accounting policies, but commonly used methods include straight-line, declining balance, and sum-of-the-years'-digits. Companies may also record impairments to reduce the value of a capital investment should a loss be incurred. In addition, whereas operating expenses may simply be stopped, companies have a series of entries to post when a capital investment is disposed of. ## Example of Capital Investment As part of its year-end financial statements, Amazon.com reported the following assets it owned for fiscal year 2021 and 2022. ![Amazon, Balance Sheet]() :max_bytes(150000):strip_icc()/Capture3-473a78c04f70462ca4984a54aa1dd274.JPG) Amazon, Balance Sheet. This format of the balance sheet is standard where assets are reported by liquidity starting with the most liquid assets. Because capital investments are not liquid, they are often reported lower in the list. At year-end 2022, Amazon reported a net asset balance of $186.7 billion for property and equipment. This figure is net because capital investments, aside from land, are often depreciated and reported as their cost less any accumulated depreciation. Note that this $186.7 billion is also being excluded from current assets. Because of the long-term nature of capital investments, they are reported as noncurrent assets. ## What Is an Example of a Capital Investment? When a company buys land, that is often a capital investment. Because of the long-term nature of buying land and the illiquidity of the asset, a company usually needs to raise a lot of capital to buy the asset. ## How Does a Capital Investment Work? A capital investment works based on the benefits a company may receive over a long period of time compared to the short-term investment. In theory, a company will pay a large sum of money upfront (or over time). Then, the company will receive a benefit from the asset (potentially even after it has finished paying for it). The idea is a capital investment [should provide better long-term value](https://www.investopedia.com/terms/c/capital-investment-analysis.asp) compared to a good or service that is being purchased and used in a single accounting period. ## What Is the Largest Downside to a Capital Investment? Companies must often make a long-term financial or legal commitment when buying capital investments. This means tying up cash, getting rid of flexibility, and taking a risk that may not pan out. Whereas a company can be more nimble by paying for something smaller, a company aims to leverage a single investment to scale growth or innovate. That growth or innovation may not materialize. ## The Bottom Line Companies may decide to make capital investments as a way to innovate, modernize, and capture a competitive advantage over its competitors. This investment often requires a large sum of money, and the company often receives an illiquid asset such as land, buildings, machinery, or equipment. The accounting treatment for capital investments if often different than operating outlays as capital investments are usually depreciated.

What Is Capital Investment? Capital investment is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Real estate, manufacturing plants, and machinery are among the assets that are purchased as capital investments. The capital used may come from a wide range of sources from traditional bank loans to venture capital deals. Key Takeaways Capital investment is the expenditure of money to fund a company's long-term growth.The term often refers to a company's acquisition of permanent fixed assets such as real estate and equipment.Capital assets are reported as non-current assets and most are depreciated.The funds for capital investment can come from a number of sources, including cash on hand, though big projects are most often financed through obtaining loans or issuing stock.Examples of capital investments are land, buildings, machinery, equipment, or software. Investopedia / Theresa Chiechi How Capital Investment Works Capital investment is a broad term that can be defined in two distinct ways: An individual, a venture capital group or a financial institution may make a capital investment in a business. The money can be provided as a loan or a share of the profits down the road. In this sense of the word, capital means cash. The executives of a company may make a capital investment in the business. They buy long-term assets such as equipment that will help the company run more efficiently or grow faster. In this sense, capital means physical assets. In either case, the money for capital investment must come from somewhere. A new company might seek capital investment from any number of sources, including venture capital firms, angel investors, or traditional financial institutions. When a new company goes public, it is acquiring capital investment on a large scale from many investors. An established company might make a capital investment using its own cash reserves or seek a loan from a bank. It might issue bonds or stock shares in order to finance capital investment. There is no minimum or maximum capital investment. It can range from less than $100,000 in seed financing for a start-up to hundreds of millions of dollars for massive projects undertaken by companies in capital-intensive sectors such as mining, utilities, and infrastructure. Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. Capital Investments for Business A decision by a business to make a capital investment is a long-term growth strategy. A company plans and implements capital investments in order to ensure future growth. Capital investments generally are made to increase operational capacity, capture a larger share of the market, and generate more revenue. The company may make a capital investment in the form of an equity stake in another company's complementary operations for the same purposes. In many cases, capital investments are a necessary and normal part of an industry. Consider an oil-drilling company that relies on heavy machinery to extract raw materials to be processed. As opposed to a law firm that will have low-to-no capital investment requirements, capital-intensive businesses usually need specific assets in order to operate. In addition, there are strategic components for a business to consider when deciding whether or not to invest in a capital asset. For instance, consider how certain heavy machinery such as a company vehicle could be leased. Should the company be willing to incur debt and tie up capital, the company may spend less money in the long-term by incurring a capital investment as opposed to a periodic "rental" expense. Types of Capital Investments Companies often acquire capital investments for diversification, modernization, or business expansion. This may mean buying capital investments different from existing aspects of its business or capital investments that simply do things better than before. Some specific types of capital investments include: Land: Companies may buy bare land to be used for development or expansion. Buildings: Companies may buy existing buildings for manufacturing, storage, production, or headquarter operations. Assets Under Development: Companies may incur spending over time to assemble assets that may be capitalized. For example, a company can build its own building; the accumulation of charges may be considered a capital investment. Furniture and Fixtures: Though furniture and fixtures may be more temporary in nature, certain aspects of accounting rules result in some overlap between FFE and capital investments. Machines: Companies that invest in the production elements of making goods are making capital investments. Software Development or Computing Devices: Companies more frequently invest capital to build software; these costs now commonly qualify for capitalization and amortization over time. Because land does not deteriorate in a similar manner compared to other capital investments, it is not depreciated. Advantages and Disadvantages of Capital Investments Pros of Capital Investments The advantages of capital investments can vary depending on the specific situation. However, most companies embark on capital investments for productivity.  By investing in new equipment or technology, companies can improve their efficiency, thus lower costs and increasing output. These types of investments may also improve the quality of goods produced. Capital investments can also lead to cost savings over time. For example, a new piece of equipment may be more energy-efficient than an older model, which can result in lower utility bills. Similarly, new technology may streamline processes and reduce the need for manual labor. Last, companies may decide the long-term discounted cash flow is favorable when comparing the upfront investment of a capital investment compared to the long-term, ongoing cash outlay of a recurring expense. By investing in their long-term assets, companies can also gain a competitive advantage in the market. This can make it more difficult for competitors to catch up and can help the company to maintain its market position over the long term. If a company is willing to take a risk and incur a large investment to strengthen its business, this may create a barrier to entry that competitors can not overcome or compete against. Cons of Capital Investment The preferred option for capital investment is always a company's own operating cash flow, but that may not be sufficient to cover the anticipated costs. It is more likely the company will resort to outside financing. Therefore, there is usually a little more risk to capital investments. This is especially true for capital investments that are customized or hard to liquidate; once the company has bought the capital investment, it may be hard to exit the investment. Capital investment is meant to benefit a company in the long run, but it nonetheless can have short-term downsides. Capital investments tends to reduce earnings growth in the short term, and that never pleases stockholders of a public company. This may be especially true for capital investments that also incur operating costs (i.e. the acquisition of land will be accompanied by a potentially hefty annual property tax assessment). In addition, if a company does not have sufficient capital on hand to make a large investment, there are downsides to each of its financing options. Issuing additional stock shares, which is often the funding option for public companies, dilutes the value of its outstanding shares. Existing shareholders generally dislike finding that their stake in the company has been reduced. Alternatively, the total amount of debt a company has on the books is closely watched by stockholders and analysts. The payments on that debt can stifle the company's further growth. Pros May increase productivity if capital investment is more efficient than prior methods May result in higher quality manufactured goods May be cheaper in the long-run when compared against rented or monthly expensed solutions May create a barrier to entry that yields a competitive advantage Cons May be too expensive for the company to outright purchase on their own. May limit or restrict short-term profitability of the company May be accompanied by additional operating expenses May reduce the liquidity of the company should it be difficult to sell the capital asset Accounting for Capital Investments Accounting practices for capital investments involve recording the cost of the asset, allocating the cost over its useful life, and carrying the investment as the difference between cost and accumulated depreciation. The accounting treatment can vary depending on the type of asset, as land is not depreciated but many other capital investments are depreciated. The cost of the asset should be recorded in the company's accounting records. This can include the purchase price of the asset as well as any additional costs related to the purchase such as installation or transportation costs. Companies may record the fair market value for certain capital investments under certain circumstances, but capital investments must initially be recorded at cost. If the asset has a cost that meets the company's capitalization policy, the cost of the asset will be recorded as a capital asset on the balance sheet. This allows the company to spread the cost of the asset over its useful life and to recognize the expense over time. This is the primary difference between the assets mentioned earlier and normal operating costs, as operating costs are expensed in the period they are incurred while capital investment costs are spread over time. The useful life of a capital investment is an estimate of the number of years that the asset will be used by the company. The depreciation method used will depend on the asset and the company's accounting policies, but commonly used methods include straight-line, declining balance, and sum-of-the-years'-digits. Companies may also record impairments to reduce the value of a capital investment should a loss be incurred. In addition, whereas operating expenses may simply be stopped, companies have a series of entries to post when a capital investment is disposed of. Example of Capital Investment As part of its year-end financial statements, Amazon.com reported the following assets it owned for fiscal year 2021 and 2022. Amazon, Balance Sheet. This format of the balance sheet is standard where assets are reported by liquidity starting with the most liquid assets. Because capital investments are not liquid, they are often reported lower in the list. At year-end 2022, Amazon reported a net asset balance of $186.7 billion for property and equipment. This figure is net because capital investments, aside from land, are often depreciated and reported as their cost less any accumulated depreciation. Note that this $186.7 billion is also being excluded from current assets. Because of the long-term nature of capital investments, they are reported as noncurrent assets. What Is an Example of a Capital Investment? When a company buys land, that is often a capital investment. Because of the long-term nature of buying land and the illiquidity of the asset, a company usually needs to raise a lot of capital to buy the asset. How Does a Capital Investment Work? A capital investment works based on the benefits a company may receive over a long period of time compared to the short-term investment. In theory, a company will pay a large sum of money upfront (or over time). Then, the company will receive a benefit from the asset (potentially even after it has finished paying for it). The idea is a capital investment should provide better long-term value compared to a good or service that is being purchased and used in a single accounting period. What Is the Largest Downside to a Capital Investment? Companies must often make a long-term financial or legal commitment when buying capital investments. This means tying up cash, getting rid of flexibility, and taking a risk that may not pan out. Whereas a company can be more nimble by paying for something smaller, a company aims to leverage a single investment to scale growth or innovate. That growth or innovation may not materialize. The Bottom Line Companies may decide to make capital investments as a way to innovate, modernize, and capture a competitive advantage over its competitors. This investment often requires a large sum of money, and the company often receives an illiquid asset such as land, buildings, machinery, or equipment. The accounting treatment for capital investments if often different than operating outlays as capital investments are usually depreciated.

https://www.investopedia.com/etf-vs-investment-trust-8386101

ETF vs. Investment Trust: What’s the Difference?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Exchange-traded funds (ETFs) and investment trusts are two popular investment products, each with specific characteristics, advantages, and disadvantages. The primary difference between them is how they’re structured. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Investment trusts are closed-end funds with a fixed number of shares set at an initial public offering (IPO). ETFs are open-end funds, and their shares are created or redeemed based on investor demand.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>The primary difference between exchange-traded funds (ETFs) and investment trusts is that the former are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/open-endfund.asp">open-end funds</a>, while the latter are <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/closed-endinvestment.asp">closed-end funds</a>.</li> <li>Investment trusts issue a fixed number of shares at inception, while ETFs can issue new shares based on investor demand.</li> <li>Investment trusts are more likely than ETFs to trade at prices different from their net asset value (NAV).</li> <li>Investment trusts typically have lower liquidity and are more actively managed than ETFs, which might increase trading costs and management fees.</li> <li>ETFs usually are more tax-efficient than investment trusts because capital gains can be reduced through the ETF creation and redemption process.</li> </ul></div></div></div> <span class="heading-toc" id="toc-what-is-an-etf"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is an ETF? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">ETF</a> is an investment security that's similar to a mutual fund in that it invests in a basket of securities. However, unlike mutual funds, it trades on an exchange and can be bought or sold like a stock. ETFs aim to track a particular index, sector, commodity, or other asset. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> ETFs have become popular because they offer flexibility and are cost-effective. They can be used in a variety of investment strategies, from passive index tracking to actively managed portfolios. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> ETFs can offer diversified exposure to specific asset classes, currencies, sectors, or indexes while trading on exchanges like individual stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> ETFs are open-end funds, which means that their management can <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mutualfund/05/062705.asp">create or redeem</a> shares based on investor demand. This should keep their share price in line with the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value (NAV)</a> of their underlying assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Larger ETFs have substantial <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aum.asp">assets under management (AUM)</a> and a high <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volumeoftrade.asp">trading volume</a>, which should keep management fees and trading costs low. For example, the SPDR S&amp;P 500 ETF Trust (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=spy">SPY</a>) has an expense ratio of 0.09% and turns over almost 10.9 million shares daily.<span class="ql-inline-citation" data-cite="3"></span> In addition, ETFs disclose their portfolio holdings daily, offering transparency.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>U.S. ETFs accounted for 28.2% of total equity trading volume on U.S. exchanges in the third quarter of 2023.<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-what-is-an-investment-trust"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> What Is an Investment Trust? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Investment trusts, also called closed-end funds, pool resources from multiple <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investors</a> to buy a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a> of assets. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">Assets</a> might include equities, commodities, fixed-income securities, or real estate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> As closed-end funds, investment trusts issue a fixed number of shares at inception that doesn’t change.<span class="ql-inline-citation" data-cite="19"></span> This has several effects: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <li><strong>Long-term strategies</strong>: This stability in share numbers allows fund managers to focus on long-term investment strategies without concern for short-term redemption pressures.</li> <li><strong>Trading at premium or discount</strong>: Investment trust shares can trade at a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp">premium</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discount.asp">discount</a> to their NAV, a key characteristic to consider. For instance, BlackRock Health Sciences Trust (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=bme">BME</a>), which invests in the healthcare and life sciences sectors, traded at a -5.26% discount to its NAV as of Feb. 23, 2024. So, depending on the NAV relative to the share price, this can create opportunities to buy shares of investment trusts at a discount or sell them at a premium.<span class="ql-inline-citation" data-cite="24"></span></li> <li><strong>Less need for <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquidity</a></strong>: The closed-end structure means fund managers don’t need to keep large amounts of cash on hand for redemptions and can put more to work for investors in other assets.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Independent boards or trustees oversee the management of investment trusts. They are expected to adhere to the trust’s objectives and act as an added layer of governance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Investment trusts can adopt active or passive investment strategies and cater to income-seeking or growth-oriented investors. Some jurisdictions grant tax advantages to investment trusts, enhancing their tax efficiency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> While investment trusts can offer valuable <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> and investment opportunities, they have risks. Therefore, investors should assess their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/">financial goals</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a> before including them in their portfolios.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-key-differences-between-etfs-and-investment-trusts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Key Differences Between ETFs and Investment Trusts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> ETFs and investment trusts are both common <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment.asp">investment</a> vehicles, but they have significant differences in their structure, management, and tax efficiency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> <strong>1.</strong> ETFs are managed investment funds that aim to mirror the performance of a specific index or asset class. They trade on stock exchanges, providing investors with greater liquidity and flexibility. By contrast, investment trusts are closed-end funds with a fixed number of shares and can trade at a premium or discount to their NAV. This can create unique opportunities and risks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <strong>2.</strong> While investment trusts also trade on exchanges, they typically have a lower volume of trade, which could increase trading costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <strong>3.</strong> Management styles differ substantially between ETFs and investment trusts. Large ETFs that track bellwether stock indexes, such as the S&amp;P 500, typically have ultra-low management fees because of their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passivemanagement.asp">passive approach</a>.<span class="ql-inline-citation" data-cite="26"></span><span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Investment trusts tend to be more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">actively managed</a>, requiring the expertise of a skilled investment manager to navigate market conditions. Investment trusts also regularly borrow money to invest, which can enhance returns but also amplify losses.<span class="ql-inline-citation" data-cite="32"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <strong>4.</strong> These investment products have differing tax implications. ETFs are usually more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/exchangetradedfunds/08/etf-taxes-introduction.asp">tax-efficient</a> since capital gains can be minimized through their creations and redemptions.<span class="ql-inline-citation" data-cite="29"></span> Investment trusts, however, may distribute capital gains, creating a tax liability.<span class="ql-inline-citation" data-cite="19"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> While both ETFs and investment trusts can offer diversified investment choices, understanding their key differences can help you make more informed investment decisions aligned with your financial goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_48-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_49-0"> <h3 class="mntl-sc-block__comparison-list-heading mntl-sc-block-comparisonlist__comparison-list-heading">Key Differences </h3> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">ETFs</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Greater liquidity and flexibility because they trade like stocks</p></li> <li><p>Higher trading volume</p></li> <li><p>Often have lower trading costs</p></li> <li><p>May be passively managed and therefore have lower expense costs</p></li> <li><p>Tax-efficient</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Investment Trusts</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Closed end-funds</p></li> <li><p>Lower trading volume</p></li> <li><p>May have higher trading costs</p></li> <li><p>Will usually be actively managed and have higher management fees</p></li> <li><p>May be less tax-efficient</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of ETFs </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-subheading__text"> Advantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> <li><strong>Diversification</strong>: ETFs offer instant diversification at low cost. For instance, the SPY ETF tracks the S&amp;P 500 Index, offering investors exposure to 500 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/large-cap.asp">large-cap</a> U.S. stocks.<span class="ql-inline-citation" data-cite="22"></span> This diversification helps spread <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risk</a>, reducing the impact of a poor performance from individual stocks or underperforming sectors.</li> <li><strong>Liquidity</strong>: ETFs trade on stock exchanges, making many of them highly liquid. Ample share turnover helps to reduce transaction costs, such as <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/slippage.asp">slippage</a> and high <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bid-askspread.asp">bid-ask spreads</a>. Plus, it’s easy to buy or sell ETF shares of popular ETFs throughout the trading day. For example, the Invesco QQQ Trust (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=qqq">QQQ</a>), which is for those who favor tech stocks and tracks the performance of the Nasdaq-100 Index, has an average daily intraday liquidity of almost 50 million shares.<span class="ql-inline-citation" data-cite="5"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <li><strong>Lack of control</strong>:<strong> </strong>Many ETFs are passively managed, meaning you have no say in the individual securities included in the fund’s portfolio. For instance, if you want to exclude a specific company from your portfolio for <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ethical-investing.asp">ethical reasons</a>, you can’t do so in an ETF tracking a broad index like the S&amp;P 500 or the Nasdaq-100.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trackingerror.asp"><strong>Tracking errors</strong></a>: ETFs aim to replicate the performance of an underlying index. However, tracking discrepancies can occur. For example, the ETF’s expenses, deducted from the ETF’s returns, could cause its performance to slightly deviate from that of the index, currency, or sector it covers. To illustrate, as of Dec. 31, 2023, the iShares MSCI Emerging Markets ETF (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=eem">EEM</a>) had a 10-year return of 1.96% compared with the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp">benchmark</a> index’s 2.66% return over the same period.<span class="ql-inline-citation" data-cite="25"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_58-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_59-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/spot-bitcoin-etfs-8358373">Spot bitcoin ETFs</a>, which began trading for the first time in the United States in January 2024, can have higher management fees than traditional ETFs.</p></div></div></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-investment-trusts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_60-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Investment Trusts </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> Advantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> <li><strong>Closed-end structure</strong>: Investment trusts' structure lets portfolio managers take a longer-term perspective without buying or selling assets to meet redemptions.<span class="ql-inline-citation" data-cite="19"></span> For instance, the managers of BME can focus on the fund’s longer-term investment objectives without worrying about a flood of redemptions during a market downturn.</li> <li><strong>Leverage</strong>: Some investment trusts use <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp">leverage</a> to enhance returns. This can magnify gains during favorable market conditions when they borrow money to invest. For example, the PIMCO Dynamic Income Fund (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=pdi">PDI</a>) had 38.35% total effective leverage as of Jan. 31, 2024, primarily due to <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041615/what-difference-between-repurchase-agreement-and-reverse-repurchase-agreement.asp">reverse repurchase agreements</a> that may help amplify returns if bond yields remain elevated.<span class="ql-inline-citation" data-cite="23"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <li><strong>Premiums and discounts</strong>: Investment trusts may trade above or below their NAV. While a premium could indicate strong demand, a discount may represent a lack of investor interest. For example, when BME traded at a -5.26% discount to its NAV on Feb. 23, 2024, this meant that, potentially, investors could receive less than the value of the fund’s underlying assets.<span class="ql-inline-citation" data-cite="24"></span></li><li><strong>Liquidity and costs</strong>: Investment trusts, like ETFs, trade on stock exchanges. However, they usually have lower liquidity because of their fixed supply of shares. As a result of lower share turnover, you might incur higher trading costs and wider bid-ask spreads. You could also face liquidity issues if an investment trust issuer suspends a fund during a period of underperformance.<span class="ql-inline-citation" data-cite="30"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-are-etfs-or-investment-trusts-better-for-long-term-investments"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are ETFs or Investment Trusts Better for Long-term Investments?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Both can be suitable as long-term investments. Some investors prefer ETFs for their lower costs and index-tracking nature, making them potentially better for passive, long-term strategies. With their fixed share structure, investment trusts can be suitable for long-term investors looking for potential income sources and who can handle price fluctuations when the shares go above or below NAV.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-how-do-management-styles-differ-between-etfs-and-investment-trusts"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Management Styles Differ Between ETFs and Investment Trusts?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ETFs and investment trusts have distinct management styles. ETFs often passively track an index, a buy-and-hold approach which involves minimal decision making by fund managers. By contrast, investment trusts frequently follow active management strategies, with fund managers actively selecting and adjusting the portfolio in an attempt to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outperform.asp">outperform</a> the market. Investment trusts may also use leverage, which can add to the active management of a fund.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-are-there-differences-in-dividends-between-etfs-and-investment-trusts"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are There Differences in Dividends Between ETFs and Investment Trusts?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Investment trusts have potentially higher dividend yields, partly because of their ability to use leverage and the income-focused strategies often employed by fund managers. ETFs can pay dividends, too, but their yields derive from their underlying assets. An ETF geared toward capturing value from increases in stock prices typically provides less in dividends.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-are-there-etfs-or-investment-trusts-focused-on-niche-markets"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are There ETFs or Investment Trusts Focused on Niche Markets?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Certain ETFs and investment trusts zero in on quite specific markets or themes. For example, some focus on emerging or specialized fields like esports, space exploration, biotechnology, blockchain, or clean energy technology. There are geographically targeted ETFs and investment trusts, some regions of which might be underrepresented in mainstream investment funds.</p><p>These funds can be a great opportunity to put your money into areas and themes that you’re passionate about. However, they also have their own risks, including potentially higher volatility and setbacks associated with a tight investment focus.<span class="ql-inline-citation" data-cite="31"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_75-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> ETFs and investment trusts differ in their structure and management. ETFs are open-end funds, allowing for more efficient trading close to their NAV. They can offer diversified exposure across various asset classes and are frequently passively managed, leading to lower management fees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> By contrast, investment trusts have a closed-end structure, issuing a fixed number of shares at inception, which means that they can frequently trade at a premium or discount to the fund’s NAV. Investment trusts, which usually have more active management and use leverage, may have lower liquidity, affecting trading costs compared with more liquid ETFs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Choosing between ETFs and investment trusts requires a careful consideration of liquidity, the fund’s use of leverage, tax efficiency, and whether the fund trades at a premium or discount. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> Before investing in either, be sure that it meets your long-term financial goals. It’s always prudent to seek out advice from a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-advisor.asp">financial advisor</a>. </p></div>

Exchange-traded funds (ETFs) and investment trusts are two popular investment products, each with specific characteristics, advantages, and disadvantages. The primary difference between them is how they’re structured. Investment trusts are closed-end funds with a fixed number of shares set at an initial public offering (IPO). ETFs are open-end funds, and their shares are created or redeemed based on investor demand. ### Key Takeaways * The primary difference between exchange-traded funds (ETFs) and investment trusts is that the former are [open-end funds](https://www.investopedia.com/terms/o/open-endfund.asp), while the latter are [closed-end funds](https://www.investopedia.com/terms/c/closed-endinvestment.asp). * Investment trusts issue a fixed number of shares at inception, while ETFs can issue new shares based on investor demand. * Investment trusts are more likely than ETFs to trade at prices different from their net asset value (NAV). * Investment trusts typically have lower liquidity and are more actively managed than ETFs, which might increase trading costs and management fees. * ETFs usually are more tax-efficient than investment trusts because capital gains can be reduced through the ETF creation and redemption process. ## What Is an ETF? An [ETF](https://www.investopedia.com/terms/e/etf.asp) is an investment security that's similar to a mutual fund in that it invests in a basket of securities. However, unlike mutual funds, it trades on an exchange and can be bought or sold like a stock. ETFs aim to track a particular index, sector, commodity, or other asset. ETFs have become popular because they offer flexibility and are cost-effective. They can be used in a variety of investment strategies, from passive index tracking to actively managed portfolios. ETFs can offer diversified exposure to specific asset classes, currencies, sectors, or indexes while trading on exchanges like individual stocks. ETFs are open-end funds, which means that their management can [create or redeem](https://www.investopedia.com/articles/mutualfund/05/062705.asp) shares based on investor demand. This should keep their share price in line with the [net asset value (NAV)](https://www.investopedia.com/terms/n/nav.asp) of their underlying assets. Larger ETFs have substantial [assets under management (AUM)](https://www.investopedia.com/terms/a/aum.asp) and a high [trading volume](https://www.investopedia.com/terms/v/volumeoftrade.asp), which should keep management fees and trading costs low. For example, the SPDR S&P 500 ETF Trust ([SPY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=spy)) has an expense ratio of 0.09% and turns over almost 10.9 million shares daily. In addition, ETFs disclose their portfolio holdings daily, offering transparency. ### U.S. ETFs accounted for 28.2% of total equity trading volume on U.S. exchanges in the third quarter of 2023. ## What Is an Investment Trust? Investment trusts, also called closed-end funds, pool resources from multiple [investors](https://www.investopedia.com/terms/i/investor.asp) to buy a [portfolio](https://www.investopedia.com/terms/p/portfolio.asp) of assets. [Assets](https://www.investopedia.com/terms/a/asset.asp) might include equities, commodities, fixed-income securities, or real estate. As closed-end funds, investment trusts issue a fixed number of shares at inception that doesn’t change. This has several effects: * **Long-term strategies**: This stability in share numbers allows fund managers to focus on long-term investment strategies without concern for short-term redemption pressures. * **Trading at premium or discount**: Investment trust shares can trade at a [premium](https://www.investopedia.com/terms/p/premium.asp) or [discount](https://www.investopedia.com/terms/d/discount.asp) to their NAV, a key characteristic to consider. For instance, BlackRock Health Sciences Trust ([BME](https://www.investopedia.com/markets/quote?tvwidgetsymbol=bme)), which invests in the healthcare and life sciences sectors, traded at a -5.26% discount to its NAV as of Feb. 23, 2024. So, depending on the NAV relative to the share price, this can create opportunities to buy shares of investment trusts at a discount or sell them at a premium. * **Less need for [liquidity](https://www.investopedia.com/terms/l/liquidity.asp)**: The closed-end structure means fund managers don’t need to keep large amounts of cash on hand for redemptions and can put more to work for investors in other assets. Independent boards or trustees oversee the management of investment trusts. They are expected to adhere to the trust’s objectives and act as an added layer of governance. Investment trusts can adopt active or passive investment strategies and cater to income-seeking or growth-oriented investors. Some jurisdictions grant tax advantages to investment trusts, enhancing their tax efficiency. While investment trusts can offer valuable [diversification](https://www.investopedia.com/terms/d/diversification.asp) and investment opportunities, they have risks. Therefore, investors should assess their [financial goals](https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/) and [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp) before including them in their portfolios. ## Key Differences Between ETFs and Investment Trusts ETFs and investment trusts are both common [investment](https://www.investopedia.com/terms/i/investment.asp) vehicles, but they have significant differences in their structure, management, and tax efficiency. **1.** ETFs are managed investment funds that aim to mirror the performance of a specific index or asset class. They trade on stock exchanges, providing investors with greater liquidity and flexibility. By contrast, investment trusts are closed-end funds with a fixed number of shares and can trade at a premium or discount to their NAV. This can create unique opportunities and risks. **2.** While investment trusts also trade on exchanges, they typically have a lower volume of trade, which could increase trading costs. **3.** Management styles differ substantially between ETFs and investment trusts. Large ETFs that track bellwether stock indexes, such as the S&P 500, typically have ultra-low management fees because of their [passive approach](https://www.investopedia.com/terms/p/passivemanagement.asp). Investment trusts tend to be more [actively managed](https://www.investopedia.com/terms/a/activemanagement.asp), requiring the expertise of a skilled investment manager to navigate market conditions. Investment trusts also regularly borrow money to invest, which can enhance returns but also amplify losses. **4.** These investment products have differing tax implications. ETFs are usually more [tax-efficient](https://www.investopedia.com/articles/exchangetradedfunds/08/etf-taxes-introduction.asp) since capital gains can be minimized through their creations and redemptions. Investment trusts, however, may distribute capital gains, creating a tax liability. While both ETFs and investment trusts can offer diversified investment choices, understanding their key differences can help you make more informed investment decisions aligned with your financial goals. ### Key Differences ETFs * Greater liquidity and flexibility because they trade like stocks * Higher trading volume * Often have lower trading costs * May be passively managed and therefore have lower expense costs * Tax-efficient Investment Trusts * Closed end-funds * Lower trading volume * May have higher trading costs * Will usually be actively managed and have higher management fees * May be less tax-efficient ## Advantages and Disadvantages of ETFs ### Advantages * **Diversification**: ETFs offer instant diversification at low cost. For instance, the SPY ETF tracks the S&P 500 Index, offering investors exposure to 500 [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) U.S. stocks. This diversification helps spread [risk](https://www.investopedia.com/terms/r/risk.asp), reducing the impact of a poor performance from individual stocks or underperforming sectors. * **Liquidity**: ETFs trade on stock exchanges, making many of them highly liquid. Ample share turnover helps to reduce transaction costs, such as [slippage](https://www.investopedia.com/terms/s/slippage.asp) and high [bid-ask spreads](https://www.investopedia.com/terms/b/bid-askspread.asp). Plus, it’s easy to buy or sell ETF shares of popular ETFs throughout the trading day. For example, the Invesco QQQ Trust ([QQQ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=qqq)), which is for those who favor tech stocks and tracks the performance of the Nasdaq-100 Index, has an average daily intraday liquidity of almost 50 million shares. ### Disadvantages * **Lack of control**:Many ETFs are passively managed, meaning you have no say in the individual securities included in the fund’s portfolio. For instance, if you want to exclude a specific company from your portfolio for [ethical reasons](https://www.investopedia.com/terms/e/ethical-investing.asp), you can’t do so in an ETF tracking a broad index like the S&P 500 or the Nasdaq-100. * [**Tracking errors**](https://www.investopedia.com/terms/t/trackingerror.asp): ETFs aim to replicate the performance of an underlying index. However, tracking discrepancies can occur. For example, the ETF’s expenses, deducted from the ETF’s returns, could cause its performance to slightly deviate from that of the index, currency, or sector it covers. To illustrate, as of Dec. 31, 2023, the iShares MSCI Emerging Markets ETF ([EEM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=eem)) had a 10-year return of 1.96% compared with the [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) index’s 2.66% return over the same period. ### [Spot bitcoin ETFs](https://www.investopedia.com/spot-bitcoin-etfs-8358373), which began trading for the first time in the United States in January 2024, can have higher management fees than traditional ETFs. ## Advantages and Disadvantages of Investment Trusts ### Advantages * **Closed-end structure**: Investment trusts' structure lets portfolio managers take a longer-term perspective without buying or selling assets to meet redemptions. For instance, the managers of BME can focus on the fund’s longer-term investment objectives without worrying about a flood of redemptions during a market downturn. * **Leverage**: Some investment trusts use [leverage](https://www.investopedia.com/terms/l/leverage.asp) to enhance returns. This can magnify gains during favorable market conditions when they borrow money to invest. For example, the PIMCO Dynamic Income Fund ([PDI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=pdi)) had 38.35% total effective leverage as of Jan. 31, 2024, primarily due to [reverse repurchase agreements](https://www.investopedia.com/ask/answers/041615/what-difference-between-repurchase-agreement-and-reverse-repurchase-agreement.asp) that may help amplify returns if bond yields remain elevated. ### Disadvantages * **Premiums and discounts**: Investment trusts may trade above or below their NAV. While a premium could indicate strong demand, a discount may represent a lack of investor interest. For example, when BME traded at a -5.26% discount to its NAV on Feb. 23, 2024, this meant that, potentially, investors could receive less than the value of the fund’s underlying assets. * **Liquidity and costs**: Investment trusts, like ETFs, trade on stock exchanges. However, they usually have lower liquidity because of their fixed supply of shares. As a result of lower share turnover, you might incur higher trading costs and wider bid-ask spreads. You could also face liquidity issues if an investment trust issuer suspends a fund during a period of underperformance. ## Are ETFs or Investment Trusts Better for Long-term Investments? Both can be suitable as long-term investments. Some investors prefer ETFs for their lower costs and index-tracking nature, making them potentially better for passive, long-term strategies. With their fixed share structure, investment trusts can be suitable for long-term investors looking for potential income sources and who can handle price fluctuations when the shares go above or below NAV. ## How Do Management Styles Differ Between ETFs and Investment Trusts? ETFs and investment trusts have distinct management styles. ETFs often passively track an index, a buy-and-hold approach which involves minimal decision making by fund managers. By contrast, investment trusts frequently follow active management strategies, with fund managers actively selecting and adjusting the portfolio in an attempt to [outperform](https://www.investopedia.com/terms/o/outperform.asp) the market. Investment trusts may also use leverage, which can add to the active management of a fund. ## Are There Differences in Dividends Between ETFs and Investment Trusts? Yes. Investment trusts have potentially higher dividend yields, partly because of their ability to use leverage and the income-focused strategies often employed by fund managers. ETFs can pay dividends, too, but their yields derive from their underlying assets. An ETF geared toward capturing value from increases in stock prices typically provides less in dividends. ## Are There ETFs or Investment Trusts Focused on Niche Markets? Yes. Certain ETFs and investment trusts zero in on quite specific markets or themes. For example, some focus on emerging or specialized fields like esports, space exploration, biotechnology, blockchain, or clean energy technology. There are geographically targeted ETFs and investment trusts, some regions of which might be underrepresented in mainstream investment funds. These funds can be a great opportunity to put your money into areas and themes that you’re passionate about. However, they also have their own risks, including potentially higher volatility and setbacks associated with a tight investment focus. ## The Bottom Line ETFs and investment trusts differ in their structure and management. ETFs are open-end funds, allowing for more efficient trading close to their NAV. They can offer diversified exposure across various asset classes and are frequently passively managed, leading to lower management fees. By contrast, investment trusts have a closed-end structure, issuing a fixed number of shares at inception, which means that they can frequently trade at a premium or discount to the fund’s NAV. Investment trusts, which usually have more active management and use leverage, may have lower liquidity, affecting trading costs compared with more liquid ETFs. Choosing between ETFs and investment trusts requires a careful consideration of liquidity, the fund’s use of leverage, tax efficiency, and whether the fund trades at a premium or discount. Before investing in either, be sure that it meets your long-term financial goals. It’s always prudent to seek out advice from a [financial advisor](https://www.investopedia.com/terms/f/financial-advisor.asp).

Exchange-traded funds (ETFs) and investment trusts are two popular investment products, each with specific characteristics, advantages, and disadvantages. The primary difference between them is how they’re structured. Investment trusts are closed-end funds with a fixed number of shares set at an initial public offering (IPO). ETFs are open-end funds, and their shares are created or redeemed based on investor demand. Key Takeaways The primary difference between exchange-traded funds (ETFs) and investment trusts is that the former are open-end funds, while the latter are closed-end funds. Investment trusts issue a fixed number of shares at inception, while ETFs can issue new shares based on investor demand. Investment trusts are more likely than ETFs to trade at prices different from their net asset value (NAV). Investment trusts typically have lower liquidity and are more actively managed than ETFs, which might increase trading costs and management fees. ETFs usually are more tax-efficient than investment trusts because capital gains can be reduced through the ETF creation and redemption process. What Is an ETF? An ETF is an investment security that's similar to a mutual fund in that it invests in a basket of securities. However, unlike mutual funds, it trades on an exchange and can be bought or sold like a stock. ETFs aim to track a particular index, sector, commodity, or other asset. ETFs have become popular because they offer flexibility and are cost-effective. They can be used in a variety of investment strategies, from passive index tracking to actively managed portfolios. ETFs can offer diversified exposure to specific asset classes, currencies, sectors, or indexes while trading on exchanges like individual stocks. ETFs are open-end funds, which means that their management can create or redeem shares based on investor demand. This should keep their share price in line with the net asset value (NAV) of their underlying assets. Larger ETFs have substantial assets under management (AUM) and a high trading volume, which should keep management fees and trading costs low. For example, the SPDR S&P 500 ETF Trust (SPY) has an expense ratio of 0.09% and turns over almost 10.9 million shares daily. In addition, ETFs disclose their portfolio holdings daily, offering transparency. U.S. ETFs accounted for 28.2% of total equity trading volume on U.S. exchanges in the third quarter of 2023. What Is an Investment Trust? Investment trusts, also called closed-end funds, pool resources from multiple investors to buy a portfolio of assets. Assets might include equities, commodities, fixed-income securities, or real estate. As closed-end funds, investment trusts issue a fixed number of shares at inception that doesn’t change. This has several effects: Long-term strategies: This stability in share numbers allows fund managers to focus on long-term investment strategies without concern for short-term redemption pressures. Trading at premium or discount: Investment trust shares can trade at a premium or discount to their NAV, a key characteristic to consider. For instance, BlackRock Health Sciences Trust (BME), which invests in the healthcare and life sciences sectors, traded at a -5.26% discount to its NAV as of Feb. 23, 2024. So, depending on the NAV relative to the share price, this can create opportunities to buy shares of investment trusts at a discount or sell them at a premium. Less need for liquidity: The closed-end structure means fund managers don’t need to keep large amounts of cash on hand for redemptions and can put more to work for investors in other assets. Independent boards or trustees oversee the management of investment trusts. They are expected to adhere to the trust’s objectives and act as an added layer of governance. Investment trusts can adopt active or passive investment strategies and cater to income-seeking or growth-oriented investors. Some jurisdictions grant tax advantages to investment trusts, enhancing their tax efficiency. While investment trusts can offer valuable diversification and investment opportunities, they have risks. Therefore, investors should assess their financial goals and risk tolerance before including them in their portfolios. Key Differences Between ETFs and Investment Trusts ETFs and investment trusts are both common investment vehicles, but they have significant differences in their structure, management, and tax efficiency. 1. ETFs are managed investment funds that aim to mirror the performance of a specific index or asset class. They trade on stock exchanges, providing investors with greater liquidity and flexibility. By contrast, investment trusts are closed-end funds with a fixed number of shares and can trade at a premium or discount to their NAV. This can create unique opportunities and risks. 2. While investment trusts also trade on exchanges, they typically have a lower volume of trade, which could increase trading costs. 3. Management styles differ substantially between ETFs and investment trusts. Large ETFs that track bellwether stock indexes, such as the S&P 500, typically have ultra-low management fees because of their passive approach. Investment trusts tend to be more actively managed, requiring the expertise of a skilled investment manager to navigate market conditions. Investment trusts also regularly borrow money to invest, which can enhance returns but also amplify losses. 4. These investment products have differing tax implications. ETFs are usually more tax-efficient since capital gains can be minimized through their creations and redemptions. Investment trusts, however, may distribute capital gains, creating a tax liability. While both ETFs and investment trusts can offer diversified investment choices, understanding their key differences can help you make more informed investment decisions aligned with your financial goals. Key Differences ETFs Greater liquidity and flexibility because they trade like stocks Higher trading volume Often have lower trading costs May be passively managed and therefore have lower expense costs Tax-efficient Investment Trusts Closed end-funds Lower trading volume May have higher trading costs Will usually be actively managed and have higher management fees May be less tax-efficient Advantages and Disadvantages of ETFs Advantages Diversification: ETFs offer instant diversification at low cost. For instance, the SPY ETF tracks the S&P 500 Index, offering investors exposure to 500 large-cap U.S. stocks. This diversification helps spread risk, reducing the impact of a poor performance from individual stocks or underperforming sectors. Liquidity: ETFs trade on stock exchanges, making many of them highly liquid. Ample share turnover helps to reduce transaction costs, such as slippage and high bid-ask spreads. Plus, it’s easy to buy or sell ETF shares of popular ETFs throughout the trading day. For example, the Invesco QQQ Trust (QQQ), which is for those who favor tech stocks and tracks the performance of the Nasdaq-100 Index, has an average daily intraday liquidity of almost 50 million shares. Disadvantages Lack of control: Many ETFs are passively managed, meaning you have no say in the individual securities included in the fund’s portfolio. For instance, if you want to exclude a specific company from your portfolio for ethical reasons, you can’t do so in an ETF tracking a broad index like the S&P 500 or the Nasdaq-100. Tracking errors: ETFs aim to replicate the performance of an underlying index. However, tracking discrepancies can occur. For example, the ETF’s expenses, deducted from the ETF’s returns, could cause its performance to slightly deviate from that of the index, currency, or sector it covers. To illustrate, as of Dec. 31, 2023, the iShares MSCI Emerging Markets ETF (EEM) had a 10-year return of 1.96% compared with the benchmark index’s 2.66% return over the same period. Spot bitcoin ETFs, which began trading for the first time in the United States in January 2024, can have higher management fees than traditional ETFs. Advantages and Disadvantages of Investment Trusts Advantages Closed-end structure: Investment trusts' structure lets portfolio managers take a longer-term perspective without buying or selling assets to meet redemptions. For instance, the managers of BME can focus on the fund’s longer-term investment objectives without worrying about a flood of redemptions during a market downturn. Leverage: Some investment trusts use leverage to enhance returns. This can magnify gains during favorable market conditions when they borrow money to invest. For example, the PIMCO Dynamic Income Fund (PDI) had 38.35% total effective leverage as of Jan. 31, 2024, primarily due to reverse repurchase agreements that may help amplify returns if bond yields remain elevated. Disadvantages Premiums and discounts: Investment trusts may trade above or below their NAV. While a premium could indicate strong demand, a discount may represent a lack of investor interest. For example, when BME traded at a -5.26% discount to its NAV on Feb. 23, 2024, this meant that, potentially, investors could receive less than the value of the fund’s underlying assets.Liquidity and costs: Investment trusts, like ETFs, trade on stock exchanges. However, they usually have lower liquidity because of their fixed supply of shares. As a result of lower share turnover, you might incur higher trading costs and wider bid-ask spreads. You could also face liquidity issues if an investment trust issuer suspends a fund during a period of underperformance. Are ETFs or Investment Trusts Better for Long-term Investments? Both can be suitable as long-term investments. Some investors prefer ETFs for their lower costs and index-tracking nature, making them potentially better for passive, long-term strategies. With their fixed share structure, investment trusts can be suitable for long-term investors looking for potential income sources and who can handle price fluctuations when the shares go above or below NAV. How Do Management Styles Differ Between ETFs and Investment Trusts? ETFs and investment trusts have distinct management styles. ETFs often passively track an index, a buy-and-hold approach which involves minimal decision making by fund managers. By contrast, investment trusts frequently follow active management strategies, with fund managers actively selecting and adjusting the portfolio in an attempt to outperform the market. Investment trusts may also use leverage, which can add to the active management of a fund. Are There Differences in Dividends Between ETFs and Investment Trusts? Yes. Investment trusts have potentially higher dividend yields, partly because of their ability to use leverage and the income-focused strategies often employed by fund managers. ETFs can pay dividends, too, but their yields derive from their underlying assets. An ETF geared toward capturing value from increases in stock prices typically provides less in dividends. Are There ETFs or Investment Trusts Focused on Niche Markets? Yes. Certain ETFs and investment trusts zero in on quite specific markets or themes. For example, some focus on emerging or specialized fields like esports, space exploration, biotechnology, blockchain, or clean energy technology. There are geographically targeted ETFs and investment trusts, some regions of which might be underrepresented in mainstream investment funds.These funds can be a great opportunity to put your money into areas and themes that you’re passionate about. However, they also have their own risks, including potentially higher volatility and setbacks associated with a tight investment focus. The Bottom Line ETFs and investment trusts differ in their structure and management. ETFs are open-end funds, allowing for more efficient trading close to their NAV. They can offer diversified exposure across various asset classes and are frequently passively managed, leading to lower management fees. By contrast, investment trusts have a closed-end structure, issuing a fixed number of shares at inception, which means that they can frequently trade at a premium or discount to the fund’s NAV. Investment trusts, which usually have more active management and use leverage, may have lower liquidity, affecting trading costs compared with more liquid ETFs. Choosing between ETFs and investment trusts requires a careful consideration of liquidity, the fund’s use of leverage, tax efficiency, and whether the fund trades at a premium or discount. Before investing in either, be sure that it meets your long-term financial goals. It’s always prudent to seek out advice from a financial advisor.

https://www.investopedia.com/amazon-construction-7197518

Amazon Pauses Construction on Second Phase of Virginia Headquarters

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Amazon will pause construction<span class="ql-inline-citation" data-cite="6"></span> of its headquarters in Arlington, Virginia, as the company rethinks space needs and work-from-home policies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The project, known as PenPlace, is part of Amazon's second headquarters, in suburban Washington, chosen after a nationwide search. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The property would include three 22-story office buildings, a 700-person meeting center and the Helix, a 350-foot tower.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways </h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>After announcing 18,000 layoffs at the beginning of the year, Amazon is pausing the second phase of its construction of a new headquarters in Arlington, Va.</li><li>The pause will only affect one of two projects set for the Washington, D.C. metro area. The first phase of construction is still slated to be completed in time for employees to work in office by June.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Construction hasn't stopped on a nearby complex called Met Park, which has two office towers and is set to have space for more than 14,000 employees, according to John Schoettler, Amazon’s head of real estate. Plans for the Arlington developments were announced in 2017. Schoettler said Amazon has already hired more than 8,000 employees for Met Park campus. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> “We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit,” Schoettler said, according to a statement cited by Bloomberg, which was first to report the news. “We remain committed to Arlington, Virginia, and the greater Capital Region.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Amazon, like many other corporations and tech companies across the U.S., is assessing its remote work policies as office spaces are used less since the pandemic. In February, Amazon CEO Andy Jassy said the company would require employees to return to the office at least three days a week beginning in March -- and move that employees have pushed back against.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> According to data from Kastle, a building security system that tracks how many employees are accessing the buildings they manage, an average of 46.6% of workers in the Washington, D.C. metro area were in the office from Feb. 16 to Feb. 23.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The pause came after Amazon announced layoffs in late January that are expected to affect up to 18,000 employees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The company is still planning to expand its presence in Arlington, and is expected to spend $2.5 billion on construction projects, with plans to hire around 25,000 workers by 2030, according to Bloomberg, which first reported the pause.<span class="ql-inline-citation" data-cite="4"></span> Amazon picked Arlington, alongside a location in New York City, to house its new headquarters, but the New York project was halted after protests from local politicians and activists. Amazon was offered nearly $3 billion in incentives to choose the Queens location as its headquarters, but walked back on the plans in 2019, following the local opposition.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The company was on its way to increasing its physical presence around the country in the throes of the coronavirus pandemic, which brought on a surge of online marketplaces. It has since pulled back on planned expansions in Nashville and Bellevue, Washington, citing uncertainty around remote work policies.<span class="ql-inline-citation" data-cite="3"></span> </p></div>

Amazon will pause construction of its headquarters in Arlington, Virginia, as the company rethinks space needs and work-from-home policies. The project, known as PenPlace, is part of Amazon's second headquarters, in suburban Washington, chosen after a nationwide search. The property would include three 22-story office buildings, a 700-person meeting center and the Helix, a 350-foot tower. ### Key Takeaways * After announcing 18,000 layoffs at the beginning of the year, Amazon is pausing the second phase of its construction of a new headquarters in Arlington, Va. * The pause will only affect one of two projects set for the Washington, D.C. metro area. The first phase of construction is still slated to be completed in time for employees to work in office by June. Construction hasn't stopped on a nearby complex called Met Park, which has two office towers and is set to have space for more than 14,000 employees, according to John Schoettler, Amazon’s head of real estate. Plans for the Arlington developments were announced in 2017. Schoettler said Amazon has already hired more than 8,000 employees for Met Park campus. “We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit,” Schoettler said, according to a statement cited by Bloomberg, which was first to report the news. “We remain committed to Arlington, Virginia, and the greater Capital Region.” Amazon, like many other corporations and tech companies across the U.S., is assessing its remote work policies as office spaces are used less since the pandemic. In February, Amazon CEO Andy Jassy said the company would require employees to return to the office at least three days a week beginning in March -- and move that employees have pushed back against.  According to data from Kastle, a building security system that tracks how many employees are accessing the buildings they manage, an average of 46.6% of workers in the Washington, D.C. metro area were in the office from Feb. 16 to Feb. 23. The pause came after Amazon announced layoffs in late January that are expected to affect up to 18,000 employees. The company is still planning to expand its presence in Arlington, and is expected to spend $2.5 billion on construction projects, with plans to hire around 25,000 workers by 2030, according to Bloomberg, which first reported the pause. Amazon picked Arlington, alongside a location in New York City, to house its new headquarters, but the New York project was halted after protests from local politicians and activists. Amazon was offered nearly $3 billion in incentives to choose the Queens location as its headquarters, but walked back on the plans in 2019, following the local opposition.  The company was on its way to increasing its physical presence around the country in the throes of the coronavirus pandemic, which brought on a surge of online marketplaces. It has since pulled back on planned expansions in Nashville and Bellevue, Washington, citing uncertainty around remote work policies.

Amazon will pause construction of its headquarters in Arlington, Virginia, as the company rethinks space needs and work-from-home policies. The project, known as PenPlace, is part of Amazon's second headquarters, in suburban Washington, chosen after a nationwide search. The property would include three 22-story office buildings, a 700-person meeting center and the Helix, a 350-foot tower. Key Takeaways After announcing 18,000 layoffs at the beginning of the year, Amazon is pausing the second phase of its construction of a new headquarters in Arlington, Va.The pause will only affect one of two projects set for the Washington, D.C. metro area. The first phase of construction is still slated to be completed in time for employees to work in office by June. Construction hasn't stopped on a nearby complex called Met Park, which has two office towers and is set to have space for more than 14,000 employees, according to John Schoettler, Amazon’s head of real estate. Plans for the Arlington developments were announced in 2017. Schoettler said Amazon has already hired more than 8,000 employees for Met Park campus. “We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit,” Schoettler said, according to a statement cited by Bloomberg, which was first to report the news. “We remain committed to Arlington, Virginia, and the greater Capital Region.” Amazon, like many other corporations and tech companies across the U.S., is assessing its remote work policies as office spaces are used less since the pandemic. In February, Amazon CEO Andy Jassy said the company would require employees to return to the office at least three days a week beginning in March -- and move that employees have pushed back against.  According to data from Kastle, a building security system that tracks how many employees are accessing the buildings they manage, an average of 46.6% of workers in the Washington, D.C. metro area were in the office from Feb. 16 to Feb. 23. The pause came after Amazon announced layoffs in late January that are expected to affect up to 18,000 employees. The company is still planning to expand its presence in Arlington, and is expected to spend $2.5 billion on construction projects, with plans to hire around 25,000 workers by 2030, according to Bloomberg, which first reported the pause. Amazon picked Arlington, alongside a location in New York City, to house its new headquarters, but the New York project was halted after protests from local politicians and activists. Amazon was offered nearly $3 billion in incentives to choose the Queens location as its headquarters, but walked back on the plans in 2019, following the local opposition.  The company was on its way to increasing its physical presence around the country in the throes of the coronavirus pandemic, which brought on a surge of online marketplaces. It has since pulled back on planned expansions in Nashville and Bellevue, Washington, citing uncertainty around remote work policies.

https://www.investopedia.com/financial-challenges-for-lgbtq-service-members-5193638

Financial Challenges for LGBTQ+ Service Members and Their Families

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> It’s been over a decade since lesbian, gay, and bisexual service members could serve openly,<span class="ql-inline-citation" data-cite="42"></span> and two years for transgender service members<span class="ql-inline-citation" data-cite="41"></span> (in addition to a brief period during the Obama administration). Despite making huge strides and gaining important rights, some issues still persist for LGBTQ+ service members and their families, many of which pose financial challenges. Here’s a look at the discriminatory barriers the community has overcome—and some they’re still fighting. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>Service members who were forced to leave service under "don't ask, don't tell" were <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guide-to-finance-for-lgbtq-americans-5118290">set back financially</a>—they lost short-term income and benefits, but also long-term security such as retirement and veterans' medical care.</li> <li>As of now, the military's health insurance only covers assisted reproductive services if “medically necessary and combined with coital conception.”</li> <li>Prior to 2013, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lgbtq-elder-care-in-retirement-5176588">retirement</a>, burial, and GI Bill benefits.</li> </ul></div></div></div> <span class="heading-toc" id="toc-historic-barriers"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Historic Barriers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Though policies changed over time, for the most part, LGBTQ+ people were banned from serving in the U.S. military until 1993. That year, the federal “don’t ask, don’t tell” (DADT) policy went into effect.<span class="ql-inline-citation" data-cite="43"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> 'Don't ask, don't tell' </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> DADT permitted gay, lesbian, and bisexual people to serve. The trade-off: They had to serve in silence and, if their identities were discovered, they could be discharged. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Congress repealed DADT in 2011, allowing open LGB service, and when the Defense of Marriage Act was struck down in 2013, the military started extending spousal and family benefits to same-sex married couples.<span class="ql-inline-citation" data-cite="44"></span><span class="ql-inline-citation" data-cite="24"></span><span class="ql-inline-citation" data-cite="25"></span> But many states didn’t permit same-sex marriage until the 2015 Supreme Court decision that expanded it nationwide.<span class="ql-inline-citation" data-cite="49"></span><span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The conflicting state and federal laws left gaps in protection. For example, a couple who married in a state that adopted same-sex marriage early—such as New York, in 2011—wouldn't receive federal recognition and benefits until the military started extending benefits in 2013.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Plus, many states still didn't recognize same-sex marriage until 2015, which created confusion for couples stationed in those states. They would have to wed in another state that allowed it in order to get the military to recognize the marriage, but with conflicting laws and policies, this didn't always go smoothly. These issues left some families in limbo for years, without military or governmental benefits, such as spousal moving or living expenses, health insurance, life insurance, or tax breaks.<span class="ql-inline-citation" data-cite="28"></span><span class="ql-inline-citation" data-cite="27"></span>Additionally, the spouses of LGBTQ+ service members who retired before marriage equality still do not have access to military retirement and burial benefits, says Jennifer Dane, an LGBTQ+ Air Force veteran who served under DADT and former executive director of the Modern Military Association of America (MMAA). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> During the 17 years DADT was in place, it is estimated that more than 14,000 troops were discharged for sexual orientation, according to the Center for American Progress. The think tank estimates an additional 4,000 chose not to reenlist each year due to the discriminatory policy.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> These numbers don’t tell the whole story, Dane says. “These facts and figures do not include those who were kicked out under other types of discharges such as administrative, bad conduct, character unbecoming, and many others,” she explains. “It also doesn’t highlight the fact that service members were also honorably discharged, but marked with the scarlet letter of ‘homosexual conduct’ under their reenlistment code, nullifying any future service. They may have retained their military benefits, but it tainted their lives and livelihoods forever.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Regardless of the type of discharge, service members who were forced to leave the military under DADT were set back financially—as a result of losing short-term income and benefits as well as long-term security like retirement and veterans' medical care. Additionally, those who were dishonorably discharged lost access to jobs, free veterans programs, and scholarships that require honorable discharges, Dane explains. Organizations such as her prior employer, MMAA, offer free legal services to help those discharged under DADT restore their records. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Transgender service members </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Transgender service members have faced a different battle. They were not included in DADT and remained prohibited from serving until 2016, when the Obama administration lifted the trans service ban. The Trump administration put it back in place soon after, and it was again repealed in early 2021 by the Biden administration.<span class="ql-inline-citation" data-cite="30"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Trans troops who were discharged or forced to separate due to the two bans were exposed to similar loss of financial stability and benefits such as healthcare, which also impacted their family members. The policies were created via presidential executive order rather than Congressional legislation, hence the pingponging. That also means a future ban could be implemented unless legislation is adopted to prevent it. Such legislation has not yet been passed by Congress.<span class="ql-inline-citation" data-cite="45"></span><span class="ql-inline-citation" data-cite="32"></span><span class="ql-inline-citation" data-cite="31"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-areas-that-still-pose-financial-challenges"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Areas That Still Pose Financial Challenges </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Even though same-sex couples can now marry and access the same benefits as heterosexual couples and trans troops can serve openly, some barriers remain in place. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Building a family </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> For LGBTQ+ people, the process of having or adopting children is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-costs-of-lgbtq-family-planning-5180217">notoriously expensive</a> and typically not covered by Tricare, the military’s health insurance. Even though same-sex couples who are both men aren’t experiencing infertility—they biologically <em>can’t</em> have a child—the military system has no accommodation for that and lumps them into the same framework as heterosexual couples.<span class="ql-inline-citation" data-cite="5"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Dane notes that even though the VA’s current policy states that it does not discriminate in terms of who can receive fertility benefits, "There are still significant barriers that same-sex couples and folks who are single veterans face." One of those barriers is that if you are not married to a man, you have to provide your own sperm. This policy isn't inclusive for LGBTQ+ families and families who are single and need support. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> LGBTQ+ military advocates are working to improve family-building Tricare coverage. But currently, Tricare’s policy only covers assisted reproductive service if “medically necessary and combined with coital conception.” It may pick up the bill for some diagnostic testing, but it specifically doesn’t cover artificial or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-much-does-iui-cost-6503322">intrauterine insemination</a>, non-coital reproductive services, or any costs for donors, semen banks, or surrogacy. Some assisted reproductive services are included only if the service member was injured while on active duty.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Due to this gap, some fertility clinics offer military discounts, though the massive out-of-pocket expenses may require financing, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-ivf-loans-5088591">IVF loans</a>. There are also some <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.familyequality.org/resources/lgbtq-family-building-grants/">family-building grants</a>. Additional information and resources are available through the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.militarybirthresourcenetwork.org/" rel="nofollow">Military Birth Resource Network</a> or the new <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.militaryfamilybuilding.org/" rel="nofollow">Military Family Building Coalition</a>.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-subheading__text"> Caring for LGBTQ+ dependents </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> With the integration of openly serving LGBTQ+ troops, the military has gradually started offering care for service members in areas such as HIV prevention and hormone therapy. But when it comes to the needs of LGBTQ+ kids and spouses, many military treatment facilities don’t have the experts or training to support their needs. In some cases, they can refer dependents to local providers in the Tricare network, but there may not be any, and they might live in a state that has banned gender-affirming care for youth (although those laws don’t apply to on-base care).<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Trans and non-binary military family members diagnosed with gender dysphoria can be enrolled in the Exceptional Family Member Program (EFMP)—a designation for dependents with special needs, from autism to asthma. With EFMP classification, the military makes accommodations to try to station the family at a base and/or area with the right resources.<span class="ql-inline-citation" data-cite="33"></span> Currently, if a military family with a trans youth is at a base that’s too small or inexperienced to offer gender-affirming care, getting them enrolled in EFMP—or attempting a compassionate reassignment—can help ensure their next duty station will be in a place with access to gender-affirming care. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> In 2021, congressional Democrats introduced the ​​Armed Forces Transgender Dependent Protection Act, which would have brought additional protections to these military families, but the bill never went anywhere. Both MMAA and the trans military advocacy organization SPARTA are actively working to improve access to care for LGBTQ+ dependents.<span class="ql-inline-citation" data-cite="34"></span><span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> Facing state-level discrimination </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Though federal civil rights protections prevent discrimination on the basis of certain types of identity, such as race or religion, there’s no explicit protection for sexual orientation or gender identity. LGBTQ+ activists have long fought for the passage of the federal Equality Act, which would amend the 1964 Civil Rights Act to include LGBTQ+ rights in all key aspects of life.<span class="ql-inline-citation" data-cite="36"></span><span class="ql-inline-citation" data-cite="35"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Though it passed twice in the House, the Equality Act remains bottlenecked in the Senate. Some cities and counties have passed nondiscrimination laws to protect their LGBTQ+ citizens, but many conservative state legislatures are passing a record number of anti-LGBTQ+ laws that could affect LGBTQ+ military families stationed in those states. These laws restrict everything from adoption to medical care, typically on religious grounds.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> In lieu of the Equality Act, the federal government has intervened in piecemeal ways. A 2020 Supreme Court decision <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lgbtq-representation-in-the-workforce-5184133">prohibited workplace discrimination</a> for LGBTQ+ people, which could make it easier for an LGBTQ+ military spouse to find work in any state.<span class="ql-inline-citation" data-cite="21"></span> Then, in 2022, the Respect for Marriage Act was signed into law, which affirms that all states and the federal government must recognize same-sex marriages. The catch: If The Supreme Court overturns marriage equality, states can ban same-sex marriage again. This law simply requires that should that happen, even states that ban it must recognize same-sex marriages formed in states that allow it. On the bright side, it codifies in law the right to federal spousal benefits for same-sex couples.<span class="ql-inline-citation" data-cite="40"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> The Biden administration has also implemented several separate policies that ban LGBTQ+ discrimination in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-lending-for-lgbtq-people-5120688">housing</a>, medical care, and credit.<span class="ql-inline-citation" data-cite="22"></span> However, according to the Human Rights Campaign, these create a patchwork of reversible policies. Until the Equality Act is passed and in place, depending on where military families are stationed, they may still encounter various forms of discrimination—some legal, some not.<span class="ql-inline-citation" data-cite="23"></span> For additional information, the nonprofit American Civil Liberties Union has a primer on LGBTQ+ rights and a hub for reporting illegal discrimination.<span class="ql-inline-citation" data-cite="38"></span><span class="ql-inline-citation" data-cite="37"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Catching up on savings </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Though the military started providing benefits to same-sex married couples in 2013, many troops couldn’t marry until 2015, when all states adopted marriage equality. Prior to that, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including retirement, burial, and GI Bill benefits, Dane says. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Younger service members who joined after DADT and marriage equality may not face as many of these issues. But even as discrimination has become illegal in more areas, it still can—and does—happen. According to a 2022 survey on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lgbtq-marriage-and-personal-finance-5176477">LGBTQ+ finances</a> by U.S. Bank, the LGBTQ+ community faces higher levels of poverty, homelessness, and overall financial stress than the general population. The survey found that 42% of LGBTQ+ people felt extreme or moderate stress from experiencing discrimination with financial services. Additionally, 60% of LGBTQ+ people aren't having the children they want due to lack of money. Other surveys in recent years have found that the LGBTQ+ community has lower salaries and less in retirement savings than the general population.<span class="ql-inline-citation" data-cite="39"></span><span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> This means it’s crucial for LGBTQ+ military families to focus on financial health, from creating a budget to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/preparing-for-retirement-as-an-lgbtq-person-5183693">focusing on retirement savings</a>. If family-building is in your future, it’s wise to start saving for it well in advance. Many bases offer free financial counseling, but you could also <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-find-an-lgbtq-friendly-financial-planner-5186139">hire a financial planner in the LGBTQ+ community</a> who’s well versed in navigating common challenges. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Amid ever-changing laws and policies, it’s also smart to hire a lawyer to create wills and other estate planning documents to add an extra level of protection for your family. This is especially crucial if you have children because same-sex and second-parent adoption laws vary and are at times barred, depending on the state. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-how-many-lgbtq-veterans-are-there"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many LGBTQ+ Veterans Are There?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are an estimated one million lesbian, gay, bisexual, and transgender veterans in the U.S., with California having the largest number of gay and lesbian veterans among the states.<span class="ql-inline-citation" data-cite="46"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-what-financial-issues-impact-the-lgbtq-community"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Financial Issues Impact the LGBTQ+ Community?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Although same-sex couples can marry and have access to the same benefits as heterosexual couples, they still face financial challenges. Data from 2021 and 2022 from the Federal Reserve Board and the Census Bureau Household Pulse Survey reveal that LGBTQ+ adults and couples have fewer savings and investments as well as lower incomes than straight adults and heterosexual couples. They are also less likely to own a home. Bisexual women and transgender adults have the lowest household savings and investments among LGBTQ+ and non-LGBTQ+ people.<span class="ql-inline-citation" data-cite="47"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-how-can-companies-support-lgbtq-employees"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Companies Support LGBTQ+ Employees?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>According to a 2021 study by the Williams Institute,<span class="ql-inline-citation" data-cite="48"></span> half of LGBT workers in the U.S. have not come out to their supervisors. In addition, 26% keep their LGBT identity from their co-workers as well. The reason: Employees who had come out at work were three time more likely to report harassment or discrimination at the workplace than those who weren't out to anyone at work.</p><p>Employment discrimination based on sexual orientation or transgender status was struck down in 2020 by the U.S. Supreme Court in Bostock v. Clayton County.<span class="ql-inline-citation" data-cite="21"></span> To begin with, employers can take steps to help LGBTQ+ employees feel welcome and supported by creating a comprehensive LGBTQ+ policy that includes sexual orientation and gender identity as protected statuses. Here are some other steps employers can take:<span class="ql-inline-citation" data-cite="48"></span></p><ul><li>Establish formal LGBTQ+ awareness training programs.</li><li>Ensure that employee benefits cover LGBTQ+ employees.</li><li>Implement gender-neutral bathrooms and dress codes.</li><li>Celebrate LGBTQ+ events such as Pride Month.</li><li>Treat LGBTQ+ employees with dignity and respect.</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> The LGBTQ+ military community has made astonishing progress in the past decade, seeing the end of discriminatory policies and the addition of more protections. Though this has offered more financial security for many LGBTQ+ military families, they still face barriers, especially with family-building, dependent care, catching up financially, and navigating worsening state-level discrimination. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> There is also still work to be done to include intersex, gender diverse, and nonbinary people within the military, Dane says. Much progress has been made, but the battle for full equality continues. </p></div>

It’s been over a decade since lesbian, gay, and bisexual service members could serve openly, and two years for transgender service members (in addition to a brief period during the Obama administration). Despite making huge strides and gaining important rights, some issues still persist for LGBTQ+ service members and their families, many of which pose financial challenges. Here’s a look at the discriminatory barriers the community has overcome—and some they’re still fighting. ### Key Takeaways * Service members who were forced to leave service under "don't ask, don't tell" were [set back financially](https://www.investopedia.com/guide-to-finance-for-lgbtq-americans-5118290)—they lost short-term income and benefits, but also long-term security such as retirement and veterans' medical care. * As of now, the military's health insurance only covers assisted reproductive services if “medically necessary and combined with coital conception.” * Prior to 2013, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including [retirement](https://www.investopedia.com/lgbtq-elder-care-in-retirement-5176588), burial, and GI Bill benefits. ## Historic Barriers Though policies changed over time, for the most part, LGBTQ+ people were banned from serving in the U.S. military until 1993. That year, the federal “don’t ask, don’t tell” (DADT) policy went into effect. ### 'Don't ask, don't tell' DADT permitted gay, lesbian, and bisexual people to serve. The trade-off: They had to serve in silence and, if their identities were discovered, they could be discharged. Congress repealed DADT in 2011, allowing open LGB service, and when the Defense of Marriage Act was struck down in 2013, the military started extending spousal and family benefits to same-sex married couples. But many states didn’t permit same-sex marriage until the 2015 Supreme Court decision that expanded it nationwide. The conflicting state and federal laws left gaps in protection. For example, a couple who married in a state that adopted same-sex marriage early—such as New York, in 2011—wouldn't receive federal recognition and benefits until the military started extending benefits in 2013. Plus, many states still didn't recognize same-sex marriage until 2015, which created confusion for couples stationed in those states. They would have to wed in another state that allowed it in order to get the military to recognize the marriage, but with conflicting laws and policies, this didn't always go smoothly. These issues left some families in limbo for years, without military or governmental benefits, such as spousal moving or living expenses, health insurance, life insurance, or tax breaks.Additionally, the spouses of LGBTQ+ service members who retired before marriage equality still do not have access to military retirement and burial benefits, says Jennifer Dane, an LGBTQ+ Air Force veteran who served under DADT and former executive director of the Modern Military Association of America (MMAA). During the 17 years DADT was in place, it is estimated that more than 14,000 troops were discharged for sexual orientation, according to the Center for American Progress. The think tank estimates an additional 4,000 chose not to reenlist each year due to the discriminatory policy. These numbers don’t tell the whole story, Dane says. “These facts and figures do not include those who were kicked out under other types of discharges such as administrative, bad conduct, character unbecoming, and many others,” she explains. “It also doesn’t highlight the fact that service members were also honorably discharged, but marked with the scarlet letter of ‘homosexual conduct’ under their reenlistment code, nullifying any future service. They may have retained their military benefits, but it tainted their lives and livelihoods forever.” Regardless of the type of discharge, service members who were forced to leave the military under DADT were set back financially—as a result of losing short-term income and benefits as well as long-term security like retirement and veterans' medical care. Additionally, those who were dishonorably discharged lost access to jobs, free veterans programs, and scholarships that require honorable discharges, Dane explains. Organizations such as her prior employer, MMAA, offer free legal services to help those discharged under DADT restore their records. ### Transgender service members Transgender service members have faced a different battle. They were not included in DADT and remained prohibited from serving until 2016, when the Obama administration lifted the trans service ban. The Trump administration put it back in place soon after, and it was again repealed in early 2021 by the Biden administration. Trans troops who were discharged or forced to separate due to the two bans were exposed to similar loss of financial stability and benefits such as healthcare, which also impacted their family members. The policies were created via presidential executive order rather than Congressional legislation, hence the pingponging. That also means a future ban could be implemented unless legislation is adopted to prevent it. Such legislation has not yet been passed by Congress. ## Areas That Still Pose Financial Challenges Even though same-sex couples can now marry and access the same benefits as heterosexual couples and trans troops can serve openly, some barriers remain in place. ### Building a family For LGBTQ+ people, the process of having or adopting children is [notoriously expensive](https://www.investopedia.com/the-costs-of-lgbtq-family-planning-5180217) and typically not covered by Tricare, the military’s health insurance. Even though same-sex couples who are both men aren’t experiencing infertility—they biologically *can’t* have a child—the military system has no accommodation for that and lumps them into the same framework as heterosexual couples.  Dane notes that even though the VA’s current policy states that it does not discriminate in terms of who can receive fertility benefits, "There are still significant barriers that same-sex couples and folks who are single veterans face." One of those barriers is that if you are not married to a man, you have to provide your own sperm. This policy isn't inclusive for LGBTQ+ families and families who are single and need support. LGBTQ+ military advocates are working to improve family-building Tricare coverage. But currently, Tricare’s policy only covers assisted reproductive service if “medically necessary and combined with coital conception.” It may pick up the bill for some diagnostic testing, but it specifically doesn’t cover artificial or [intrauterine insemination](https://www.investopedia.com/how-much-does-iui-cost-6503322), non-coital reproductive services, or any costs for donors, semen banks, or surrogacy. Some assisted reproductive services are included only if the service member was injured while on active duty. Due to this gap, some fertility clinics offer military discounts, though the massive out-of-pocket expenses may require financing, such as [IVF loans](https://www.investopedia.com/best-ivf-loans-5088591). There are also some [family-building grants](https://www.familyequality.org/resources/lgbtq-family-building-grants/). Additional information and resources are available through the [Military Birth Resource Network](https://www.militarybirthresourcenetwork.org/) or the new [Military Family Building Coalition](https://www.militaryfamilybuilding.org/). ### Caring for LGBTQ+ dependents With the integration of openly serving LGBTQ+ troops, the military has gradually started offering care for service members in areas such as HIV prevention and hormone therapy. But when it comes to the needs of LGBTQ+ kids and spouses, many military treatment facilities don’t have the experts or training to support their needs. In some cases, they can refer dependents to local providers in the Tricare network, but there may not be any, and they might live in a state that has banned gender-affirming care for youth (although those laws don’t apply to on-base care). Trans and non-binary military family members diagnosed with gender dysphoria can be enrolled in the Exceptional Family Member Program (EFMP)—a designation for dependents with special needs, from autism to asthma. With EFMP classification, the military makes accommodations to try to station the family at a base and/or area with the right resources. Currently, if a military family with a trans youth is at a base that’s too small or inexperienced to offer gender-affirming care, getting them enrolled in EFMP—or attempting a compassionate reassignment—can help ensure their next duty station will be in a place with access to gender-affirming care. In 2021, congressional Democrats introduced the ​​Armed Forces Transgender Dependent Protection Act, which would have brought additional protections to these military families, but the bill never went anywhere. Both MMAA and the trans military advocacy organization SPARTA are actively working to improve access to care for LGBTQ+ dependents. ### Facing state-level discrimination Though federal civil rights protections prevent discrimination on the basis of certain types of identity, such as race or religion, there’s no explicit protection for sexual orientation or gender identity. LGBTQ+ activists have long fought for the passage of the federal Equality Act, which would amend the 1964 Civil Rights Act to include LGBTQ+ rights in all key aspects of life. Though it passed twice in the House, the Equality Act remains bottlenecked in the Senate. Some cities and counties have passed nondiscrimination laws to protect their LGBTQ+ citizens, but many conservative state legislatures are passing a record number of anti-LGBTQ+ laws that could affect LGBTQ+ military families stationed in those states. These laws restrict everything from adoption to medical care, typically on religious grounds. In lieu of the Equality Act, the federal government has intervened in piecemeal ways. A 2020 Supreme Court decision [prohibited workplace discrimination](https://www.investopedia.com/lgbtq-representation-in-the-workforce-5184133) for LGBTQ+ people, which could make it easier for an LGBTQ+ military spouse to find work in any state. Then, in 2022, the Respect for Marriage Act was signed into law, which affirms that all states and the federal government must recognize same-sex marriages. The catch: If The Supreme Court overturns marriage equality, states can ban same-sex marriage again. This law simply requires that should that happen, even states that ban it must recognize same-sex marriages formed in states that allow it. On the bright side, it codifies in law the right to federal spousal benefits for same-sex couples. The Biden administration has also implemented several separate policies that ban LGBTQ+ discrimination in [housing](https://www.investopedia.com/mortgage-lending-for-lgbtq-people-5120688), medical care, and credit. However, according to the Human Rights Campaign, these create a patchwork of reversible policies. Until the Equality Act is passed and in place, depending on where military families are stationed, they may still encounter various forms of discrimination—some legal, some not. For additional information, the nonprofit American Civil Liberties Union has a primer on LGBTQ+ rights and a hub for reporting illegal discrimination. ### Catching up on savings Though the military started providing benefits to same-sex married couples in 2013, many troops couldn’t marry until 2015, when all states adopted marriage equality. Prior to that, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including retirement, burial, and GI Bill benefits, Dane says. Younger service members who joined after DADT and marriage equality may not face as many of these issues. But even as discrimination has become illegal in more areas, it still can—and does—happen. According to a 2022 survey on [LGBTQ+ finances](https://www.investopedia.com/lgbtq-marriage-and-personal-finance-5176477) by U.S. Bank, the LGBTQ+ community faces higher levels of poverty, homelessness, and overall financial stress than the general population. The survey found that 42% of LGBTQ+ people felt extreme or moderate stress from experiencing discrimination with financial services. Additionally, 60% of LGBTQ+ people aren't having the children they want due to lack of money. Other surveys in recent years have found that the LGBTQ+ community has lower salaries and less in retirement savings than the general population. This means it’s crucial for LGBTQ+ military families to focus on financial health, from creating a budget to [focusing on retirement savings](https://www.investopedia.com/preparing-for-retirement-as-an-lgbtq-person-5183693). If family-building is in your future, it’s wise to start saving for it well in advance. Many bases offer free financial counseling, but you could also [hire a financial planner in the LGBTQ+ community](https://www.investopedia.com/how-to-find-an-lgbtq-friendly-financial-planner-5186139) who’s well versed in navigating common challenges. Amid ever-changing laws and policies, it’s also smart to hire a lawyer to create wills and other estate planning documents to add an extra level of protection for your family. This is especially crucial if you have children because same-sex and second-parent adoption laws vary and are at times barred, depending on the state. ## How Many LGBTQ+ Veterans Are There? There are an estimated one million lesbian, gay, bisexual, and transgender veterans in the U.S., with California having the largest number of gay and lesbian veterans among the states. ## What Financial Issues Impact the LGBTQ+ Community? Although same-sex couples can marry and have access to the same benefits as heterosexual couples, they still face financial challenges. Data from 2021 and 2022 from the Federal Reserve Board and the Census Bureau Household Pulse Survey reveal that LGBTQ+ adults and couples have fewer savings and investments as well as lower incomes than straight adults and heterosexual couples. They are also less likely to own a home. Bisexual women and transgender adults have the lowest household savings and investments among LGBTQ+ and non-LGBTQ+ people. ## How Can Companies Support LGBTQ+ Employees? According to a 2021 study by the Williams Institute, half of LGBT workers in the U.S. have not come out to their supervisors. In addition, 26% keep their LGBT identity from their co-workers as well. The reason: Employees who had come out at work were three time more likely to report harassment or discrimination at the workplace than those who weren't out to anyone at work. Employment discrimination based on sexual orientation or transgender status was struck down in 2020 by the U.S. Supreme Court in Bostock v. Clayton County. To begin with, employers can take steps to help LGBTQ+ employees feel welcome and supported by creating a comprehensive LGBTQ+ policy that includes sexual orientation and gender identity as protected statuses. Here are some other steps employers can take: * Establish formal LGBTQ+ awareness training programs. * Ensure that employee benefits cover LGBTQ+ employees. * Implement gender-neutral bathrooms and dress codes. * Celebrate LGBTQ+ events such as Pride Month. * Treat LGBTQ+ employees with dignity and respect. ## The Bottom Line The LGBTQ+ military community has made astonishing progress in the past decade, seeing the end of discriminatory policies and the addition of more protections. Though this has offered more financial security for many LGBTQ+ military families, they still face barriers, especially with family-building, dependent care, catching up financially, and navigating worsening state-level discrimination. There is also still work to be done to include intersex, gender diverse, and nonbinary people within the military, Dane says. Much progress has been made, but the battle for full equality continues.

It’s been over a decade since lesbian, gay, and bisexual service members could serve openly, and two years for transgender service members (in addition to a brief period during the Obama administration). Despite making huge strides and gaining important rights, some issues still persist for LGBTQ+ service members and their families, many of which pose financial challenges. Here’s a look at the discriminatory barriers the community has overcome—and some they’re still fighting. Key Takeaways Service members who were forced to leave service under "don't ask, don't tell" were set back financially—they lost short-term income and benefits, but also long-term security such as retirement and veterans' medical care. As of now, the military's health insurance only covers assisted reproductive services if “medically necessary and combined with coital conception.” Prior to 2013, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including retirement, burial, and GI Bill benefits. Historic Barriers Though policies changed over time, for the most part, LGBTQ+ people were banned from serving in the U.S. military until 1993. That year, the federal “don’t ask, don’t tell” (DADT) policy went into effect. 'Don't ask, don't tell' DADT permitted gay, lesbian, and bisexual people to serve. The trade-off: They had to serve in silence and, if their identities were discovered, they could be discharged. Congress repealed DADT in 2011, allowing open LGB service, and when the Defense of Marriage Act was struck down in 2013, the military started extending spousal and family benefits to same-sex married couples. But many states didn’t permit same-sex marriage until the 2015 Supreme Court decision that expanded it nationwide. The conflicting state and federal laws left gaps in protection. For example, a couple who married in a state that adopted same-sex marriage early—such as New York, in 2011—wouldn't receive federal recognition and benefits until the military started extending benefits in 2013. Plus, many states still didn't recognize same-sex marriage until 2015, which created confusion for couples stationed in those states. They would have to wed in another state that allowed it in order to get the military to recognize the marriage, but with conflicting laws and policies, this didn't always go smoothly. These issues left some families in limbo for years, without military or governmental benefits, such as spousal moving or living expenses, health insurance, life insurance, or tax breaks.Additionally, the spouses of LGBTQ+ service members who retired before marriage equality still do not have access to military retirement and burial benefits, says Jennifer Dane, an LGBTQ+ Air Force veteran who served under DADT and former executive director of the Modern Military Association of America (MMAA). During the 17 years DADT was in place, it is estimated that more than 14,000 troops were discharged for sexual orientation, according to the Center for American Progress. The think tank estimates an additional 4,000 chose not to reenlist each year due to the discriminatory policy. These numbers don’t tell the whole story, Dane says. “These facts and figures do not include those who were kicked out under other types of discharges such as administrative, bad conduct, character unbecoming, and many others,” she explains. “It also doesn’t highlight the fact that service members were also honorably discharged, but marked with the scarlet letter of ‘homosexual conduct’ under their reenlistment code, nullifying any future service. They may have retained their military benefits, but it tainted their lives and livelihoods forever.” Regardless of the type of discharge, service members who were forced to leave the military under DADT were set back financially—as a result of losing short-term income and benefits as well as long-term security like retirement and veterans' medical care. Additionally, those who were dishonorably discharged lost access to jobs, free veterans programs, and scholarships that require honorable discharges, Dane explains. Organizations such as her prior employer, MMAA, offer free legal services to help those discharged under DADT restore their records. Transgender service members Transgender service members have faced a different battle. They were not included in DADT and remained prohibited from serving until 2016, when the Obama administration lifted the trans service ban. The Trump administration put it back in place soon after, and it was again repealed in early 2021 by the Biden administration. Trans troops who were discharged or forced to separate due to the two bans were exposed to similar loss of financial stability and benefits such as healthcare, which also impacted their family members. The policies were created via presidential executive order rather than Congressional legislation, hence the pingponging. That also means a future ban could be implemented unless legislation is adopted to prevent it. Such legislation has not yet been passed by Congress. Areas That Still Pose Financial Challenges Even though same-sex couples can now marry and access the same benefits as heterosexual couples and trans troops can serve openly, some barriers remain in place. Building a family For LGBTQ+ people, the process of having or adopting children is notoriously expensive and typically not covered by Tricare, the military’s health insurance. Even though same-sex couples who are both men aren’t experiencing infertility—they biologically can’t have a child—the military system has no accommodation for that and lumps them into the same framework as heterosexual couples.  Dane notes that even though the VA’s current policy states that it does not discriminate in terms of who can receive fertility benefits, "There are still significant barriers that same-sex couples and folks who are single veterans face." One of those barriers is that if you are not married to a man, you have to provide your own sperm. This policy isn't inclusive for LGBTQ+ families and families who are single and need support. LGBTQ+ military advocates are working to improve family-building Tricare coverage. But currently, Tricare’s policy only covers assisted reproductive service if “medically necessary and combined with coital conception.” It may pick up the bill for some diagnostic testing, but it specifically doesn’t cover artificial or intrauterine insemination, non-coital reproductive services, or any costs for donors, semen banks, or surrogacy. Some assisted reproductive services are included only if the service member was injured while on active duty. Due to this gap, some fertility clinics offer military discounts, though the massive out-of-pocket expenses may require financing, such as IVF loans. There are also some family-building grants. Additional information and resources are available through the Military Birth Resource Network or the new Military Family Building Coalition. Caring for LGBTQ+ dependents With the integration of openly serving LGBTQ+ troops, the military has gradually started offering care for service members in areas such as HIV prevention and hormone therapy. But when it comes to the needs of LGBTQ+ kids and spouses, many military treatment facilities don’t have the experts or training to support their needs. In some cases, they can refer dependents to local providers in the Tricare network, but there may not be any, and they might live in a state that has banned gender-affirming care for youth (although those laws don’t apply to on-base care). Trans and non-binary military family members diagnosed with gender dysphoria can be enrolled in the Exceptional Family Member Program (EFMP)—a designation for dependents with special needs, from autism to asthma. With EFMP classification, the military makes accommodations to try to station the family at a base and/or area with the right resources. Currently, if a military family with a trans youth is at a base that’s too small or inexperienced to offer gender-affirming care, getting them enrolled in EFMP—or attempting a compassionate reassignment—can help ensure their next duty station will be in a place with access to gender-affirming care. In 2021, congressional Democrats introduced the ​​Armed Forces Transgender Dependent Protection Act, which would have brought additional protections to these military families, but the bill never went anywhere. Both MMAA and the trans military advocacy organization SPARTA are actively working to improve access to care for LGBTQ+ dependents. Facing state-level discrimination Though federal civil rights protections prevent discrimination on the basis of certain types of identity, such as race or religion, there’s no explicit protection for sexual orientation or gender identity. LGBTQ+ activists have long fought for the passage of the federal Equality Act, which would amend the 1964 Civil Rights Act to include LGBTQ+ rights in all key aspects of life. Though it passed twice in the House, the Equality Act remains bottlenecked in the Senate. Some cities and counties have passed nondiscrimination laws to protect their LGBTQ+ citizens, but many conservative state legislatures are passing a record number of anti-LGBTQ+ laws that could affect LGBTQ+ military families stationed in those states. These laws restrict everything from adoption to medical care, typically on religious grounds. In lieu of the Equality Act, the federal government has intervened in piecemeal ways. A 2020 Supreme Court decision prohibited workplace discrimination for LGBTQ+ people, which could make it easier for an LGBTQ+ military spouse to find work in any state. Then, in 2022, the Respect for Marriage Act was signed into law, which affirms that all states and the federal government must recognize same-sex marriages. The catch: If The Supreme Court overturns marriage equality, states can ban same-sex marriage again. This law simply requires that should that happen, even states that ban it must recognize same-sex marriages formed in states that allow it. On the bright side, it codifies in law the right to federal spousal benefits for same-sex couples. The Biden administration has also implemented several separate policies that ban LGBTQ+ discrimination in housing, medical care, and credit. However, according to the Human Rights Campaign, these create a patchwork of reversible policies. Until the Equality Act is passed and in place, depending on where military families are stationed, they may still encounter various forms of discrimination—some legal, some not. For additional information, the nonprofit American Civil Liberties Union has a primer on LGBTQ+ rights and a hub for reporting illegal discrimination. Catching up on savings Though the military started providing benefits to same-sex married couples in 2013, many troops couldn’t marry until 2015, when all states adopted marriage equality. Prior to that, any same-sex couple—military or not—missed out on years of potential tax breaks and financial benefits, including retirement, burial, and GI Bill benefits, Dane says. Younger service members who joined after DADT and marriage equality may not face as many of these issues. But even as discrimination has become illegal in more areas, it still can—and does—happen. According to a 2022 survey on LGBTQ+ finances by U.S. Bank, the LGBTQ+ community faces higher levels of poverty, homelessness, and overall financial stress than the general population. The survey found that 42% of LGBTQ+ people felt extreme or moderate stress from experiencing discrimination with financial services. Additionally, 60% of LGBTQ+ people aren't having the children they want due to lack of money. Other surveys in recent years have found that the LGBTQ+ community has lower salaries and less in retirement savings than the general population. This means it’s crucial for LGBTQ+ military families to focus on financial health, from creating a budget to focusing on retirement savings. If family-building is in your future, it’s wise to start saving for it well in advance. Many bases offer free financial counseling, but you could also hire a financial planner in the LGBTQ+ community who’s well versed in navigating common challenges. Amid ever-changing laws and policies, it’s also smart to hire a lawyer to create wills and other estate planning documents to add an extra level of protection for your family. This is especially crucial if you have children because same-sex and second-parent adoption laws vary and are at times barred, depending on the state. How Many LGBTQ+ Veterans Are There? There are an estimated one million lesbian, gay, bisexual, and transgender veterans in the U.S., with California having the largest number of gay and lesbian veterans among the states. What Financial Issues Impact the LGBTQ+ Community? Although same-sex couples can marry and have access to the same benefits as heterosexual couples, they still face financial challenges. Data from 2021 and 2022 from the Federal Reserve Board and the Census Bureau Household Pulse Survey reveal that LGBTQ+ adults and couples have fewer savings and investments as well as lower incomes than straight adults and heterosexual couples. They are also less likely to own a home. Bisexual women and transgender adults have the lowest household savings and investments among LGBTQ+ and non-LGBTQ+ people. How Can Companies Support LGBTQ+ Employees? According to a 2021 study by the Williams Institute, half of LGBT workers in the U.S. have not come out to their supervisors. In addition, 26% keep their LGBT identity from their co-workers as well. The reason: Employees who had come out at work were three time more likely to report harassment or discrimination at the workplace than those who weren't out to anyone at work.Employment discrimination based on sexual orientation or transgender status was struck down in 2020 by the U.S. Supreme Court in Bostock v. Clayton County. To begin with, employers can take steps to help LGBTQ+ employees feel welcome and supported by creating a comprehensive LGBTQ+ policy that includes sexual orientation and gender identity as protected statuses. Here are some other steps employers can take:Establish formal LGBTQ+ awareness training programs.Ensure that employee benefits cover LGBTQ+ employees.Implement gender-neutral bathrooms and dress codes.Celebrate LGBTQ+ events such as Pride Month.Treat LGBTQ+ employees with dignity and respect. The Bottom Line The LGBTQ+ military community has made astonishing progress in the past decade, seeing the end of discriminatory policies and the addition of more protections. Though this has offered more financial security for many LGBTQ+ military families, they still face barriers, especially with family-building, dependent care, catching up financially, and navigating worsening state-level discrimination. There is also still work to be done to include intersex, gender diverse, and nonbinary people within the military, Dane says. Much progress has been made, but the battle for full equality continues.

https://www.investopedia.com/home-depot-earnings-q1-fy-2024-results-8648018

Home Depot Affirms 2024 Guidance While Posting Earnings Beat, Sales Miss

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Home Depot posted mixed first-quarter results Tuesday, with sales just missing estimates and profits narrowly beating them.</li><li>The retailer also affirmed its full-year guidance, expecting total sales and earnings to increase slightly compared to fiscal 2023 while it opens a dozen new stores.</li><li>The guidance does not include the $18 billion acquisition of SRS Distribution that Home Depot announced in March, which is expected to close by the end of fiscal 2024.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Home Depot's (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HD">HD</a>) first-quarter results released Tuesday included an earnings beat but slight revenue miss, as the company is still suffering from customers putting off larger projects and purchases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <span class="heading-toc" id="toc-continued-softness-in-certain-larger-discretionary-projects"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> 'Continued Softness in Certain Larger Discretionary Projects' </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Home Depot narrowly missed consensus revenue estimates, with total sales declining to $36.42 billion from last year's mark of $37.26 billion, below the $36.65 billion <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-depot-q1-fy-2024-earnings-preview-8643751">analysts expected</a>, according to Visible Alpha.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> However, the home improvement retailer did beat income estimates, recording $3.6 billion in profits, or $3.63 per share, compared to the $3.55 billion and $3.58 per share analysts expected. Profit fell 7% year-over-year from the first quarter of 2023 despite sales only slipping 2.3%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> "While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement," <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/ceo.asp">Chief Executive Officer (CEO</a>) Ted Decker said. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> In previous quarters, Home Depot said it had seen big-ticket transactions—defined as those over $1,000—fall as inflation and interest rates remaining persistently high have forced <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-depot-q4-fiscal-2023-earnings-8585053">many consumers to put off</a> larger purchases or home improvement projects. The company is also grappling with a decrease in home improvement spending after millions of Americans staying at home during the pandemic caused a spike in those projects. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-affirms-2024-guidance-looks-ahead-to-closing-of-srs-deal"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Affirms 2024 Guidance, Looks Ahead To Closing of SRS Deal </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Home Depot also affirmed its full-year guidance for fiscal 2024, which includes 53 weeks of operating results, projecting total sales to increase about 1% compared with fiscal 2023 despite a likely 1% drop in 52-week <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/comparable-store-sales.asp">comparable store sales</a>. The company expects to open about 12 new locations this year, and projects 53-week <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp">earnings per share (EPS</a>) to also increase by about 1%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The 2024 guidance does not include one yet-to-be-closed acquisition that could boost Home Depot's earnings reports next year and beyond, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-depot-buys-srs-distribution-for-usd18-25b-in-move-to-expand-pro-market-8621457">$18.25 billion deal</a> announced in March to buy SRS Distribution, which distributes roofing materials and other construction products to a network of contractors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Decker and other executives said at the time and in the company's February earnings call that while inflation is forcing consumers to put off larger purchases, Home Depot's focus will be on increasing its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketshare.asp">market share</a> among the professional contractor market, which the SRS acquisition should do once it closes by the end of this year.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> They also said a priority will be growing Home Depot's footprint by opening new stores and warehouses that could ship large orders directly to construction sites, another strategy to boost the pro market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Shares were down 0.6% to $338.90 as of 11:40 a.m. ET Tuesday. </p></div>

### Key Takeaways * Home Depot posted mixed first-quarter results Tuesday, with sales just missing estimates and profits narrowly beating them. * The retailer also affirmed its full-year guidance, expecting total sales and earnings to increase slightly compared to fiscal 2023 while it opens a dozen new stores. * The guidance does not include the $18 billion acquisition of SRS Distribution that Home Depot announced in March, which is expected to close by the end of fiscal 2024. Home Depot's ([HD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HD)) first-quarter results released Tuesday included an earnings beat but slight revenue miss, as the company is still suffering from customers putting off larger projects and purchases. ## 'Continued Softness in Certain Larger Discretionary Projects' Home Depot narrowly missed consensus revenue estimates, with total sales declining to $36.42 billion from last year's mark of $37.26 billion, below the $36.65 billion [analysts expected](https://www.investopedia.com/home-depot-q1-fy-2024-earnings-preview-8643751), according to Visible Alpha. However, the home improvement retailer did beat income estimates, recording $3.6 billion in profits, or $3.63 per share, compared to the $3.55 billion and $3.58 per share analysts expected. Profit fell 7% year-over-year from the first quarter of 2023 despite sales only slipping 2.3%. "While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement," [Chief Executive Officer (CEO](https://www.investopedia.com/terms/c/ceo.asp)) Ted Decker said. In previous quarters, Home Depot said it had seen big-ticket transactions—defined as those over $1,000—fall as inflation and interest rates remaining persistently high have forced [many consumers to put off](https://www.investopedia.com/home-depot-q4-fiscal-2023-earnings-8585053) larger purchases or home improvement projects. The company is also grappling with a decrease in home improvement spending after millions of Americans staying at home during the pandemic caused a spike in those projects. ## Affirms 2024 Guidance, Looks Ahead To Closing of SRS Deal Home Depot also affirmed its full-year guidance for fiscal 2024, which includes 53 weeks of operating results, projecting total sales to increase about 1% compared with fiscal 2023 despite a likely 1% drop in 52-week [comparable store sales](https://www.investopedia.com/terms/c/comparable-store-sales.asp). The company expects to open about 12 new locations this year, and projects 53-week [earnings per share (EPS](https://www.investopedia.com/terms/e/eps.asp)) to also increase by about 1%. The 2024 guidance does not include one yet-to-be-closed acquisition that could boost Home Depot's earnings reports next year and beyond, the [$18.25 billion deal](https://www.investopedia.com/home-depot-buys-srs-distribution-for-usd18-25b-in-move-to-expand-pro-market-8621457) announced in March to buy SRS Distribution, which distributes roofing materials and other construction products to a network of contractors. Decker and other executives said at the time and in the company's February earnings call that while inflation is forcing consumers to put off larger purchases, Home Depot's focus will be on increasing its [market share](https://www.investopedia.com/terms/m/marketshare.asp) among the professional contractor market, which the SRS acquisition should do once it closes by the end of this year. They also said a priority will be growing Home Depot's footprint by opening new stores and warehouses that could ship large orders directly to construction sites, another strategy to boost the pro market. Shares were down 0.6% to $338.90 as of 11:40 a.m. ET Tuesday.

Key Takeaways Home Depot posted mixed first-quarter results Tuesday, with sales just missing estimates and profits narrowly beating them.The retailer also affirmed its full-year guidance, expecting total sales and earnings to increase slightly compared to fiscal 2023 while it opens a dozen new stores.The guidance does not include the $18 billion acquisition of SRS Distribution that Home Depot announced in March, which is expected to close by the end of fiscal 2024. Home Depot's (HD) first-quarter results released Tuesday included an earnings beat but slight revenue miss, as the company is still suffering from customers putting off larger projects and purchases. 'Continued Softness in Certain Larger Discretionary Projects' Home Depot narrowly missed consensus revenue estimates, with total sales declining to $36.42 billion from last year's mark of $37.26 billion, below the $36.65 billion analysts expected, according to Visible Alpha. However, the home improvement retailer did beat income estimates, recording $3.6 billion in profits, or $3.63 per share, compared to the $3.55 billion and $3.58 per share analysts expected. Profit fell 7% year-over-year from the first quarter of 2023 despite sales only slipping 2.3%. "While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, our product assortment in stores and online, and our associate engagement," Chief Executive Officer (CEO) Ted Decker said. In previous quarters, Home Depot said it had seen big-ticket transactions—defined as those over $1,000—fall as inflation and interest rates remaining persistently high have forced many consumers to put off larger purchases or home improvement projects. The company is also grappling with a decrease in home improvement spending after millions of Americans staying at home during the pandemic caused a spike in those projects. Affirms 2024 Guidance, Looks Ahead To Closing of SRS Deal Home Depot also affirmed its full-year guidance for fiscal 2024, which includes 53 weeks of operating results, projecting total sales to increase about 1% compared with fiscal 2023 despite a likely 1% drop in 52-week comparable store sales. The company expects to open about 12 new locations this year, and projects 53-week earnings per share (EPS) to also increase by about 1%. The 2024 guidance does not include one yet-to-be-closed acquisition that could boost Home Depot's earnings reports next year and beyond, the $18.25 billion deal announced in March to buy SRS Distribution, which distributes roofing materials and other construction products to a network of contractors. Decker and other executives said at the time and in the company's February earnings call that while inflation is forcing consumers to put off larger purchases, Home Depot's focus will be on increasing its market share among the professional contractor market, which the SRS acquisition should do once it closes by the end of this year. They also said a priority will be growing Home Depot's footprint by opening new stores and warehouses that could ship large orders directly to construction sites, another strategy to boost the pro market. Shares were down 0.6% to $338.90 as of 11:40 a.m. ET Tuesday.

https://www.investopedia.com/terms/n/noise.asp

Noise: What it Means, Cause, Alternatives

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-noise"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Noise? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> In a broad analytical context, noise refers to information or activity that confuses or misrepresents genuine underlying trends. In the financial markets, noise can include small price corrections in the market as well as price fluctuations–called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a>–that distorts the overall trend. However, market noise can make it challenging for investors to discern what's driving the trend and whether a trend is changing or merely experiencing short-term volatility. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Noise refers to information or activity that confuses or misrepresents genuine underlying trends.</li><li>In the financial markets, noise can include small price movements and corrections in that distort the overall trend.</li><li>Market noise can make it difficult to determine what's driving a trend or if a trend is changing or merely experiencing short-term volatility.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-noise"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Noise </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Noise can signify stock market activity caused by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/programtrading.asp">program trading</a>, dividend payments or other phenomena that is not reflective of overall market sentiment. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">Dividends</a> are cash payments that companies pay investors as a reward for owning their shares. The concept of noise was formally introduced in a landmark 1986 paper by economist Fischer Black, where he stated that "noise" ought to be distinguished from "information" and that a disproportionate amount of trading occurred on the basis of noise, rather than evidence.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> All trading is somewhat speculative, but noise traders are considered to be particularly reactionary, relying on trending news, apparent surges or declines in prices, or word of mouth rather than the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentalanalysis.asp">fundamental analysis</a> of companies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-noise-and-time-frames"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Noise and Time Frames </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Typically, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. The price of a security can vary widely throughout a given day, but almost none of this movement represents a fundamental change in the perceived value of the security. Day traders trade short-term movements in a security with the goal of entering and exiting a position within minutes or hours. Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/noisetrader.asp">noise traders</a> attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> A longer time frame can provide a clearer picture of a trend. For example, a stock might swing wildly on earnings news for a few hours. However, when comparing that price movement to the trend over the past few months, the earnings move might be small relative to the overall trend. Only hindsight provides assurance of the credibility of information and whether the recent news or events will impact the trend. When buying and selling stocks at a rapid, short-term pace, it can be difficult to distinguish "information" from "noise." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-causes-of-noise"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Causes of Noise </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> There are market fluctuations that occur that usually tend to be noise. Intraday information typically causes short-term price fluctuations. More often than not–unless it's a major announcement or event–the trend usually remains intact once the noise settles down. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Short-term volatility or price moves can be the result of program trading, which means that a large investment institution has programmed computers to make trades when prices reach a certain level. It's also advisable to be on the lookout for artificial <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bubble.asp">bubbles</a>, which are often created when many noise traders congregate their purchases around a single company or industry. Market noise can also lead to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correction.asp">corrections</a> or reverse movements of more than ten percent of the value of a security. These corrections are typically adjustments to a significant overvaluation of a security or index. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-having-a-system-the-alternative-to-noise-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Having a System: The Alternative to Noise Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Many traders create processes and rules for making trading decisions to help avoid noise. These traders establish preset risk and reward parameters, meaning they know how much they're willing to risk on a trade as well as when to take profit or unwind the position. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> With a trading plan, investors attempt, with some precision, to determine what would constitute a profitable move in their current position. Typically, investors who do not have a trading process for arriving at a decision are more susceptible to noise trading. Of course, making decisions based on a personal trading strategy doesn't remove susceptibility to misinformation. However, traders who know what they're looking for are far less likely to be swayed by noise than traders who rely on news or other fluctuations. </p></div>

## What Is Noise? In a broad analytical context, noise refers to information or activity that confuses or misrepresents genuine underlying trends. In the financial markets, noise can include small price corrections in the market as well as price fluctuations–called [volatility](https://www.investopedia.com/terms/v/volatility.asp)–that distorts the overall trend. However, market noise can make it challenging for investors to discern what's driving the trend and whether a trend is changing or merely experiencing short-term volatility. ### Key Takeaways * Noise refers to information or activity that confuses or misrepresents genuine underlying trends. * In the financial markets, noise can include small price movements and corrections in that distort the overall trend. * Market noise can make it difficult to determine what's driving a trend or if a trend is changing or merely experiencing short-term volatility. ## Understanding Noise Noise can signify stock market activity caused by [program trading](https://www.investopedia.com/terms/p/programtrading.asp), dividend payments or other phenomena that is not reflective of overall market sentiment. [Dividends](https://www.investopedia.com/terms/d/dividend.asp) are cash payments that companies pay investors as a reward for owning their shares. The concept of noise was formally introduced in a landmark 1986 paper by economist Fischer Black, where he stated that "noise" ought to be distinguished from "information" and that a disproportionate amount of trading occurred on the basis of noise, rather than evidence. All trading is somewhat speculative, but noise traders are considered to be particularly reactionary, relying on trending news, apparent surges or declines in prices, or word of mouth rather than the [fundamental analysis](https://www.investopedia.com/terms/f/fundamentalanalysis.asp) of companies. ## Noise and Time Frames Typically, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. The price of a security can vary widely throughout a given day, but almost none of this movement represents a fundamental change in the perceived value of the security. Day traders trade short-term movements in a security with the goal of entering and exiting a position within minutes or hours. Some [noise traders](https://www.investopedia.com/terms/n/noisetrader.asp) attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.  A longer time frame can provide a clearer picture of a trend. For example, a stock might swing wildly on earnings news for a few hours. However, when comparing that price movement to the trend over the past few months, the earnings move might be small relative to the overall trend. Only hindsight provides assurance of the credibility of information and whether the recent news or events will impact the trend. When buying and selling stocks at a rapid, short-term pace, it can be difficult to distinguish "information" from "noise." ## Causes of Noise There are market fluctuations that occur that usually tend to be noise. Intraday information typically causes short-term price fluctuations. More often than not–unless it's a major announcement or event–the trend usually remains intact once the noise settles down. Short-term volatility or price moves can be the result of program trading, which means that a large investment institution has programmed computers to make trades when prices reach a certain level. It's also advisable to be on the lookout for artificial [bubbles](https://www.investopedia.com/terms/b/bubble.asp), which are often created when many noise traders congregate their purchases around a single company or industry. Market noise can also lead to [corrections](https://www.investopedia.com/terms/c/correction.asp) or reverse movements of more than ten percent of the value of a security. These corrections are typically adjustments to a significant overvaluation of a security or index. ## Having a System: The Alternative to Noise Trading Many traders create processes and rules for making trading decisions to help avoid noise. These traders establish preset risk and reward parameters, meaning they know how much they're willing to risk on a trade as well as when to take profit or unwind the position. With a trading plan, investors attempt, with some precision, to determine what would constitute a profitable move in their current position. Typically, investors who do not have a trading process for arriving at a decision are more susceptible to noise trading. Of course, making decisions based on a personal trading strategy doesn't remove susceptibility to misinformation. However, traders who know what they're looking for are far less likely to be swayed by noise than traders who rely on news or other fluctuations.

What Is Noise? In a broad analytical context, noise refers to information or activity that confuses or misrepresents genuine underlying trends. In the financial markets, noise can include small price corrections in the market as well as price fluctuations–called volatility–that distorts the overall trend. However, market noise can make it challenging for investors to discern what's driving the trend and whether a trend is changing or merely experiencing short-term volatility. Key Takeaways Noise refers to information or activity that confuses or misrepresents genuine underlying trends.In the financial markets, noise can include small price movements and corrections in that distort the overall trend.Market noise can make it difficult to determine what's driving a trend or if a trend is changing or merely experiencing short-term volatility. Understanding Noise Noise can signify stock market activity caused by program trading, dividend payments or other phenomena that is not reflective of overall market sentiment. Dividends are cash payments that companies pay investors as a reward for owning their shares. The concept of noise was formally introduced in a landmark 1986 paper by economist Fischer Black, where he stated that "noise" ought to be distinguished from "information" and that a disproportionate amount of trading occurred on the basis of noise, rather than evidence. All trading is somewhat speculative, but noise traders are considered to be particularly reactionary, relying on trending news, apparent surges or declines in prices, or word of mouth rather than the fundamental analysis of companies. Noise and Time Frames Typically, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise. The price of a security can vary widely throughout a given day, but almost none of this movement represents a fundamental change in the perceived value of the security. Day traders trade short-term movements in a security with the goal of entering and exiting a position within minutes or hours. Some noise traders attempt to take advantage of market noise by entering buy and sell transactions without the use of fundamental data.  A longer time frame can provide a clearer picture of a trend. For example, a stock might swing wildly on earnings news for a few hours. However, when comparing that price movement to the trend over the past few months, the earnings move might be small relative to the overall trend. Only hindsight provides assurance of the credibility of information and whether the recent news or events will impact the trend. When buying and selling stocks at a rapid, short-term pace, it can be difficult to distinguish "information" from "noise." Causes of Noise There are market fluctuations that occur that usually tend to be noise. Intraday information typically causes short-term price fluctuations. More often than not–unless it's a major announcement or event–the trend usually remains intact once the noise settles down. Short-term volatility or price moves can be the result of program trading, which means that a large investment institution has programmed computers to make trades when prices reach a certain level. It's also advisable to be on the lookout for artificial bubbles, which are often created when many noise traders congregate their purchases around a single company or industry. Market noise can also lead to corrections or reverse movements of more than ten percent of the value of a security. These corrections are typically adjustments to a significant overvaluation of a security or index. Having a System: The Alternative to Noise Trading Many traders create processes and rules for making trading decisions to help avoid noise. These traders establish preset risk and reward parameters, meaning they know how much they're willing to risk on a trade as well as when to take profit or unwind the position. With a trading plan, investors attempt, with some precision, to determine what would constitute a profitable move in their current position. Typically, investors who do not have a trading process for arriving at a decision are more susceptible to noise trading. Of course, making decisions based on a personal trading strategy doesn't remove susceptibility to misinformation. However, traders who know what they're looking for are far less likely to be swayed by noise than traders who rely on news or other fluctuations.

https://www.investopedia.com/terms/u/unleveredbeta.asp

Unlevered Beta: Definition, Formula, Example, and Calculation

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-unlevered-beta-"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Unlevered Beta ? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/beta.asp">Beta</a> is a measure of market risk. Unlevered beta (or asset beta) measures the market risk of the company without the impact of debt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> 'Unlevering' a beta removes the financial effects of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp">leverage</a> thus isolating the risk due solely to company assets. In other words, how much did the company's equity contribute to its risk profile. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Levered beta (commonly referred to as just beta or equity beta) is a measure of market risk. Debt and equity are factored in when assessing a company's risk profile.</li><li>Unlevered beta strips off the debt component to isolate the risk due solely to company assets.</li><li>High debt-to-equity ratio usually translates to an increase in the risk associated with a company's stock.</li><li>A beta of 1 means that the stock is as risky as the market while betas greater or less than 1 reflect risk thresholds higher or lower than the market, respectively.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Unlevered Beta" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/e3I0m37gtKhaKHfyL_ZKjAB5oi8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/e3I0m37gtKhaKHfyL_ZKjAB5oi8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png" data-srcset="https://www.investopedia.com/thmb/VY12Z_j-dkDkSe4_61gnbBFU3sw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Unlevered Beta" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/e3I0m37gtKhaKHfyL_ZKjAB5oi8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png" srcset="https://www.investopedia.com/thmb/VY12Z_j-dkDkSe4_61gnbBFU3sw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Laura Porter</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-unlevered-beta"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding Unlevered Beta </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Beta is the slope of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coefficientofvariation.asp">coefficient</a> for a stock regressed against a benchmark <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketindex.asp">market index</a> like the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">Standard &amp; Poor's (S&amp;P) 500 Index</a>. A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. Levered beta measures the risk of a firm with debt and equity in its <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalstructure.asp">capital structure</a> to the volatility of the market. The other type of beta is known as <em>unlevered beta</em>.</p> <p>'Unlevering' the beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/102714/why-do-i-need-unlever-beta-when-making-wacc-calculations.asp">Comparing companies' unlevered betas</a> give an investor clarity on the composition of risk being assumed when purchasing the stock.</p> <p><span data-value="\text{Unlevered beta (asset beta)} =\frac{ \text{Levered beta (equity beta)} } {\left( 1 + \frac{\left( 1-\text{tax rate} \right )*\text{Debt}}{\text{Equity}} \right )}"><span class="katex"><span class="katex-mathml"> <math> <semantics> <mrow> <mtext> Unlevered beta (asset beta) </mtext> <mo> = </mo> <mfrac> <mtext> Levered beta (equity beta) </mtext> <mrow> <mo> ( </mo> <mn> 1 </mn> <mo> + </mo> <mfrac> <mrow> <mrow> <mo> ( </mo> <mn> 1 </mn> <mo> − </mo> <mtext> tax rate </mtext> <mo> ) </mo> </mrow> <mo> ∗ </mo> <mtext> Debt </mtext> </mrow> <mtext> Equity </mtext> </mfrac> <mo> ) </mo> </mrow> </mfrac> </mrow> <annotation encoding="application/x-tex"> \text{Unlevered beta (asset beta)} =\frac{ \text{Levered beta (equity beta)} } {\left( 1 + \frac{\left( 1-\text{tax rate} \right )*\text{Debt}}{\text{Equity}} \right )} </annotation> </semantics> </math></span><span class="katex-html"><span class="base"><span class="strut"></span><span class="mord text"><span class="mord">Unlevered beta (asset beta)</span></span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span></span><span class="base"><span class="strut"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist"><span class=""><span class="pstrut"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="minner mtight"><span class="mopen sizing reset-size3 size6 mtight delimcenter"><span class="mtight">(</span></span><span class="mord mtight">1</span><span class="mbin mtight">+</span><span class="mord mtight"><span class="mopen nulldelimiter sizing reset-size3 size6"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist"><span class=""><span class="pstrut"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="mord text mtight"><span class="mord mtight">Equity</span></span></span></span></span><span class=""><span class="pstrut"></span><span class="frac-line mtight"></span></span><span class=""><span class="pstrut"></span><span class="sizing reset-size3 size1 mtight"><span class="mord mtight"><span class="minner mtight"><span class="mopen mtight delimcenter"><span class="mtight">(</span></span><span class="mord mtight">1</span><span class="mbin mtight">−</span><span class="mord text mtight"><span class="mord mtight">tax rate</span></span><span class="mclose mtight delimcenter"><span class="mtight">)</span></span></span><span class="mbin mtight">∗</span><span class="mord text mtight"><span class="mord mtight">Debt</span></span></span></span></span></span><span class="vlist-s">​</span></span><span class="vlist-r"><span class="vlist"><span class=""></span></span></span></span></span><span class="mclose nulldelimiter sizing reset-size3 size6"></span></span><span class="mclose sizing reset-size3 size6 mtight delimcenter"><span class="mtight">)</span></span></span></span></span></span><span class=""><span class="pstrut"></span><span class="frac-line"></span></span><span class=""><span class="pstrut"></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord text mtight"><span class="mord mtight">Levered beta (equity beta)</span></span></span></span></span></span><span class="vlist-s">​</span></span><span class="vlist-r"><span class="vlist"><span class=""></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></span></p><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <p>Take a company that is increasing its debt thus raising its debt-to-equity ratio. This will lead to a larger percentage of earnings being used to service that debt which will amplify investor uncertainty about future earnings stream. Consequently, the company's stock is deemed to be getting riskier but that risk is not due to market risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Isolating and removing the debt component of overall risk results in unlevered beta.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The level of debt that a company has can affect its performance, making it more sensitive to changes in its stock price. Note that the company being analyzed has debt in its financial statements, but unlevered beta treats it like it has no debt by stripping any debt off the calculation. Since companies have different capital structures and levels of debt, an analyst can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> To 'unlever' the beta, the levered beta for the company has to be known in addition to the company’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debtequityratio.asp">debt-equity ratio</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporatetax.asp">corporate tax rate</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-systematic-risk-and-beta"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Systematic Risk and Beta </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/systematicrisk.asp">Systematic risk</a> is the type of risk that is caused by factors beyond a company's control. This type of risk cannot be diversified away. Examples of systematic risk include natural disasters, political elections, inflation, and wars. Beta is used to measure the level of systematic risk, or <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a>, of a stock or portfolio. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Beta is a statistical measure that compares the volatility of the price of a stock against the volatility of the broader market. If the volatility of the stock, as measured by beta, is higher, the stock is considered risky. If the volatility of the stock is lower, the stock is said to have less risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> A beta of one is equivalent to the risk of the broader market. That is, a company with a beta of one has the same systematic risk as the broader market. A beta of two means the company is twice as volatile as the overall market, but a beta of less than one means the company is less volatile and presents less risk than the broader market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-example-of-unlevered-beta"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Example of Unlevered Beta </span> </h2> <blockquote class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> B_U = B_L ÷ [1 + ((1 - Tax Rate) x D/E)] </blockquote> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> For example, calculating the unlevered beta for Tesla, Inc. (as of November 2017): </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li>beta (B_L) is 0.73</li><li>Debt to Equity (D/E) ratio is 2.2</li><li>corporate tax rate is 35%.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <blockquote class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Tesla B_U = 0.73 ÷ [1 +((1 – 0.35) * 2.2)]= 0.30 </blockquote> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Unlevered beta is almost always equal to or lower than levered beta given that debt will most often be zero or positive. (In the rare occasions where a company's debt component is negative, say a company is hoarding cash, then unlevered beta can potentially be higher than levered beta.) </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> If the unlevered beta is positive, investors will invest in the company's stock when prices are expected to rise. A negative unlevered beta will prompt investors to invest in the stock when prices are expected to decline. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-how-can-unlevered-beta-help-an-investor"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Unlevered Beta Help an Investor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Unlevered beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. Comparing companies' unlevered betas give an investor clarity on the composition of risk being assumed when purchasing the stock. Since companies have different capital structures and levels of debt, an investor can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-is-beta"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Beta?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Simply put, beta (ß) is a measure of market risk. More precisely, it is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. In statistical terms, it is the slope of the coefficient for a security (stock) regressed against a benchmark market index (S&amp;P 500). Each of these data points represents an individual stock's returns against those of the market as a whole. So, beta effectively describes the activity of a security's returns as it responds to swings in the market.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-is-levered-beta"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Levered Beta?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market. A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. So, a publicly traded security's levered beta measures the sensitivity of that security's tendency to perform in relation to the overall market. A levered beta greater than positive 1 or less than negative 1 means that it has greater volatility than the market. A levered beta between negative 1 and positive 1 has less volatility than the market.</p></div> </div></div>

## What Is Unlevered Beta ? [Beta](https://www.investopedia.com/terms/b/beta.asp) is a measure of market risk. Unlevered beta (or asset beta) measures the market risk of the company without the impact of debt. 'Unlevering' a beta removes the financial effects of [leverage](https://www.investopedia.com/terms/l/leverage.asp) thus isolating the risk due solely to company assets. In other words, how much did the company's equity contribute to its risk profile. ### Key Takeaways * Levered beta (commonly referred to as just beta or equity beta) is a measure of market risk. Debt and equity are factored in when assessing a company's risk profile. * Unlevered beta strips off the debt component to isolate the risk due solely to company assets. * High debt-to-equity ratio usually translates to an increase in the risk associated with a company's stock. * A beta of 1 means that the stock is as risky as the market while betas greater or less than 1 reflect risk thresholds higher or lower than the market, respectively. ![Unlevered Beta]() :max_bytes(150000):strip_icc()/unleveredbeta.asp-final-5c7d121ad1ce4e45b8928b192797cb49.png) Investopedia / Laura Porter ## Understanding Unlevered Beta Beta is the slope of the [coefficient](https://www.investopedia.com/terms/c/coefficientofvariation.asp) for a stock regressed against a benchmark [market index](https://www.investopedia.com/terms/m/marketindex.asp) like the [Standard & Poor's (S&P) 500 Index](https://www.investopedia.com/terms/s/sp500.asp). A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. Levered beta measures the risk of a firm with debt and equity in its [capital structure](https://www.investopedia.com/terms/c/capitalstructure.asp) to the volatility of the market. The other type of beta is known as *unlevered beta*. 'Unlevering' the beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. [Comparing companies' unlevered betas](https://www.investopedia.com/ask/answers/102714/why-do-i-need-unlever-beta-when-making-wacc-calculations.asp) give an investor clarity on the composition of risk being assumed when purchasing the stock. Unlevered beta (asset beta) = Levered beta (equity beta) ( 1 + ( 1 − tax rate ) ∗ Debt Equity ) \text{Unlevered beta (asset beta)} =\frac{ \text{Levered beta (equity beta)} } {\left( 1 + \frac{\left( 1-\text{tax rate} \right )\*\text{Debt}}{\text{Equity}} \right )} Unlevered beta (asset beta)=(1+Equity(1−tax rate)∗Debt​)Levered beta (equity beta)​ Take a company that is increasing its debt thus raising its debt-to-equity ratio. This will lead to a larger percentage of earnings being used to service that debt which will amplify investor uncertainty about future earnings stream. Consequently, the company's stock is deemed to be getting riskier but that risk is not due to market risk. ### Isolating and removing the debt component of overall risk results in unlevered beta. The level of debt that a company has can affect its performance, making it more sensitive to changes in its stock price. Note that the company being analyzed has debt in its financial statements, but unlevered beta treats it like it has no debt by stripping any debt off the calculation. Since companies have different capital structures and levels of debt, an analyst can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in. To 'unlever' the beta, the levered beta for the company has to be known in addition to the company’s [debt-equity ratio](https://www.investopedia.com/terms/d/debtequityratio.asp) and [corporate tax rate](https://www.investopedia.com/terms/c/corporatetax.asp). ## Systematic Risk and Beta [Systematic risk](https://www.investopedia.com/terms/s/systematicrisk.asp) is the type of risk that is caused by factors beyond a company's control. This type of risk cannot be diversified away. Examples of systematic risk include natural disasters, political elections, inflation, and wars. Beta is used to measure the level of systematic risk, or [volatility](https://www.investopedia.com/terms/v/volatility.asp), of a stock or portfolio. Beta is a statistical measure that compares the volatility of the price of a stock against the volatility of the broader market. If the volatility of the stock, as measured by beta, is higher, the stock is considered risky. If the volatility of the stock is lower, the stock is said to have less risk. A beta of one is equivalent to the risk of the broader market. That is, a company with a beta of one has the same systematic risk as the broader market. A beta of two means the company is twice as volatile as the overall market, but a beta of less than one means the company is less volatile and presents less risk than the broader market. ## Example of Unlevered Beta > BU = BL ÷ [1 + ((1 - Tax Rate) x D/E)] For example, calculating the unlevered beta for Tesla, Inc. (as of November 2017): * beta (BL) is 0.73 * Debt to Equity (D/E) ratio is 2.2 * corporate tax rate is 35%. > Tesla BU = 0.73 ÷ [1 +((1 – 0.35) \* 2.2)]= 0.30 Unlevered beta is almost always equal to or lower than levered beta given that debt will most often be zero or positive. (In the rare occasions where a company's debt component is negative, say a company is hoarding cash, then unlevered beta can potentially be higher than levered beta.) If the unlevered beta is positive, investors will invest in the company's stock when prices are expected to rise. A negative unlevered beta will prompt investors to invest in the stock when prices are expected to decline. ## How Can Unlevered Beta Help an Investor? Unlevered beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. Comparing companies' unlevered betas give an investor clarity on the composition of risk being assumed when purchasing the stock. Since companies have different capital structures and levels of debt, an investor can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in. ## What Is Beta? Simply put, beta (ß) is a measure of market risk. More precisely, it is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. In statistical terms, it is the slope of the coefficient for a security (stock) regressed against a benchmark market index (S&P 500). Each of these data points represents an individual stock's returns against those of the market as a whole. So, beta effectively describes the activity of a security's returns as it responds to swings in the market. ## What Is Levered Beta? Levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market. A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. So, a publicly traded security's levered beta measures the sensitivity of that security's tendency to perform in relation to the overall market. A levered beta greater than positive 1 or less than negative 1 means that it has greater volatility than the market. A levered beta between negative 1 and positive 1 has less volatility than the market.

What Is Unlevered Beta ? Beta is a measure of market risk. Unlevered beta (or asset beta) measures the market risk of the company without the impact of debt. 'Unlevering' a beta removes the financial effects of leverage thus isolating the risk due solely to company assets. In other words, how much did the company's equity contribute to its risk profile. Key Takeaways Levered beta (commonly referred to as just beta or equity beta) is a measure of market risk. Debt and equity are factored in when assessing a company's risk profile.Unlevered beta strips off the debt component to isolate the risk due solely to company assets.High debt-to-equity ratio usually translates to an increase in the risk associated with a company's stock.A beta of 1 means that the stock is as risky as the market while betas greater or less than 1 reflect risk thresholds higher or lower than the market, respectively. Investopedia / Laura Porter Understanding Unlevered Beta Beta is the slope of the coefficient for a stock regressed against a benchmark market index like the Standard & Poor's (S&P) 500 Index. A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. Levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market. The other type of beta is known as unlevered beta. 'Unlevering' the beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. Comparing companies' unlevered betas give an investor clarity on the composition of risk being assumed when purchasing the stock. Unlevered beta (asset beta) = Levered beta (equity beta) ( 1 + ( 1 − tax rate ) ∗ Debt Equity ) \text{Unlevered beta (asset beta)} =\frac{ \text{Levered beta (equity beta)} } {\left( 1 + \frac{\left( 1-\text{tax rate} \right )*\text{Debt}}{\text{Equity}} \right )} Unlevered beta (asset beta)=(1+Equity(1−tax rate)∗Debt​)Levered beta (equity beta)​ Take a company that is increasing its debt thus raising its debt-to-equity ratio. This will lead to a larger percentage of earnings being used to service that debt which will amplify investor uncertainty about future earnings stream. Consequently, the company's stock is deemed to be getting riskier but that risk is not due to market risk. Isolating and removing the debt component of overall risk results in unlevered beta. The level of debt that a company has can affect its performance, making it more sensitive to changes in its stock price. Note that the company being analyzed has debt in its financial statements, but unlevered beta treats it like it has no debt by stripping any debt off the calculation. Since companies have different capital structures and levels of debt, an analyst can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in. To 'unlever' the beta, the levered beta for the company has to be known in addition to the company’s debt-equity ratio and corporate tax rate. Systematic Risk and Beta Systematic risk is the type of risk that is caused by factors beyond a company's control. This type of risk cannot be diversified away. Examples of systematic risk include natural disasters, political elections, inflation, and wars. Beta is used to measure the level of systematic risk, or volatility, of a stock or portfolio. Beta is a statistical measure that compares the volatility of the price of a stock against the volatility of the broader market. If the volatility of the stock, as measured by beta, is higher, the stock is considered risky. If the volatility of the stock is lower, the stock is said to have less risk. A beta of one is equivalent to the risk of the broader market. That is, a company with a beta of one has the same systematic risk as the broader market. A beta of two means the company is twice as volatile as the overall market, but a beta of less than one means the company is less volatile and presents less risk than the broader market. Example of Unlevered Beta BU = BL ÷ [1 + ((1 - Tax Rate) x D/E)] For example, calculating the unlevered beta for Tesla, Inc. (as of November 2017): beta (BL) is 0.73Debt to Equity (D/E) ratio is 2.2corporate tax rate is 35%. Tesla BU = 0.73 ÷ [1 +((1 – 0.35) * 2.2)]= 0.30 Unlevered beta is almost always equal to or lower than levered beta given that debt will most often be zero or positive. (In the rare occasions where a company's debt component is negative, say a company is hoarding cash, then unlevered beta can potentially be higher than levered beta.) If the unlevered beta is positive, investors will invest in the company's stock when prices are expected to rise. A negative unlevered beta will prompt investors to invest in the stock when prices are expected to decline. How Can Unlevered Beta Help an Investor? Unlevered beta removes any beneficial or detrimental effects gained by adding debt to the firm's capital structure. Comparing companies' unlevered betas give an investor clarity on the composition of risk being assumed when purchasing the stock. Since companies have different capital structures and levels of debt, an investor can calculate the unlevered beta to effectively compare them against each other or against the market. This way, only the sensitivity of a firm’s assets (equity) to the market will be factored in. What Is Beta? Simply put, beta (ß) is a measure of market risk. More precisely, it is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. In statistical terms, it is the slope of the coefficient for a security (stock) regressed against a benchmark market index (S&P 500). Each of these data points represents an individual stock's returns against those of the market as a whole. So, beta effectively describes the activity of a security's returns as it responds to swings in the market. What Is Levered Beta? Levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market. A key determinant of beta is leverage, which measures the level of a company’s debt to its equity. So, a publicly traded security's levered beta measures the sensitivity of that security's tendency to perform in relation to the overall market. A levered beta greater than positive 1 or less than negative 1 means that it has greater volatility than the market. A levered beta between negative 1 and positive 1 has less volatility than the market.

https://www.investopedia.com/present-bias-in-investment-7369328

5 Ways to Avoid Present Bias in Investment Decisions

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-present-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Present Bias? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> In behavioral economics, present bias is a form of time-inconsistent preference whereby individuals overvalue more immediate rewards or benefits at the expense of future rewards or benefits.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Present bias can lead people to make irrational decisions that favor short-term gains, often at the expense of long-term well-being. For example, a person might choose to spend money on a vacation instead of saving for retirement, or opt for a high-calorie dessert instead of a healthier diet. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> In <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investing.asp">investing</a>, present bias can take the form of hyperbolic discounting, where people discount the value of future rewards far more steeply as they get closer to the present.<span class="ql-inline-citation" data-cite="3"></span> In other words, people tend to place a much higher subjective value on rewards received in the very near term than those received further in the future, even if the latter are objectively more valuable. This can lead to a misaligned preference for short-term opportunities with immediate payoffs over long-term investments with greater overall expected returns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Present bias occurs when people place far more weight on near-term benefits at the expense of longer-term ones.</li><li>This can negatively impact investing decisions by favoring short-term gains over long-term growth.</li><li>Investors may experience present bias as hyperbolic discounting.</li><li>Overcoming present bias involves adopting strategies that prioritize long-term investing success.</li><li>Identifying and understanding other cognitive biases can also help improve investing decisions.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-present-bias-impacts-investing-decisions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> How Present Bias Impacts Investing Decisions </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Present bias can distort individuals’ perceptions and plans about the future, leading them to rush into short-term consumption because the immediate rewards seem promising. This can result in impulsive decisions that may not align with one’s long-term financial goals. For instance, an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investor</a> might be drawn to the potential high returns of a speculative investment without considering the risks involved, and at the expense of investing in a more diversified account for the long run. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> For example, an investor might choose a high-dividend-yield stock over a growth stock with no dividends but higher potential for capital <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/appreciation.asp">appreciation</a> in the future. Such a preference for immediate dividend payments can lead to missed opportunities for long-term wealth accumulation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Risk-averse investors may also exhibit present bias due to loss aversion. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loss-psychology.asp">Loss aversion</a> is when we prioritize avoiding losses over achieving gains. As delaying a reward may imply the possibility of not ever receiving the reward, risk-averse investors tend to act present biased. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Moreover, loss aversion implies that people will avoid locking in a loss and actually seek more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialrisk.asp">risk</a> in hopes of making back their money. Present bias may also be at play by putting off the sure thing of locking in a loss. Research also shows that investors tend to be more conservative and risk-averse when they have shorter <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timehorizon.asp">time horizons</a>, which could be driven by loss aversion and the fear of not receiving future rewards.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-5-tips-to-overcome-present-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> 5 Tips to Overcome Present Bias </span> </h2> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li><strong>Set SMART goals</strong>: Establish specific, measurable, attainable, relevant, and time-bound (SMART) investment goals to help you maintain focus on long-term objectives, reducing the influence of present bias and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/temporal-discounting-7972594">the impulse to act in the short term</a>.</li> <li><strong>Adopt a long-term investment strategy</strong>: Develop and stick to to a long-term investment strategy, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dollarcostaveraging.asp">dollar-cost averaging</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp">dividend reinvestment</a>, that encourages consistent, disciplined investing over time.</li> <li><strong>Diversify your investment portfolio</strong>: <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">Diversification</a> can help reduce the impact of present bias by spreading your investments across various <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp">asset classes</a> and investment vehicles, thereby mitigating the risks associated with short-term fluctuations in the market.</li> <li><strong>Implement a cooling-off period</strong>: Before making any new investment decision, give yourself a cooling-off period to reevaluate the decision and consider its long-term implications. This can help prevent impulsive decisions driven by present bias.</li> <li><strong>Seek expert advice</strong>: Consulting with a <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-advisor.asp">financial advisor</a> or <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker.asp">broker</a> can provide an objective perspective on your investment decisions and help you identify and overcome present bias.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_22-0"><span class="heading-toc" id="toc-what-causes-present-bias"></span> <h2 class="mntl-sc-block-questionandanswer__question">What causes present bias?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Present bias is thought to be a cognitive error caused by our innate preference for immediate gratification and our tendency to put off thinking about our future selves. Cultural forces that promote such preferences for the short term at the expense of the long term may also play a role.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_24-0"><span class="heading-toc" id="toc-is-procrastination-a-form-of-present-bias"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is procrastination a form of present bias?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Procrastination is the purposeful act of delaying or postponing important tasks or decisions, often despite knowing that there may be negative consequences for the delay. Procrastinators may put off tasks because they overvalue the immediate utility of engaging in more enjoyable activities or avoiding discomfort in the present moment. Procrastination could be considered a special type of present bias, since it involves prioritizing short-term comfort over the long-term benefits of completing a task or making a decision.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_26-0"><span class="heading-toc" id="toc-how-does-present-bias-affect-consumers"></span> <h2 class="mntl-sc-block-questionandanswer__question">How does present bias affect consumers?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Present bias can lead consumers to make impulsive purchases, overspend, and take on excessive debt. These behaviors can result in a preference for spending over savings, which can result in long-term financial instability, such as not having enough retirement savings later in life.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_28-0"><span class="heading-toc" id="toc-what-are-some-other-biases-that-affect-investing-decisions"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are some other biases that affect investing decisions?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Other biases that can affect investing decisions include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/confirmation-bias.asp">confirmation bias</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/recency-availability-bias-5206686">recency bias</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/anchoring-and-adjustment.asp">anchoring and adjustment</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp">overconfidence</a>, and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/herdinstinct.asp">herd mentality</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Present bias is a form of inconsistent temporal choice that occurs when people more heavily weight short-term benefits at the expense of long-term benefits. This can have a significant impact on one’s financial well-being, as impulsive spending or speculation can preempt long-term savings and strategic investing decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Present bias can take the form of hyperbolic discounting, which often leads to short-term thinking and suboptimal outcomes. By recognizing and addressing present bias, individuals can make more informed decisions that prioritize long-term financial success. Implementing strategies such as setting clear investment goals, adopting a long-term investment strategy, diversifying, and seeking professional advice can help mitigate the effects of present bias. </p></div>

## What Is Present Bias? In behavioral economics, present bias is a form of time-inconsistent preference whereby individuals overvalue more immediate rewards or benefits at the expense of future rewards or benefits. Present bias can lead people to make irrational decisions that favor short-term gains, often at the expense of long-term well-being. For example, a person might choose to spend money on a vacation instead of saving for retirement, or opt for a high-calorie dessert instead of a healthier diet. In [investing](https://www.investopedia.com/terms/i/investing.asp), present bias can take the form of hyperbolic discounting, where people discount the value of future rewards far more steeply as they get closer to the present. In other words, people tend to place a much higher subjective value on rewards received in the very near term than those received further in the future, even if the latter are objectively more valuable. This can lead to a misaligned preference for short-term opportunities with immediate payoffs over long-term investments with greater overall expected returns. ### Key Takeaways * Present bias occurs when people place far more weight on near-term benefits at the expense of longer-term ones. * This can negatively impact investing decisions by favoring short-term gains over long-term growth. * Investors may experience present bias as hyperbolic discounting. * Overcoming present bias involves adopting strategies that prioritize long-term investing success. * Identifying and understanding other cognitive biases can also help improve investing decisions. ## How Present Bias Impacts Investing Decisions Present bias can distort individuals’ perceptions and plans about the future, leading them to rush into short-term consumption because the immediate rewards seem promising. This can result in impulsive decisions that may not align with one’s long-term financial goals. For instance, an [investor](https://www.investopedia.com/terms/i/investor.asp) might be drawn to the potential high returns of a speculative investment without considering the risks involved, and at the expense of investing in a more diversified account for the long run. For example, an investor might choose a high-dividend-yield stock over a growth stock with no dividends but higher potential for capital [appreciation](https://www.investopedia.com/terms/a/appreciation.asp) in the future. Such a preference for immediate dividend payments can lead to missed opportunities for long-term wealth accumulation. Risk-averse investors may also exhibit present bias due to loss aversion. [Loss aversion](https://www.investopedia.com/terms/l/loss-psychology.asp) is when we prioritize avoiding losses over achieving gains. As delaying a reward may imply the possibility of not ever receiving the reward, risk-averse investors tend to act present biased. Moreover, loss aversion implies that people will avoid locking in a loss and actually seek more [risk](https://www.investopedia.com/terms/f/financialrisk.asp) in hopes of making back their money. Present bias may also be at play by putting off the sure thing of locking in a loss. Research also shows that investors tend to be more conservative and risk-averse when they have shorter [time horizons](https://www.investopedia.com/terms/t/timehorizon.asp), which could be driven by loss aversion and the fear of not receiving future rewards. ## 5 Tips to Overcome Present Bias 1. **Set SMART goals**: Establish specific, measurable, attainable, relevant, and time-bound (SMART) investment goals to help you maintain focus on long-term objectives, reducing the influence of present bias and [the impulse to act in the short term](https://www.investopedia.com/temporal-discounting-7972594). 2. **Adopt a long-term investment strategy**: Develop and stick to to a long-term investment strategy, such as [dollar-cost averaging](https://www.investopedia.com/terms/d/dollarcostaveraging.asp) or [dividend reinvestment](https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp), that encourages consistent, disciplined investing over time. 3. **Diversify your investment portfolio**: [Diversification](https://www.investopedia.com/terms/d/diversification.asp) can help reduce the impact of present bias by spreading your investments across various [asset classes](https://www.investopedia.com/terms/a/assetclasses.asp) and investment vehicles, thereby mitigating the risks associated with short-term fluctuations in the market. 4. **Implement a cooling-off period**: Before making any new investment decision, give yourself a cooling-off period to reevaluate the decision and consider its long-term implications. This can help prevent impulsive decisions driven by present bias. 5. **Seek expert advice**: Consulting with a [financial advisor](https://www.investopedia.com/terms/f/financial-advisor.asp) or [broker](https://www.investopedia.com/terms/b/broker.asp) can provide an objective perspective on your investment decisions and help you identify and overcome present bias. ## What causes present bias? Present bias is thought to be a cognitive error caused by our innate preference for immediate gratification and our tendency to put off thinking about our future selves. Cultural forces that promote such preferences for the short term at the expense of the long term may also play a role. ## Is procrastination a form of present bias? Procrastination is the purposeful act of delaying or postponing important tasks or decisions, often despite knowing that there may be negative consequences for the delay. Procrastinators may put off tasks because they overvalue the immediate utility of engaging in more enjoyable activities or avoiding discomfort in the present moment. Procrastination could be considered a special type of present bias, since it involves prioritizing short-term comfort over the long-term benefits of completing a task or making a decision. ## How does present bias affect consumers? Present bias can lead consumers to make impulsive purchases, overspend, and take on excessive debt. These behaviors can result in a preference for spending over savings, which can result in long-term financial instability, such as not having enough retirement savings later in life. ## What are some other biases that affect investing decisions? Other biases that can affect investing decisions include [confirmation bias](https://www.investopedia.com/terms/c/confirmation-bias.asp), [recency bias](https://www.investopedia.com/recency-availability-bias-5206686), [anchoring and adjustment](https://www.investopedia.com/terms/a/anchoring-and-adjustment.asp), [overconfidence](https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp), and [herd mentality](https://www.investopedia.com/terms/h/herdinstinct.asp). ## The Bottom Line Present bias is a form of inconsistent temporal choice that occurs when people more heavily weight short-term benefits at the expense of long-term benefits. This can have a significant impact on one’s financial well-being, as impulsive spending or speculation can preempt long-term savings and strategic investing decisions. Present bias can take the form of hyperbolic discounting, which often leads to short-term thinking and suboptimal outcomes. By recognizing and addressing present bias, individuals can make more informed decisions that prioritize long-term financial success. Implementing strategies such as setting clear investment goals, adopting a long-term investment strategy, diversifying, and seeking professional advice can help mitigate the effects of present bias.

What Is Present Bias? In behavioral economics, present bias is a form of time-inconsistent preference whereby individuals overvalue more immediate rewards or benefits at the expense of future rewards or benefits. Present bias can lead people to make irrational decisions that favor short-term gains, often at the expense of long-term well-being. For example, a person might choose to spend money on a vacation instead of saving for retirement, or opt for a high-calorie dessert instead of a healthier diet. In investing, present bias can take the form of hyperbolic discounting, where people discount the value of future rewards far more steeply as they get closer to the present. In other words, people tend to place a much higher subjective value on rewards received in the very near term than those received further in the future, even if the latter are objectively more valuable. This can lead to a misaligned preference for short-term opportunities with immediate payoffs over long-term investments with greater overall expected returns. Key Takeaways Present bias occurs when people place far more weight on near-term benefits at the expense of longer-term ones.This can negatively impact investing decisions by favoring short-term gains over long-term growth.Investors may experience present bias as hyperbolic discounting.Overcoming present bias involves adopting strategies that prioritize long-term investing success.Identifying and understanding other cognitive biases can also help improve investing decisions. How Present Bias Impacts Investing Decisions Present bias can distort individuals’ perceptions and plans about the future, leading them to rush into short-term consumption because the immediate rewards seem promising. This can result in impulsive decisions that may not align with one’s long-term financial goals. For instance, an investor might be drawn to the potential high returns of a speculative investment without considering the risks involved, and at the expense of investing in a more diversified account for the long run. For example, an investor might choose a high-dividend-yield stock over a growth stock with no dividends but higher potential for capital appreciation in the future. Such a preference for immediate dividend payments can lead to missed opportunities for long-term wealth accumulation. Risk-averse investors may also exhibit present bias due to loss aversion. Loss aversion is when we prioritize avoiding losses over achieving gains. As delaying a reward may imply the possibility of not ever receiving the reward, risk-averse investors tend to act present biased. Moreover, loss aversion implies that people will avoid locking in a loss and actually seek more risk in hopes of making back their money. Present bias may also be at play by putting off the sure thing of locking in a loss. Research also shows that investors tend to be more conservative and risk-averse when they have shorter time horizons, which could be driven by loss aversion and the fear of not receiving future rewards. 5 Tips to Overcome Present Bias Set SMART goals: Establish specific, measurable, attainable, relevant, and time-bound (SMART) investment goals to help you maintain focus on long-term objectives, reducing the influence of present bias and the impulse to act in the short term. Adopt a long-term investment strategy: Develop and stick to to a long-term investment strategy, such as dollar-cost averaging or dividend reinvestment, that encourages consistent, disciplined investing over time. Diversify your investment portfolio: Diversification can help reduce the impact of present bias by spreading your investments across various asset classes and investment vehicles, thereby mitigating the risks associated with short-term fluctuations in the market. Implement a cooling-off period: Before making any new investment decision, give yourself a cooling-off period to reevaluate the decision and consider its long-term implications. This can help prevent impulsive decisions driven by present bias. Seek expert advice: Consulting with a financial advisor or broker can provide an objective perspective on your investment decisions and help you identify and overcome present bias. What causes present bias? Present bias is thought to be a cognitive error caused by our innate preference for immediate gratification and our tendency to put off thinking about our future selves. Cultural forces that promote such preferences for the short term at the expense of the long term may also play a role. Is procrastination a form of present bias? Procrastination is the purposeful act of delaying or postponing important tasks or decisions, often despite knowing that there may be negative consequences for the delay. Procrastinators may put off tasks because they overvalue the immediate utility of engaging in more enjoyable activities or avoiding discomfort in the present moment. Procrastination could be considered a special type of present bias, since it involves prioritizing short-term comfort over the long-term benefits of completing a task or making a decision. How does present bias affect consumers? Present bias can lead consumers to make impulsive purchases, overspend, and take on excessive debt. These behaviors can result in a preference for spending over savings, which can result in long-term financial instability, such as not having enough retirement savings later in life. What are some other biases that affect investing decisions? Other biases that can affect investing decisions include confirmation bias, recency bias, anchoring and adjustment, overconfidence, and herd mentality. The Bottom Line Present bias is a form of inconsistent temporal choice that occurs when people more heavily weight short-term benefits at the expense of long-term benefits. This can have a significant impact on one’s financial well-being, as impulsive spending or speculation can preempt long-term savings and strategic investing decisions. Present bias can take the form of hyperbolic discounting, which often leads to short-term thinking and suboptimal outcomes. By recognizing and addressing present bias, individuals can make more informed decisions that prioritize long-term financial success. Implementing strategies such as setting clear investment goals, adopting a long-term investment strategy, diversifying, and seeking professional advice can help mitigate the effects of present bias.

https://www.investopedia.com/walmart-backed-ibotta-soars-in-its-trading-debut-8635385

Walmart-Backed Ibotta Soars 17% in Its Trading Debut

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Shares of Walmart-backed Ibotta jumped over 17% to $103.25 per share in the digital marketing company's first day of trading on the New York Stock Exchange Thursday under the ticker "IBTA."</li><li>The company had priced its shares at $88 apiece in its initial public offering (IPO), well above its estimated range of $76 to $84.</li><li>Ibotta offers customers promotions and other advertisements through its own platform, and through the platforms of clients like Dollar General and Walmart, which is also an investor in the company.<br/></li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Shares of Ibotta (IBTA), a digital marketing company backed by Walmart (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=WMT">WMT</a>), jumped over 17% in their first day of trading on the New York Stock Exchange Thursday. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Ibotta had priced its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ipo.asp">initial public offering (IPO)</a> at $88 per share, well above its estimated range of $76 to $84, and shares opened at $117 before finishing at $103.25 Thursday. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The number of shares offered in Ibotta's IPO rose to 6.56 million shares, up from the 5.625 million it originally suggested would be sold. Ibotta sold 2.5 million shares, while the number of shares offered by other stockholders increased to 4.06 million from 3.125 million, according to a filing with the Securities and Exchange Commission.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">Artificial intelligence</a> technology powers the company's platform, which matches hundreds of clients with potential customers through advertisements and special promotions in the Ibotta app, as well as through the official platforms of its clients like Walmart and Dollar General (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DG">DG</a>). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The company's SEC filings showed that it had over 850 clients at the end of 2023, which together represent 2,400 individual product brands. It estimated that Ibotta's platform earned customers about $1.8 billion, and Ibotta said it generated $320 million in revenue last year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Some notable clients listed in the filing include the Coca-Cola Company (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ko">KO</a>), PepsiCo (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=pep">PEP</a>) and Family Dollar, which is owned by Dollar Tree (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DLTR">DLTR</a>). </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Shares of Walmart-backed Ibotta jumped over 17% to $103.25 per share in the digital marketing company's first day of trading on the New York Stock Exchange Thursday under the ticker "IBTA." * The company had priced its shares at $88 apiece in its initial public offering (IPO), well above its estimated range of $76 to $84. * Ibotta offers customers promotions and other advertisements through its own platform, and through the platforms of clients like Dollar General and Walmart, which is also an investor in the company. Shares of Ibotta (IBTA), a digital marketing company backed by Walmart ([WMT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=WMT)), jumped over 17% in their first day of trading on the New York Stock Exchange Thursday. Ibotta had priced its [initial public offering (IPO)](https://www.investopedia.com/terms/i/ipo.asp) at $88 per share, well above its estimated range of $76 to $84, and shares opened at $117 before finishing at $103.25 Thursday. The number of shares offered in Ibotta's IPO rose to 6.56 million shares, up from the 5.625 million it originally suggested would be sold. Ibotta sold 2.5 million shares, while the number of shares offered by other stockholders increased to 4.06 million from 3.125 million, according to a filing with the Securities and Exchange Commission. [Artificial intelligence](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) technology powers the company's platform, which matches hundreds of clients with potential customers through advertisements and special promotions in the Ibotta app, as well as through the official platforms of its clients like Walmart and Dollar General ([DG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DG)). The company's SEC filings showed that it had over 850 clients at the end of 2023, which together represent 2,400 individual product brands. It estimated that Ibotta's platform earned customers about $1.8 billion, and Ibotta said it generated $320 million in revenue last year. Some notable clients listed in the filing include the Coca-Cola Company ([KO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ko)), PepsiCo ([PEP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=pep)) and Family Dollar, which is owned by Dollar Tree ([DLTR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DLTR)). Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Shares of Walmart-backed Ibotta jumped over 17% to $103.25 per share in the digital marketing company's first day of trading on the New York Stock Exchange Thursday under the ticker "IBTA."The company had priced its shares at $88 apiece in its initial public offering (IPO), well above its estimated range of $76 to $84.Ibotta offers customers promotions and other advertisements through its own platform, and through the platforms of clients like Dollar General and Walmart, which is also an investor in the company. Shares of Ibotta (IBTA), a digital marketing company backed by Walmart (WMT), jumped over 17% in their first day of trading on the New York Stock Exchange Thursday. Ibotta had priced its initial public offering (IPO) at $88 per share, well above its estimated range of $76 to $84, and shares opened at $117 before finishing at $103.25 Thursday. The number of shares offered in Ibotta's IPO rose to 6.56 million shares, up from the 5.625 million it originally suggested would be sold. Ibotta sold 2.5 million shares, while the number of shares offered by other stockholders increased to 4.06 million from 3.125 million, according to a filing with the Securities and Exchange Commission. Artificial intelligence technology powers the company's platform, which matches hundreds of clients with potential customers through advertisements and special promotions in the Ibotta app, as well as through the official platforms of its clients like Walmart and Dollar General (DG). The company's SEC filings showed that it had over 850 clients at the end of 2023, which together represent 2,400 individual product brands. It estimated that Ibotta's platform earned customers about $1.8 billion, and Ibotta said it generated $320 million in revenue last year. Some notable clients listed in the filing include the Coca-Cola Company (KO), PepsiCo (PEP) and Family Dollar, which is owned by Dollar Tree (DLTR). Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/how-to-open-a-real-estate-crowdfunding-account-8422492

How to Open a Real Estate Crowdfunding Account

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Investing directly in real estate traditionally required an investor to have a large amount of capital available. Real estate investment trusts (REITs) helped to open up real estate to more investors by combining resources via a pooled fund. More recently, crowdfunding has emerged as another way for everyday investors to add real estate to their portfolios. We’ll walk you through how to compare your options, cover your alternatives, and answer your most pressing questions. With an understanding of how to open a real estate crowdfunding account, you can choose the right investments that meet your goals and start investing.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>Real estate crowdfunding is a path to raise money online for real estate projects from a large group of investors.</li> <li>Direct investing in real estate can provide diversification and solid returns.</li> <li>There is a wide range of real estate crowdfunding platforms with different investing requirements and platform fees.</li> <li>Even in crowdfunding, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accreditedinvestor.asp">accredited investors</a> get access to a wider range of opportunities than non-accredited investors do.</li> <li>When investing through a real estate crowdfunding platform, it is critical to understand the due diligence that has been done on the deals that are presented. </li> </ul></div></div></div> <span class="heading-toc" id="toc-what-you-need-to-open-a-real-estate-crowdfunding-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> What You Need to Open a Real Estate Crowdfunding Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Similar to opening any online investing account, obtaining a real estate crowdfunding account requires that you first provide a combination of personal and financial information. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> Personal Information </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Some platforms allow you to create an account with just an email address and password, but an actual investing account will usually require your basic personal information:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li>Email</li><li>Legal name</li><li>Physical address</li><li>Phone number</li><li>Birth date</li><li>Government-issued ID number may be required for verification</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> Financial Information </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Most platforms will ask you outright whether you are an accredited investor or not, but even the platforms open to non-accredited investors will require the following information:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <li>Social Security number (or a tax identification number if using a company structure)</li> <li>Your income and net worth for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/k/knowyourclient.asp">know your client (KYC</a>) survey</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Accredited investors may have to verify their claim with one or more of the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li>Investment account statements </li><li>Tax returns</li><li>Third-party confirmation from a financial professional like an accountant</li><li>Proof of financial license</li><li>A signed affidavit  </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-how-to-open-a-real-estate-crowdfunding-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> How to Open a Real Estate Crowdfunding Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Opening a real estate crowdfunding account is relatively straightforward. That said, it is important to take a few steps back in the process before signing up with the first platform that pops up in your search. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Understand the Real Estate Crowdfunding Market </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Real estate can be a great alternative asset for investors, but it is important to know your financial situation and risk tolerance before jumping in. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/092815/how-become-accredited-investor.asp">Accreditation</a> is a key difference in the real estate crowdfunding market. Accredited investors will see a wider range of direct investment opportunities in real estate. Non-accredited investors may be limited in the types of deals they can access or the type of investments (REITs and funds only, for example).  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-advisorinsight" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If you have earned more than $200,000 per year in the last two years ($300,000 for couples) or have a net worth of $1 million not including your primary residence, you can be considered an accredited investor. There are also knowledge- and experience-based paths to accreditation, including getting a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/series7.asp">Series 7</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/series65.asp">Series 65</a>, or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/series-82.asp">Series 82</a> license. </p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Evaluating your risk tolerance is a trickier task. Many real estate crowdfunding sites trumpet high “targeted” returns in the double digits, but the flipside of that is that equity investments can also fail. In addition, even debt investments can end up going insolvent, placing the investor's initial investment at risk along with any owed proceeds. While direct real estate investments do provide diversification from the stock market, they come with many of the same sensitivities that affect the general economy. As with any higher-risk investment, real estate crowdfunding is best done with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskcapital.asp">risk capital</a> rather than making up a majority of your financial portfolio.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Research the Different Platforms </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Thorough research of a potential crowdfunding platform is a must, as this is still a relatively new industry where many companies have witnessed very few, if any, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/08/past-recessions.asp">recessionary cycles</a>. Some platforms are only open to accredited investors or have high minimum investment requirements that put them practically out of reach for non-accredited investors. Some platforms also charge fees to either the sponsor or the investors, so it is important to be aware of how the company you’re considering makes money. Beyond whether you can afford to invest on the platform or not, the process a platform goes through prior to listing an investment is key. You will want to know how the platform conducts due diligence, what it is analyzing, and how it structures the deals to protect investors.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Create an Account </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The account setup varies by platform. Some just require an email and a password to get into the platform and view investments, allowing you to finish setting up and funding an account when something catches your eye. Other platforms take you through a longer onboarding process that may include confirming accreditation status and linking a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-savings-accounts-4770633">bank account</a> prior to getting inside. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Fund the Account </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> While procedures can vary across platforms, most will accept transfers from a linked bank account, similar to traditional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-online-brokers-4587872">brokerage accounts</a>. However, in some cases, large amounts of money may have to be moved via a different process such as a wire transfer directly to the sponsor or a corporate entity like an LLC. <strong> </strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-subheading__text"> Start Investing </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> While you can start investing as soon as you have a funded account, it is important to do some of your own research on top of the due diligence done by the platform. If you don’t understand the key metrics in the research, like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loantovalue.asp">loan-to-value ratio</a> or free cash flow, then start there before you invest. Cross-check the research provided on the platform with other sources, and even consider calling real estate professionals in that area for a second opinion.<strong> </strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-choosing-a-real-estate-crowdfunding-platform"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> Choosing a Real Estate Crowdfunding Platform </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Real estate crowdfunding platforms facilitate investments in private real estate deals. This is important to remember as the terms "fund," "shares," or "REIT" mirror the publicly traded assets. Still, these are in fact illiquid private investments where any resale market may be limited to the platform listing them.<span class="ql-inline-citation" data-cite="1"></span> That is why it is critical to choose a platform that is putting in the work to qualify good investments and filter out bad ones.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>Eligibility requirements</strong>: Many platforms are still exclusively for accredited investors and most that allow non-accredited investors limit the investments to funds and REITs. Residency status can also matter, as many real estate crowdfunding platforms are only open to U.S. residents and U.S.-based entities.</li><li><strong>Minimum investments</strong>: Minimum investment levels range wildly from platform to platform. The range goes from $10 all the way to $200,000, so you’ll need to see if you have the capital on hand to even access a given platform. There may also be restrictions in the form of investment caps preventing more than a given percentage of net worth on the platform. </li><li><strong>Fees and penalties</strong>: Fees for real estate crowdfunding can be a bit confusing. Some platforms put all the fees on the sponsors, while others charge platform fees and/or management fees on their fund investments. Check any fees as well as the lock-up period rules for any set penalties around early redemptions or exits. </li><li><strong>Transparency</strong>: You’ll want to see a clear explanation of how a platform vets sponsor deals and what steps it takes to support investors in the event of a default. Does the platform clearly explain how deals are structured? Is there a set process for unexpected events like additional capital calls on a project? If you can’t easily find this information, it is likely a bad sign.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span><li><strong>Investment selection</strong>: The investment selection will interest accredited investors more than non-accredited ones. In many cases, non-accredited investors are limited to the private REITs or funds offered through the platform. For accredited investors, a wide selection of commercial real estate and multi-family units is a base-level offering. Some platforms spread the net more widely to include industrial real estate, marine investments, storage, and so on.  </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-compare-the-best-real-estate-crowdfunding-platforms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Compare the Best Real Estate Crowdfunding Platforms </span> </h2> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_50-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Company</th> <th>Fees</th> <th>Minimum Investment</th> <th>Accredited Investors Only?</th> <th>Investment Selection</th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fundrise.sjv.io/c/2104074/1032334/7376?subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="sponsored nofollow">Fundrise</a></td> <td>0.15% and 1.85%</td> <td>$10 (brokerage) or $1,000 (IRA)</td> <td>No</td> <td>Equity, debt, and funds</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://equitymultiple.4drrzr.net/c/2104074/751084/10943?u=https%3A%2F%2Fequitymultiple.com%2Fjoin&amp;subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="sponsored nofollow">EquityMultiple</a></td> <td>0.50%-1.5% + origination fee</td> <td>$20,000</td> <td>Yes</td> <td>Equity, debt, and funds</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://yieldstreet.pxf.io/c/2104074/1851598/13961?subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="nofollow">YieldStreet</a></td> <td>0.00%-2.00%</td> <td>$10,000</td> <td>No</td> <td>Equity, debt, and funds</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://arrived.com/" rel="nofollow">Arrived Homes</a></td> <td>Long Term Rentals: 3.5% Sourcing Fee, 0.15% AUM. Vacation rentals: 5% Sourcing fee, 5% Gross rents fee, property management fees (third party-pass-through fees): vary</td> <td>$100</td> <td>No</td> <td>Equity, fund</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://realtymogul.pxf.io/c/2104074/1028711/13202?subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="sponsored nofollow">RealtyMogul</a></td> <td>Vary per deal; Income REIT caps fees at 4.5%, Apartment Growth REIT caps fees at 4.75%</td> <td>Varies per project, from $5,000 and up</td> <td>No</td> <td>Equity, debt, and funds</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://crowdstreet.4cl7.net/c/2104074/977365/9753?subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="sponsored nofollow">CrowdStreet</a></td> <td>Vary per investment and are paid to the sponsor</td> <td>Typically $25,000, but varies per investment</td> <td>Yes</td> <td>Debt, equity, funds</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dlpcapitol.sjv.io/c/2104074/1755254/20525?subid1=5070790&amp;subid2=n292d7f57f76f4b439a1f0b31df6b868219" rel="nofollow">DPL Capital</a></td> <td>2% (fee rebates for investments greater than $1 million)</td> <td>$200,000</td> <td>Yes</td> <td>Debt, equity, funds</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-alternatives-to-real-estate-crowdfunding"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> Alternatives to Real Estate Crowdfunding </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Direct investments in real estate via private equity arrangements are considered a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alternative_investment.asp">alternative investment</a>. These are generally considered to be more illiquid and therefore higher-risk than publicly traded investment options. Crowdfunded real estate is not the only alternative investment, of course. Here are a few other alternatives that offer similar diversification away from the traditional market.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-subheading__text"> Fine Art and Collectibles </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Fine art, antiques, wine, and other physical property that gain value over time based on rarity and popularity are broadly categorized as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collectible.asp">collectibles</a>. To invest successfully in collectibles, you need to understand the market for various items and be able to assess quality and authenticity quickly. Investors in collectibles need to plan for things like secure storage and insurance for their investments.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-subheading__text"> Cryptocurrency </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Cryptocurrency uses blockchain technology to create a virtual currency that doesn’t derive its value from a national government. Instead, these digital currencies are traded on a market maintained through cryptocurrency exchanges. Cryptocurrency is arguably on its way to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cryptocurrency-regulations-around-the-world-5202122">becoming just another asset class</a> but even then it is on the higher-risk, speculative side, similar to real estate crowdfunding. Cryptocurrency investments can be done directly through exchanges or an investor can take the more diversified approach of gaining exposure through an exchange-traded fund (ETF).  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> Precious Metals </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Precious metals like gold, silver, and platinum are also considered alternative investments. Gold and silver come in a collectible form as with coins and jewelry that sell above the melt price. Some physical forms, like bullion bars, trade closer to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spotprice.asp">spot price</a> of gold and silver as a commodity. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-invest-in-gold-and-silver-7369625">Investors can also get access to precious metals</a> through ETFs, futures, options, and even shares of the mining companies pulling them out of the ground.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-subheading__text"> Peer-to-Peer Lending </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/peer-to-peer-lending.asp">Peer-to-peer (P2P) lending</a> is very similar to real estate crowdfunding in that it is a private capital market outside of traditional bank financing. Investors can become lenders on the platform and provide loans to other individuals. The borrower may not be able to secure traditional financing, so the rates on the loans may be higher to accommodate the higher risk of default. As with real estate crowdfunding, platforms play the key role in creating the market with providers like Prosper and Lending Club—although the latter has moved to institutional investment with no replacement for its individual investment option as of yet.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span> The requirements vary state by state, but the income and net-worth requirements are generally not as onerous as they are to be an accredited investor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-how-does-real-estate-crowdfunding-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> How Does Real Estate Crowdfunding Work? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Investors pool their money to acquire equity or debt stakes in private real estate projects or operations. In exchange for the capital, the sponsor of the deal will either pay investors out of the rent income and proceeds of an eventual sale or via regular interest payments if it is a debt investment. The platforms that list opportunities play a critical role in vetting the investment and structuring it.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-is-real-estate-crowdfunding-worth-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> Is Real Estate Crowdfunding Worth It? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Real estate crowdfunding is a higher-risk, higher-return investment. It is also less correlated with the financial markets, although it is still sensitive to the economic conditions where the properties are located. Real estate crowdfunding can provide investors with above-average returns and portfolio diversification, but it is best done with risk capital rather than making it a majority of any average investor's portfolio.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <span class="heading-toc" id="toc-what-are-the-disadvantages-of-real-estate-crowdfunding"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-heading__text"> What Are the Disadvantages of Real Estate Crowdfunding?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Real estate crowdfunding investments are higher-risk private investments. This means that in addition to the regular risks of total loss, if an investment fails, you may have issues around liquidity, fraud, and potential platform failure to consider. Investors in private projects also do not have the same guaranteed disclosures that more regulated investments have, making due diligence more difficult. Lastly, real estate crowdfunding projects face the same economic pressures as regular real estate investing. The cost of capital can go up in the form of interest rates, or inflation can drive up construction costs and suddenly a project costs more than planned. This can result in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/margincall.asp">capital call</a> to existing investors or even <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/11/dangers-of-stock-dilution.asp">dilution</a> of equity via a secondary call for investment.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <span class="heading-toc" id="toc-can-you-invest-in-real-estate-crowdfunding-with-a-401k"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_76-0"> <span class="mntl-sc-block-heading__text"> Can You Invest in Real Estate Crowdfunding With a 401(k)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> A traditional 401(k) through a brokerage or bank is unlikely to allow you to invest in crowdfunded real estate deals. To use retirement funds to invest in this type of alternative asset, you’ll need to go the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/retirement/doing-it-yourself-selfdirected-401k-and-ira/">self-directed 401(k)</a> route. While this is possible, it is recommended that you limit your exposure to alternative investments by only using risk capital. Putting all of your retirement savings into crowdfunded real estate is not part of a sound investment strategy. <br/> </p></div>

Investing directly in real estate traditionally required an investor to have a large amount of capital available. Real estate investment trusts (REITs) helped to open up real estate to more investors by combining resources via a pooled fund. More recently, crowdfunding has emerged as another way for everyday investors to add real estate to their portfolios. We’ll walk you through how to compare your options, cover your alternatives, and answer your most pressing questions. With an understanding of how to open a real estate crowdfunding account, you can choose the right investments that meet your goals and start investing.  ### Key Takeaways * Real estate crowdfunding is a path to raise money online for real estate projects from a large group of investors. * Direct investing in real estate can provide diversification and solid returns. * There is a wide range of real estate crowdfunding platforms with different investing requirements and platform fees. * Even in crowdfunding, [accredited investors](https://www.investopedia.com/terms/a/accreditedinvestor.asp) get access to a wider range of opportunities than non-accredited investors do. * When investing through a real estate crowdfunding platform, it is critical to understand the due diligence that has been done on the deals that are presented. ## What You Need to Open a Real Estate Crowdfunding Account Similar to opening any online investing account, obtaining a real estate crowdfunding account requires that you first provide a combination of personal and financial information. ### Personal Information Some platforms allow you to create an account with just an email address and password, but an actual investing account will usually require your basic personal information:  * Email * Legal name * Physical address * Phone number * Birth date * Government-issued ID number may be required for verification ### Financial Information Most platforms will ask you outright whether you are an accredited investor or not, but even the platforms open to non-accredited investors will require the following information:  * Social Security number (or a tax identification number if using a company structure) * Your income and net worth for a [know your client (KYC](https://www.investopedia.com/terms/k/knowyourclient.asp)) survey Accredited investors may have to verify their claim with one or more of the following: * Investment account statements * Tax returns * Third-party confirmation from a financial professional like an accountant * Proof of financial license * A signed affidavit ## How to Open a Real Estate Crowdfunding Account Opening a real estate crowdfunding account is relatively straightforward. That said, it is important to take a few steps back in the process before signing up with the first platform that pops up in your search. ### Understand the Real Estate Crowdfunding Market Real estate can be a great alternative asset for investors, but it is important to know your financial situation and risk tolerance before jumping in. [Accreditation](https://www.investopedia.com/articles/investing/092815/how-become-accredited-investor.asp) is a key difference in the real estate crowdfunding market. Accredited investors will see a wider range of direct investment opportunities in real estate. Non-accredited investors may be limited in the types of deals they can access or the type of investments (REITs and funds only, for example).  ### If you have earned more than $200,000 per year in the last two years ($300,000 for couples) or have a net worth of $1 million not including your primary residence, you can be considered an accredited investor. There are also knowledge- and experience-based paths to accreditation, including getting a [Series 7](https://www.investopedia.com/terms/s/series7.asp), [Series 65](https://www.investopedia.com/terms/s/series65.asp), or [Series 82](https://www.investopedia.com/terms/s/series-82.asp) license.  Evaluating your risk tolerance is a trickier task. Many real estate crowdfunding sites trumpet high “targeted” returns in the double digits, but the flipside of that is that equity investments can also fail. In addition, even debt investments can end up going insolvent, placing the investor's initial investment at risk along with any owed proceeds. While direct real estate investments do provide diversification from the stock market, they come with many of the same sensitivities that affect the general economy. As with any higher-risk investment, real estate crowdfunding is best done with [risk capital](https://www.investopedia.com/terms/r/riskcapital.asp) rather than making up a majority of your financial portfolio.  ### Research the Different Platforms Thorough research of a potential crowdfunding platform is a must, as this is still a relatively new industry where many companies have witnessed very few, if any, [recessionary cycles](https://www.investopedia.com/articles/economics/08/past-recessions.asp). Some platforms are only open to accredited investors or have high minimum investment requirements that put them practically out of reach for non-accredited investors. Some platforms also charge fees to either the sponsor or the investors, so it is important to be aware of how the company you’re considering makes money. Beyond whether you can afford to invest on the platform or not, the process a platform goes through prior to listing an investment is key. You will want to know how the platform conducts due diligence, what it is analyzing, and how it structures the deals to protect investors.  ### Create an Account The account setup varies by platform. Some just require an email and a password to get into the platform and view investments, allowing you to finish setting up and funding an account when something catches your eye. Other platforms take you through a longer onboarding process that may include confirming accreditation status and linking a [bank account](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) prior to getting inside. ### Fund the Account While procedures can vary across platforms, most will accept transfers from a linked bank account, similar to traditional [brokerage accounts](https://www.investopedia.com/best-online-brokers-4587872). However, in some cases, large amounts of money may have to be moved via a different process such as a wire transfer directly to the sponsor or a corporate entity like an LLC. ### Start Investing While you can start investing as soon as you have a funded account, it is important to do some of your own research on top of the due diligence done by the platform. If you don’t understand the key metrics in the research, like [loan-to-value ratio](https://www.investopedia.com/terms/l/loantovalue.asp) or free cash flow, then start there before you invest. Cross-check the research provided on the platform with other sources, and even consider calling real estate professionals in that area for a second opinion. ## Choosing a Real Estate Crowdfunding Platform Real estate crowdfunding platforms facilitate investments in private real estate deals. This is important to remember as the terms "fund," "shares," or "REIT" mirror the publicly traded assets. Still, these are in fact illiquid private investments where any resale market may be limited to the platform listing them. That is why it is critical to choose a platform that is putting in the work to qualify good investments and filter out bad ones.  * **Eligibility requirements**: Many platforms are still exclusively for accredited investors and most that allow non-accredited investors limit the investments to funds and REITs. Residency status can also matter, as many real estate crowdfunding platforms are only open to U.S. residents and U.S.-based entities. * **Minimum investments**: Minimum investment levels range wildly from platform to platform. The range goes from $10 all the way to $200,000, so you’ll need to see if you have the capital on hand to even access a given platform. There may also be restrictions in the form of investment caps preventing more than a given percentage of net worth on the platform. * **Fees and penalties**: Fees for real estate crowdfunding can be a bit confusing. Some platforms put all the fees on the sponsors, while others charge platform fees and/or management fees on their fund investments. Check any fees as well as the lock-up period rules for any set penalties around early redemptions or exits. * **Transparency**: You’ll want to see a clear explanation of how a platform vets sponsor deals and what steps it takes to support investors in the event of a default. Does the platform clearly explain how deals are structured? Is there a set process for unexpected events like additional capital calls on a project? If you can’t easily find this information, it is likely a bad sign. * **Investment selection**: The investment selection will interest accredited investors more than non-accredited ones. In many cases, non-accredited investors are limited to the private REITs or funds offered through the platform. For accredited investors, a wide selection of commercial real estate and multi-family units is a base-level offering. Some platforms spread the net more widely to include industrial real estate, marine investments, storage, and so on. ## Compare the Best Real Estate Crowdfunding Platforms | Company | Fees | Minimum Investment | Accredited Investors Only? | Investment Selection | | --- | --- | --- | --- | --- | | [Fundrise](https://fundrise.sjv.io/c/2104074/1032334/7376?subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | 0.15% and 1.85% | $10 (brokerage) or $1,000 (IRA) | No | Equity, debt, and funds | | [EquityMultiple](https://equitymultiple.4drrzr.net/c/2104074/751084/10943?u=https%3A%2F%2Fequitymultiple.com%2Fjoin&subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | 0.50%-1.5% + origination fee | $20,000 | Yes | Equity, debt, and funds | | [YieldStreet](https://yieldstreet.pxf.io/c/2104074/1851598/13961?subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | 0.00%-2.00% | $10,000 | No | Equity, debt, and funds | | [Arrived Homes](https://arrived.com/) | Long Term Rentals: 3.5% Sourcing Fee, 0.15% AUM. Vacation rentals: 5% Sourcing fee, 5% Gross rents fee, property management fees (third party-pass-through fees): vary | $100 | No | Equity, fund | | [RealtyMogul](https://realtymogul.pxf.io/c/2104074/1028711/13202?subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | Vary per deal; Income REIT caps fees at 4.5%, Apartment Growth REIT caps fees at 4.75% | Varies per project, from $5,000 and up | No | Equity, debt, and funds | | [CrowdStreet](https://crowdstreet.4cl7.net/c/2104074/977365/9753?subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | Vary per investment and are paid to the sponsor | Typically $25,000, but varies per investment | Yes | Debt, equity, funds | | [DPL Capital](https://dlpcapitol.sjv.io/c/2104074/1755254/20525?subid1=5070790&subid2=n292d7f57f76f4b439a1f0b31df6b868219) | 2% (fee rebates for investments greater than $1 million) | $200,000 | Yes | Debt, equity, funds | ## Alternatives to Real Estate Crowdfunding Direct investments in real estate via private equity arrangements are considered a type of [alternative investment](https://www.investopedia.com/terms/a/alternative_investment.asp). These are generally considered to be more illiquid and therefore higher-risk than publicly traded investment options. Crowdfunded real estate is not the only alternative investment, of course. Here are a few other alternatives that offer similar diversification away from the traditional market.   ### Fine Art and Collectibles Fine art, antiques, wine, and other physical property that gain value over time based on rarity and popularity are broadly categorized as [collectibles](https://www.investopedia.com/terms/c/collectible.asp). To invest successfully in collectibles, you need to understand the market for various items and be able to assess quality and authenticity quickly. Investors in collectibles need to plan for things like secure storage and insurance for their investments.  ### Cryptocurrency Cryptocurrency uses blockchain technology to create a virtual currency that doesn’t derive its value from a national government. Instead, these digital currencies are traded on a market maintained through cryptocurrency exchanges. Cryptocurrency is arguably on its way to [becoming just another asset class](https://www.investopedia.com/cryptocurrency-regulations-around-the-world-5202122) but even then it is on the higher-risk, speculative side, similar to real estate crowdfunding. Cryptocurrency investments can be done directly through exchanges or an investor can take the more diversified approach of gaining exposure through an exchange-traded fund (ETF).  ### Precious Metals Precious metals like gold, silver, and platinum are also considered alternative investments. Gold and silver come in a collectible form as with coins and jewelry that sell above the melt price. Some physical forms, like bullion bars, trade closer to the [spot price](https://www.investopedia.com/terms/s/spotprice.asp) of gold and silver as a commodity. [Investors can also get access to precious metals](https://www.investopedia.com/how-to-invest-in-gold-and-silver-7369625) through ETFs, futures, options, and even shares of the mining companies pulling them out of the ground.  ### Peer-to-Peer Lending [Peer-to-peer (P2P) lending](https://www.investopedia.com/terms/p/peer-to-peer-lending.asp) is very similar to real estate crowdfunding in that it is a private capital market outside of traditional bank financing. Investors can become lenders on the platform and provide loans to other individuals. The borrower may not be able to secure traditional financing, so the rates on the loans may be higher to accommodate the higher risk of default. As with real estate crowdfunding, platforms play the key role in creating the market with providers like Prosper and Lending Club—although the latter has moved to institutional investment with no replacement for its individual investment option as of yet. The requirements vary state by state, but the income and net-worth requirements are generally not as onerous as they are to be an accredited investor. ## How Does Real Estate Crowdfunding Work? Investors pool their money to acquire equity or debt stakes in private real estate projects or operations. In exchange for the capital, the sponsor of the deal will either pay investors out of the rent income and proceeds of an eventual sale or via regular interest payments if it is a debt investment. The platforms that list opportunities play a critical role in vetting the investment and structuring it.  ## Is Real Estate Crowdfunding Worth It? Real estate crowdfunding is a higher-risk, higher-return investment. It is also less correlated with the financial markets, although it is still sensitive to the economic conditions where the properties are located. Real estate crowdfunding can provide investors with above-average returns and portfolio diversification, but it is best done with risk capital rather than making it a majority of any average investor's portfolio.  ## What Are the Disadvantages of Real Estate Crowdfunding? Real estate crowdfunding investments are higher-risk private investments. This means that in addition to the regular risks of total loss, if an investment fails, you may have issues around liquidity, fraud, and potential platform failure to consider. Investors in private projects also do not have the same guaranteed disclosures that more regulated investments have, making due diligence more difficult. Lastly, real estate crowdfunding projects face the same economic pressures as regular real estate investing. The cost of capital can go up in the form of interest rates, or inflation can drive up construction costs and suddenly a project costs more than planned. This can result in a [capital call](https://www.investopedia.com/terms/m/margincall.asp) to existing investors or even [dilution](https://www.investopedia.com/articles/stocks/11/dangers-of-stock-dilution.asp) of equity via a secondary call for investment.  ## Can You Invest in Real Estate Crowdfunding With a 401(k)? A traditional 401(k) through a brokerage or bank is unlikely to allow you to invest in crowdfunded real estate deals. To use retirement funds to invest in this type of alternative asset, you’ll need to go the [self-directed 401(k)](https://www.investopedia.com/retirement/doing-it-yourself-selfdirected-401k-and-ira/) route. While this is possible, it is recommended that you limit your exposure to alternative investments by only using risk capital. Putting all of your retirement savings into crowdfunded real estate is not part of a sound investment strategy. 

Investing directly in real estate traditionally required an investor to have a large amount of capital available. Real estate investment trusts (REITs) helped to open up real estate to more investors by combining resources via a pooled fund. More recently, crowdfunding has emerged as another way for everyday investors to add real estate to their portfolios. We’ll walk you through how to compare your options, cover your alternatives, and answer your most pressing questions. With an understanding of how to open a real estate crowdfunding account, you can choose the right investments that meet your goals and start investing.  Key Takeaways Real estate crowdfunding is a path to raise money online for real estate projects from a large group of investors. Direct investing in real estate can provide diversification and solid returns. There is a wide range of real estate crowdfunding platforms with different investing requirements and platform fees. Even in crowdfunding, accredited investors get access to a wider range of opportunities than non-accredited investors do. When investing through a real estate crowdfunding platform, it is critical to understand the due diligence that has been done on the deals that are presented.  What You Need to Open a Real Estate Crowdfunding Account Similar to opening any online investing account, obtaining a real estate crowdfunding account requires that you first provide a combination of personal and financial information. Personal Information Some platforms allow you to create an account with just an email address and password, but an actual investing account will usually require your basic personal information:  EmailLegal namePhysical addressPhone numberBirth dateGovernment-issued ID number may be required for verification Financial Information Most platforms will ask you outright whether you are an accredited investor or not, but even the platforms open to non-accredited investors will require the following information:  Social Security number (or a tax identification number if using a company structure) Your income and net worth for a know your client (KYC) survey Accredited investors may have to verify their claim with one or more of the following: Investment account statements Tax returnsThird-party confirmation from a financial professional like an accountantProof of financial licenseA signed affidavit   How to Open a Real Estate Crowdfunding Account Opening a real estate crowdfunding account is relatively straightforward. That said, it is important to take a few steps back in the process before signing up with the first platform that pops up in your search. Understand the Real Estate Crowdfunding Market Real estate can be a great alternative asset for investors, but it is important to know your financial situation and risk tolerance before jumping in. Accreditation is a key difference in the real estate crowdfunding market. Accredited investors will see a wider range of direct investment opportunities in real estate. Non-accredited investors may be limited in the types of deals they can access or the type of investments (REITs and funds only, for example).  If you have earned more than $200,000 per year in the last two years ($300,000 for couples) or have a net worth of $1 million not including your primary residence, you can be considered an accredited investor. There are also knowledge- and experience-based paths to accreditation, including getting a Series 7, Series 65, or Series 82 license.  Evaluating your risk tolerance is a trickier task. Many real estate crowdfunding sites trumpet high “targeted” returns in the double digits, but the flipside of that is that equity investments can also fail. In addition, even debt investments can end up going insolvent, placing the investor's initial investment at risk along with any owed proceeds. While direct real estate investments do provide diversification from the stock market, they come with many of the same sensitivities that affect the general economy. As with any higher-risk investment, real estate crowdfunding is best done with risk capital rather than making up a majority of your financial portfolio.  Research the Different Platforms Thorough research of a potential crowdfunding platform is a must, as this is still a relatively new industry where many companies have witnessed very few, if any, recessionary cycles. Some platforms are only open to accredited investors or have high minimum investment requirements that put them practically out of reach for non-accredited investors. Some platforms also charge fees to either the sponsor or the investors, so it is important to be aware of how the company you’re considering makes money. Beyond whether you can afford to invest on the platform or not, the process a platform goes through prior to listing an investment is key. You will want to know how the platform conducts due diligence, what it is analyzing, and how it structures the deals to protect investors.  Create an Account The account setup varies by platform. Some just require an email and a password to get into the platform and view investments, allowing you to finish setting up and funding an account when something catches your eye. Other platforms take you through a longer onboarding process that may include confirming accreditation status and linking a bank account prior to getting inside. Fund the Account While procedures can vary across platforms, most will accept transfers from a linked bank account, similar to traditional brokerage accounts. However, in some cases, large amounts of money may have to be moved via a different process such as a wire transfer directly to the sponsor or a corporate entity like an LLC.   Start Investing While you can start investing as soon as you have a funded account, it is important to do some of your own research on top of the due diligence done by the platform. If you don’t understand the key metrics in the research, like loan-to-value ratio or free cash flow, then start there before you invest. Cross-check the research provided on the platform with other sources, and even consider calling real estate professionals in that area for a second opinion.  Choosing a Real Estate Crowdfunding Platform Real estate crowdfunding platforms facilitate investments in private real estate deals. This is important to remember as the terms "fund," "shares," or "REIT" mirror the publicly traded assets. Still, these are in fact illiquid private investments where any resale market may be limited to the platform listing them. That is why it is critical to choose a platform that is putting in the work to qualify good investments and filter out bad ones.  Eligibility requirements: Many platforms are still exclusively for accredited investors and most that allow non-accredited investors limit the investments to funds and REITs. Residency status can also matter, as many real estate crowdfunding platforms are only open to U.S. residents and U.S.-based entities.Minimum investments: Minimum investment levels range wildly from platform to platform. The range goes from $10 all the way to $200,000, so you’ll need to see if you have the capital on hand to even access a given platform. There may also be restrictions in the form of investment caps preventing more than a given percentage of net worth on the platform. Fees and penalties: Fees for real estate crowdfunding can be a bit confusing. Some platforms put all the fees on the sponsors, while others charge platform fees and/or management fees on their fund investments. Check any fees as well as the lock-up period rules for any set penalties around early redemptions or exits. Transparency: You’ll want to see a clear explanation of how a platform vets sponsor deals and what steps it takes to support investors in the event of a default. Does the platform clearly explain how deals are structured? Is there a set process for unexpected events like additional capital calls on a project? If you can’t easily find this information, it is likely a bad sign.Investment selection: The investment selection will interest accredited investors more than non-accredited ones. In many cases, non-accredited investors are limited to the private REITs or funds offered through the platform. For accredited investors, a wide selection of commercial real estate and multi-family units is a base-level offering. Some platforms spread the net more widely to include industrial real estate, marine investments, storage, and so on.   Compare the Best Real Estate Crowdfunding Platforms Company Fees Minimum Investment Accredited Investors Only? Investment Selection Fundrise 0.15% and 1.85% $10 (brokerage) or $1,000 (IRA) No Equity, debt, and funds EquityMultiple 0.50%-1.5% + origination fee $20,000 Yes Equity, debt, and funds YieldStreet 0.00%-2.00% $10,000 No Equity, debt, and funds Arrived Homes Long Term Rentals: 3.5% Sourcing Fee, 0.15% AUM. Vacation rentals: 5% Sourcing fee, 5% Gross rents fee, property management fees (third party-pass-through fees): vary $100 No Equity, fund RealtyMogul Vary per deal; Income REIT caps fees at 4.5%, Apartment Growth REIT caps fees at 4.75% Varies per project, from $5,000 and up No Equity, debt, and funds CrowdStreet Vary per investment and are paid to the sponsor Typically $25,000, but varies per investment Yes Debt, equity, funds DPL Capital 2% (fee rebates for investments greater than $1 million) $200,000 Yes Debt, equity, funds Alternatives to Real Estate Crowdfunding Direct investments in real estate via private equity arrangements are considered a type of alternative investment. These are generally considered to be more illiquid and therefore higher-risk than publicly traded investment options. Crowdfunded real estate is not the only alternative investment, of course. Here are a few other alternatives that offer similar diversification away from the traditional market.   Fine Art and Collectibles Fine art, antiques, wine, and other physical property that gain value over time based on rarity and popularity are broadly categorized as collectibles. To invest successfully in collectibles, you need to understand the market for various items and be able to assess quality and authenticity quickly. Investors in collectibles need to plan for things like secure storage and insurance for their investments.  Cryptocurrency Cryptocurrency uses blockchain technology to create a virtual currency that doesn’t derive its value from a national government. Instead, these digital currencies are traded on a market maintained through cryptocurrency exchanges. Cryptocurrency is arguably on its way to becoming just another asset class but even then it is on the higher-risk, speculative side, similar to real estate crowdfunding. Cryptocurrency investments can be done directly through exchanges or an investor can take the more diversified approach of gaining exposure through an exchange-traded fund (ETF).  Precious Metals Precious metals like gold, silver, and platinum are also considered alternative investments. Gold and silver come in a collectible form as with coins and jewelry that sell above the melt price. Some physical forms, like bullion bars, trade closer to the spot price of gold and silver as a commodity. Investors can also get access to precious metals through ETFs, futures, options, and even shares of the mining companies pulling them out of the ground.  Peer-to-Peer Lending Peer-to-peer (P2P) lending is very similar to real estate crowdfunding in that it is a private capital market outside of traditional bank financing. Investors can become lenders on the platform and provide loans to other individuals. The borrower may not be able to secure traditional financing, so the rates on the loans may be higher to accommodate the higher risk of default. As with real estate crowdfunding, platforms play the key role in creating the market with providers like Prosper and Lending Club—although the latter has moved to institutional investment with no replacement for its individual investment option as of yet. The requirements vary state by state, but the income and net-worth requirements are generally not as onerous as they are to be an accredited investor. How Does Real Estate Crowdfunding Work? Investors pool their money to acquire equity or debt stakes in private real estate projects or operations. In exchange for the capital, the sponsor of the deal will either pay investors out of the rent income and proceeds of an eventual sale or via regular interest payments if it is a debt investment. The platforms that list opportunities play a critical role in vetting the investment and structuring it.  Is Real Estate Crowdfunding Worth It? Real estate crowdfunding is a higher-risk, higher-return investment. It is also less correlated with the financial markets, although it is still sensitive to the economic conditions where the properties are located. Real estate crowdfunding can provide investors with above-average returns and portfolio diversification, but it is best done with risk capital rather than making it a majority of any average investor's portfolio.  What Are the Disadvantages of Real Estate Crowdfunding?  Real estate crowdfunding investments are higher-risk private investments. This means that in addition to the regular risks of total loss, if an investment fails, you may have issues around liquidity, fraud, and potential platform failure to consider. Investors in private projects also do not have the same guaranteed disclosures that more regulated investments have, making due diligence more difficult. Lastly, real estate crowdfunding projects face the same economic pressures as regular real estate investing. The cost of capital can go up in the form of interest rates, or inflation can drive up construction costs and suddenly a project costs more than planned. This can result in a capital call to existing investors or even dilution of equity via a secondary call for investment.  Can You Invest in Real Estate Crowdfunding With a 401(k)? A traditional 401(k) through a brokerage or bank is unlikely to allow you to invest in crowdfunded real estate deals. To use retirement funds to invest in this type of alternative asset, you’ll need to go the self-directed 401(k) route. While this is possible, it is recommended that you limit your exposure to alternative investments by only using risk capital. Putting all of your retirement savings into crowdfunded real estate is not part of a sound investment strategy. 

https://www.investopedia.com/investing/data-availability-drives-esg-investing-surge/

Data Availability Drives ESG Investing Surge

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The internet has put a wealth of facts and figures at everyone's fingertips—and in real-time, too. While highly publicized <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/data-breach.asp">data breaches</a> have understandably prompted concerns, the widespread availability of data has also emerged as a source for good. Investors and research analysts have increasingly found inventive ways to capitalize on newly available information. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> This trend has proved especially true in the world of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp">environmental, social, and governance (ESG)</a> investing, which has grown substantially in recent years. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> According to the Global Sustainable Investment Alliance's 2021 <em>Global Sustainable Investment Review, </em>at the start of 2020, sustainable investment reached $35.3 trillion in five major markets (the U.S, Canada, Europe, Japan, and Australasia)—a 15% increase in from 2018 to 2020 and 55% increase from 2016 to 2020.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> “Data is the lubricant” behind the rise, as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/stephen-franco-481160/" rel="sponsored nofollow">Stephen Franco</a>, managing director of Socially Innovative Investing at Bank of America, remarked at the 2018 Total Impact conference. ESG data have become an essential tool for investors looking to gain a truer picture of how well a company is doing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>An increase in available data has spurred the growth in impact and environmental, social, and governance (ESG) investing.</li><li>ESG asset managers are capitalizing on a new swell of quantifiable information and analysis, with investors following suit.</li><li>These new methods include the standardization of environmental, social, and governance factors.</li><li>The data have helped debunk myths that ESG investments underperform, showing that many hold their own or even outperform their traditional counterparts—and offer less risk/volatility as well.</li><li>The trend toward adding sustainable assets to portfolios is likely to continue as their market-rate returns can be proven.</li></ul></div></div></div> <span class="heading-toc" id="toc-in-search-of-value"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> In Search of Value </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Historically, most investments have been chosen using a blend of qualitative (judgment-based) and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quantitativeanalysis.asp">quantitative analysis</a>—which, in finance, refers to the process of analyzing numerical information to determine the health of a company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Publicly traded companies are required to make quantitative information available through shareholder reports, which investors analyze to make observations and predictions about a company’s health. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Research analysts supplement company financials and key performance metrics with their own observations from earnings calls, informal conversations, and interviews with company leadership.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> While this method was generally successful in helping analysts predict a company's value, the subjectiveness of the methodology frequently left risks—including environmental, social, and governance concerns—insufficiently analyzed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> According to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://urbangateways.org/people/abdur-nimeri-phd/">Abdur Nimeri</a>,  chief investment officer for UMB Family Wealth and former senior investment strategist at Northern Trust Asset Management: "Environmental and social risk wasn't as embedded in the price [of equities] as you would expect.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Moreover, staying up-to-date was difficult. "It used to be that we had a static view of the company,” says <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://investor.gittermanwealth.com/professionals/jeffrey-l-gitterman/" rel="nofollow">Jeff Gitterman</a>, co-founding partner of Gitterman Wealth Advisors. referring to the quarterly updates that public companies are required to file. But <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/big-data.asp">big data</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/alternative-investments-4427781">AI</a> have broadened the landscape. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Today, data-driven methods are emerging to help analysts better measure this non-financial information. This data allows researchers to quantify the "complex interrelationships" among intangible, difficult-to-measure concepts that help predict company success, says <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.veriswp.com/founders/" rel="nofollow">Anders Ferguson</a>, founding principal at Veris Wealth Partners. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">35.9%</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Percentage of total global assets under management that are sustainable investments.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-more-standard-esg-measures"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> More Standard ESG Measures </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> These new methods include the standardization of environmental, social, and governance factors. Now, “there’s a blizzard of numbers,” said <a class="CMY_Link CMY_Invalid" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sageadvisory.com/professionals/" rel="nofollow">Bob Smith 503</a>, president and CIO of Sage Advisory in Austin, Texas. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> “You’re going to make decisions on the data that’s available,” says <a class="CMY_Link CMY_Redirect CMY_Valid" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://flatworld-partners.com/anna-marie-wascher/" rel="nofollow">Anna-Marie Wascher</a>, CEO &amp; founding partner of Flat World Partners, an impact investing firm. As nonfinancial data grows more abundant, more and more opportunities will emerge to accurately price and factor in underlying risks at companies. <a class="CMY_Link CMY_Redirect CMY_Valid" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insights/new-approach-esg-scoring/">Newly quantified ESG information</a> is becoming a "necessary part of fundamental analysis,” says Stephen Franco. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Investors should still be careful. "The data is still immature," Franco cautions.  "The raw input still has a long way to go." What's important is combining it with other factors. "Just like how only looking at a P/E ratio doesn't tell you much about a company, neither does a raw ESG score. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> "These issues are now seen as material to company outcomes," he adds. "You're not doing your fiduciary duty if you're not looking at these statistics." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-esg-the-gps-of-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> ESG: "The GPS of Investing" </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Many investors once thought that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/history-impact-investing/">impact investing</a> was “just a fad," says <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/davidaltcfacfp/" rel="sponsored nofollow">David Alt</a>, director of responsible investing at Victory Capital Holdings. Even just "two years ago, there was a lot more resistance to ESG and impact investments.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> That pushback is rapidly disappearing. Impact investing today is “much more accepted and tolerated,” says Alt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> That change is largely a result of data not only helping investors find information about companies, but also helping them to quantify the results of their investments. "There can be no buy-in…unless you prove that you're doing the job that you were hired for,” says Smith. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> “ESG is the GPS of investing,” said Jeff Gitterman. Early ESG investors were only able to screen out companies with policies and practices that they did not want to support. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> However, ESG data means that today’s investors have much more latitude to pick the causes that interest them and invest to meet an end. "You can't have a target unless you have something that you're aiming at,” says Jim Lumberg, co-founder of Envestnet, a financial data provider. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_48-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_49-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">534</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The number of sustainable open-end and exchange-traded funds (ETFs) available to U.S. investors in 2021, up 73% from 2020.<span class="ql-inline-citation" data-cite="7"></span></p></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_50-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:70.4%;"> <img alt="# of ESG Funds" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/ldHjDDMawSm7QyCEKAcaGepZIx4=/863x0/filters:no_upscale():max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/cnQ4LjIK0fPQ0t71FtxK8HDcWDM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg" data-srcset="https://www.investopedia.com/thmb/IQLOGBP_tuhHPRQ10plffnG_P6M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg 750w" data-tracking-container="true" height="608" id="mntl-sc-block-image_1-0" width="863"/> <noscript> <img alt="# of ESG Funds" class="img--noscript universal-image__image" height="608" sizes="750px" src="https://www.investopedia.com/thmb/cnQ4LjIK0fPQ0t71FtxK8HDcWDM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg" srcset="https://www.investopedia.com/thmb/IQLOGBP_tuhHPRQ10plffnG_P6M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg 750w" width="863"/> </noscript> </div> </div> </figure> <span class="heading-toc" id="toc-sustainability-outpaces-traditional-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> Sustainability Outpaces Traditional Investments  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Even the best sales pitch is meaningless if managers aren’t able to deliver competitive returns. “Fifteen years ago, ESG investing could have been thought of as concessionary,” says Lumberg, referring to the idea that socially conscious investments underperform their traditional peers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> However, data has called that widely held belief into question. “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments… across asset classes and over time," researchers at Morgan Stanley’s Institute for Sustainable Investing declared in 2015.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> A 2019 white paper by the Institute found that there is no financial tradeoff in the returns of sustainable mutual funds/ETFs and traditional funds, and that sustainable funds may offer lower market risk.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Lumberg says that, while the “academic world had debunked” the belief that ESG investing leads to sub-par returns, many investors are still wary. As environmentally and socially conscious funds have often outpaced their peers, frequently with lower volatility, that attitude may continue to shift.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Surveys such as Morningstar's annual "Sustainable Funds U.S. Landscape Report" have supported this conclusion. "Like any investment approach, sustainable investing will not always outperform over short-term periods. But over the longer term, ESG insights can help investors develop a more complete picture of a company, one not reliant only on financial indicators," Morningstar notes.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_62-0"><span class="heading-toc" id="toc-what-does-esg-stand-for"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does ESG Stand for?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ESG stands for Environment, Social, and Governance. These make up pro-social criteria for certain investors who value such things over pure economic profit. ESG investors can screen for these criteria to identify those investments.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_64-0"><span class="heading-toc" id="toc-do-esg-investments-outperform-the-market"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do ESG Investments Outperform the Market?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Various industry and academic researchers have looked to see if ESG investments beat the market, and the answer is it depends. From 2012 through 2021, one study found that, all else equal, highly-ranked ESG stocks outperformed by 12%, but only in Europe; American stocks with high ESG scores fared no better than the broader market over the same period.<span class="ql-inline-citation" data-cite="8"></span> However, over shorter time periods, ESG performance varies quite a bit, as the graph below shows.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_66-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/YnpsT/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Average Returns for Rated Stocks By ESG Risk Rating"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_68-0"><span class="heading-toc" id="toc-where-can-i-find-esg-investments"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Can I Find ESG Investments?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are now several online resources that rank and score companies based on ESG criteria, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-green-investor-podcast-episode-7-5221028">MSCI's ESG Ratings</a>. You can also look to ESG-focused mutual funds and ETFs.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> While some investors will inevitably prove hesitant to make major shifts in their portfolios, it’s likely that the investment community’s trend of increasing sustainable assets will continue. "We can now prove that we can make market-rate returns in a socially responsible way," says <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/casey-clark-cfa-116b4a5/" rel="sponsored nofollow">Casey Clark</a>, Deputy CIO, Global Head of ESG Investments, and Portfolio Manager at Rockefeller Capital Management. </p></div>

The internet has put a wealth of facts and figures at everyone's fingertips—and in real-time, too. While highly publicized [data breaches](https://www.investopedia.com/terms/d/data-breach.asp) have understandably prompted concerns, the widespread availability of data has also emerged as a source for good. Investors and research analysts have increasingly found inventive ways to capitalize on newly available information. This trend has proved especially true in the world of [environmental, social, and governance (ESG)](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) investing, which has grown substantially in recent years. According to the Global Sustainable Investment Alliance's 2021 *Global Sustainable Investment Review,* at the start of 2020, sustainable investment reached $35.3 trillion in five major markets (the U.S, Canada, Europe, Japan, and Australasia)—a 15% increase in from 2018 to 2020 and 55% increase from 2016 to 2020. “Data is the lubricant” behind the rise, as [Stephen Franco](https://www.linkedin.com/in/stephen-franco-481160/), managing director of Socially Innovative Investing at Bank of America, remarked at the 2018 Total Impact conference. ESG data have become an essential tool for investors looking to gain a truer picture of how well a company is doing. ### Key Takeaways * An increase in available data has spurred the growth in impact and environmental, social, and governance (ESG) investing. * ESG asset managers are capitalizing on a new swell of quantifiable information and analysis, with investors following suit. * These new methods include the standardization of environmental, social, and governance factors. * The data have helped debunk myths that ESG investments underperform, showing that many hold their own or even outperform their traditional counterparts—and offer less risk/volatility as well. * The trend toward adding sustainable assets to portfolios is likely to continue as their market-rate returns can be proven. ## In Search of Value Historically, most investments have been chosen using a blend of qualitative (judgment-based) and [quantitative analysis](https://www.investopedia.com/terms/q/quantitativeanalysis.asp)—which, in finance, refers to the process of analyzing numerical information to determine the health of a company. Publicly traded companies are required to make quantitative information available through shareholder reports, which investors analyze to make observations and predictions about a company’s health. Research analysts supplement company financials and key performance metrics with their own observations from earnings calls, informal conversations, and interviews with company leadership.  While this method was generally successful in helping analysts predict a company's value, the subjectiveness of the methodology frequently left risks—including environmental, social, and governance concerns—insufficiently analyzed. According to [Abdur Nimeri](https://urbangateways.org/people/abdur-nimeri-phd/),  chief investment officer for UMB Family Wealth and former senior investment strategist at Northern Trust Asset Management: "Environmental and social risk wasn't as embedded in the price [of equities] as you would expect.” Moreover, staying up-to-date was difficult. "It used to be that we had a static view of the company,” says [Jeff Gitterman](https://investor.gittermanwealth.com/professionals/jeffrey-l-gitterman/), co-founding partner of Gitterman Wealth Advisors. referring to the quarterly updates that public companies are required to file. But [big data](https://www.investopedia.com/terms/b/big-data.asp) and [AI](https://www.investopedia.com/alternative-investments-4427781) have broadened the landscape. Today, data-driven methods are emerging to help analysts better measure this non-financial information. This data allows researchers to quantify the "complex interrelationships" among intangible, difficult-to-measure concepts that help predict company success, says [Anders Ferguson](https://www.veriswp.com/founders/), founding principal at Veris Wealth Partners. ### 35.9% Percentage of total global assets under management that are sustainable investments. ## More Standard ESG Measures These new methods include the standardization of environmental, social, and governance factors. Now, “there’s a blizzard of numbers,” said [Bob Smith 503](https://www.sageadvisory.com/professionals/), president and CIO of Sage Advisory in Austin, Texas. “You’re going to make decisions on the data that’s available,” says [Anna-Marie Wascher](https://flatworld-partners.com/anna-marie-wascher/), CEO & founding partner of Flat World Partners, an impact investing firm. As nonfinancial data grows more abundant, more and more opportunities will emerge to accurately price and factor in underlying risks at companies. [Newly quantified ESG information](https://www.investopedia.com/insights/new-approach-esg-scoring/) is becoming a "necessary part of fundamental analysis,” says Stephen Franco. Investors should still be careful. "The data is still immature," Franco cautions.  "The raw input still has a long way to go." What's important is combining it with other factors. "Just like how only looking at a P/E ratio doesn't tell you much about a company, neither does a raw ESG score. "These issues are now seen as material to company outcomes," he adds. "You're not doing your fiduciary duty if you're not looking at these statistics." ## ESG: "The GPS of Investing" Many investors once thought that [impact investing](https://www.investopedia.com/news/history-impact-investing/) was “just a fad," says [David Alt](https://www.linkedin.com/in/davidaltcfacfp/), director of responsible investing at Victory Capital Holdings. Even just "two years ago, there was a lot more resistance to ESG and impact investments.” That pushback is rapidly disappearing. Impact investing today is “much more accepted and tolerated,” says Alt. That change is largely a result of data not only helping investors find information about companies, but also helping them to quantify the results of their investments. "There can be no buy-in…unless you prove that you're doing the job that you were hired for,” says Smith. “ESG is the GPS of investing,” said Jeff Gitterman. Early ESG investors were only able to screen out companies with policies and practices that they did not want to support. However, ESG data means that today’s investors have much more latitude to pick the causes that interest them and invest to meet an end. "You can't have a target unless you have something that you're aiming at,” says Jim Lumberg, co-founder of Envestnet, a financial data provider. ### 534 The number of sustainable open-end and exchange-traded funds (ETFs) available to U.S. investors in 2021, up 73% from 2020. ![# of ESG Funds]() :max_bytes(150000):strip_icc()/Clipboard01-02a9488edbac4bf18219147303d2bf94.jpg) ## Sustainability Outpaces Traditional Investments Even the best sales pitch is meaningless if managers aren’t able to deliver competitive returns. “Fifteen years ago, ESG investing could have been thought of as concessionary,” says Lumberg, referring to the idea that socially conscious investments underperform their traditional peers. However, data has called that widely held belief into question. “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments… across asset classes and over time," researchers at Morgan Stanley’s Institute for Sustainable Investing declared in 2015. A 2019 white paper by the Institute found that there is no financial tradeoff in the returns of sustainable mutual funds/ETFs and traditional funds, and that sustainable funds may offer lower market risk. Lumberg says that, while the “academic world had debunked” the belief that ESG investing leads to sub-par returns, many investors are still wary. As environmentally and socially conscious funds have often outpaced their peers, frequently with lower volatility, that attitude may continue to shift. Surveys such as Morningstar's annual "Sustainable Funds U.S. Landscape Report" have supported this conclusion. "Like any investment approach, sustainable investing will not always outperform over short-term periods. But over the longer term, ESG insights can help investors develop a more complete picture of a company, one not reliant only on financial indicators," Morningstar notes. ## What Does ESG Stand for? ESG stands for Environment, Social, and Governance. These make up pro-social criteria for certain investors who value such things over pure economic profit. ESG investors can screen for these criteria to identify those investments. ## Do ESG Investments Outperform the Market? Various industry and academic researchers have looked to see if ESG investments beat the market, and the answer is it depends. From 2012 through 2021, one study found that, all else equal, highly-ranked ESG stocks outperformed by 12%, but only in Europe; American stocks with high ESG scores fared no better than the broader market over the same period. However, over shorter time periods, ESG performance varies quite a bit, as the graph below shows. ## Where Can I Find ESG Investments? There are now several online resources that rank and score companies based on ESG criteria, such as [MSCI's ESG Ratings](https://www.investopedia.com/the-green-investor-podcast-episode-7-5221028). You can also look to ESG-focused mutual funds and ETFs. ## The Bottom Line While some investors will inevitably prove hesitant to make major shifts in their portfolios, it’s likely that the investment community’s trend of increasing sustainable assets will continue. "We can now prove that we can make market-rate returns in a socially responsible way," says [Casey Clark](https://www.linkedin.com/in/casey-clark-cfa-116b4a5/), Deputy CIO, Global Head of ESG Investments, and Portfolio Manager at Rockefeller Capital Management.

The internet has put a wealth of facts and figures at everyone's fingertips—and in real-time, too. While highly publicized data breaches have understandably prompted concerns, the widespread availability of data has also emerged as a source for good. Investors and research analysts have increasingly found inventive ways to capitalize on newly available information. This trend has proved especially true in the world of environmental, social, and governance (ESG) investing, which has grown substantially in recent years. According to the Global Sustainable Investment Alliance's 2021 Global Sustainable Investment Review, at the start of 2020, sustainable investment reached $35.3 trillion in five major markets (the U.S, Canada, Europe, Japan, and Australasia)—a 15% increase in from 2018 to 2020 and 55% increase from 2016 to 2020. “Data is the lubricant” behind the rise, as Stephen Franco, managing director of Socially Innovative Investing at Bank of America, remarked at the 2018 Total Impact conference. ESG data have become an essential tool for investors looking to gain a truer picture of how well a company is doing. Key Takeaways An increase in available data has spurred the growth in impact and environmental, social, and governance (ESG) investing.ESG asset managers are capitalizing on a new swell of quantifiable information and analysis, with investors following suit.These new methods include the standardization of environmental, social, and governance factors.The data have helped debunk myths that ESG investments underperform, showing that many hold their own or even outperform their traditional counterparts—and offer less risk/volatility as well.The trend toward adding sustainable assets to portfolios is likely to continue as their market-rate returns can be proven. In Search of Value Historically, most investments have been chosen using a blend of qualitative (judgment-based) and quantitative analysis—which, in finance, refers to the process of analyzing numerical information to determine the health of a company. Publicly traded companies are required to make quantitative information available through shareholder reports, which investors analyze to make observations and predictions about a company’s health. Research analysts supplement company financials and key performance metrics with their own observations from earnings calls, informal conversations, and interviews with company leadership.  While this method was generally successful in helping analysts predict a company's value, the subjectiveness of the methodology frequently left risks—including environmental, social, and governance concerns—insufficiently analyzed. According to Abdur Nimeri,  chief investment officer for UMB Family Wealth and former senior investment strategist at Northern Trust Asset Management: "Environmental and social risk wasn't as embedded in the price [of equities] as you would expect.” Moreover, staying up-to-date was difficult. "It used to be that we had a static view of the company,” says Jeff Gitterman, co-founding partner of Gitterman Wealth Advisors. referring to the quarterly updates that public companies are required to file. But big data and AI have broadened the landscape. Today, data-driven methods are emerging to help analysts better measure this non-financial information. This data allows researchers to quantify the "complex interrelationships" among intangible, difficult-to-measure concepts that help predict company success, says Anders Ferguson, founding principal at Veris Wealth Partners. 35.9% Percentage of total global assets under management that are sustainable investments. More Standard ESG Measures These new methods include the standardization of environmental, social, and governance factors. Now, “there’s a blizzard of numbers,” said Bob Smith 503, president and CIO of Sage Advisory in Austin, Texas. “You’re going to make decisions on the data that’s available,” says Anna-Marie Wascher, CEO & founding partner of Flat World Partners, an impact investing firm. As nonfinancial data grows more abundant, more and more opportunities will emerge to accurately price and factor in underlying risks at companies. Newly quantified ESG information is becoming a "necessary part of fundamental analysis,” says Stephen Franco. Investors should still be careful. "The data is still immature," Franco cautions.  "The raw input still has a long way to go." What's important is combining it with other factors. "Just like how only looking at a P/E ratio doesn't tell you much about a company, neither does a raw ESG score. "These issues are now seen as material to company outcomes," he adds. "You're not doing your fiduciary duty if you're not looking at these statistics." ESG: "The GPS of Investing" Many investors once thought that impact investing was “just a fad," says David Alt, director of responsible investing at Victory Capital Holdings. Even just "two years ago, there was a lot more resistance to ESG and impact investments.” That pushback is rapidly disappearing. Impact investing today is “much more accepted and tolerated,” says Alt. That change is largely a result of data not only helping investors find information about companies, but also helping them to quantify the results of their investments. "There can be no buy-in…unless you prove that you're doing the job that you were hired for,” says Smith. “ESG is the GPS of investing,” said Jeff Gitterman. Early ESG investors were only able to screen out companies with policies and practices that they did not want to support. However, ESG data means that today’s investors have much more latitude to pick the causes that interest them and invest to meet an end. "You can't have a target unless you have something that you're aiming at,” says Jim Lumberg, co-founder of Envestnet, a financial data provider. 534 The number of sustainable open-end and exchange-traded funds (ETFs) available to U.S. investors in 2021, up 73% from 2020. Sustainability Outpaces Traditional Investments  Even the best sales pitch is meaningless if managers aren’t able to deliver competitive returns. “Fifteen years ago, ESG investing could have been thought of as concessionary,” says Lumberg, referring to the idea that socially conscious investments underperform their traditional peers. However, data has called that widely held belief into question. “Investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments… across asset classes and over time," researchers at Morgan Stanley’s Institute for Sustainable Investing declared in 2015. A 2019 white paper by the Institute found that there is no financial tradeoff in the returns of sustainable mutual funds/ETFs and traditional funds, and that sustainable funds may offer lower market risk. Lumberg says that, while the “academic world had debunked” the belief that ESG investing leads to sub-par returns, many investors are still wary. As environmentally and socially conscious funds have often outpaced their peers, frequently with lower volatility, that attitude may continue to shift. Surveys such as Morningstar's annual "Sustainable Funds U.S. Landscape Report" have supported this conclusion. "Like any investment approach, sustainable investing will not always outperform over short-term periods. But over the longer term, ESG insights can help investors develop a more complete picture of a company, one not reliant only on financial indicators," Morningstar notes. What Does ESG Stand for? ESG stands for Environment, Social, and Governance. These make up pro-social criteria for certain investors who value such things over pure economic profit. ESG investors can screen for these criteria to identify those investments. Do ESG Investments Outperform the Market? Various industry and academic researchers have looked to see if ESG investments beat the market, and the answer is it depends. From 2012 through 2021, one study found that, all else equal, highly-ranked ESG stocks outperformed by 12%, but only in Europe; American stocks with high ESG scores fared no better than the broader market over the same period. However, over shorter time periods, ESG performance varies quite a bit, as the graph below shows. Where Can I Find ESG Investments? There are now several online resources that rank and score companies based on ESG criteria, such as MSCI's ESG Ratings. You can also look to ESG-focused mutual funds and ETFs. The Bottom Line While some investors will inevitably prove hesitant to make major shifts in their portfolios, it’s likely that the investment community’s trend of increasing sustainable assets will continue. "We can now prove that we can make market-rate returns in a socially responsible way," says Casey Clark, Deputy CIO, Global Head of ESG Investments, and Portfolio Manager at Rockefeller Capital Management.

https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp

Efficient Market Hypothesis (EMH): Definition and Critique

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-efficient-market-hypothesis-emh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Efficient Market Hypothesis (EMH)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a hypothesis that states that share prices reflect all available information and consistent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alpha.asp">alpha</a> generation is impossible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices.<span class="ql-inline-citation" data-cite="4"></span> Therefore, it should be impossible to outperform the overall market through expert stock selection or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/markettiming.asp">market timing</a>, and the only way an investor can obtain higher returns is by purchasing riskier investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The efficient market hypothesis (EMH) or theory states that share prices reflect all information.</li><li>The EMH hypothesizes that stocks trade at their fair market value on exchanges.</li><li>Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio.</li><li>Opponents of EMH believe that it is possible to beat the market and that stocks can deviate from their fair market values.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Efficient Market Hypothesis (EMH)" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/lkzPRhBIEbQRH8NvsAqorXDhmfM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/lkzPRhBIEbQRH8NvsAqorXDhmfM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg" data-srcset="https://www.investopedia.com/thmb/jvj6t-AoNlgNx7xIZIdSXakI__g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Efficient Market Hypothesis (EMH)" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/lkzPRhBIEbQRH8NvsAqorXDhmfM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg" srcset="https://www.investopedia.com/thmb/jvj6t-AoNlgNx7xIZIdSXakI__g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Theresa Chiechi</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-the-efficient-market-hypothesis-emh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding the Efficient Market Hypothesis (EMH) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Although it is a cornerstone of modern financial theory, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-theory/controversial-financial-theories.asp">EMH is highly controversial</a> and often disputed. Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Theoretically, neither technical nor fundamental analysis can produce risk-adjusted excess returns (alpha) consistently, and only inside information can result in outsized risk-adjusted returns.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">$599,090.00</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The February 9, 2024 share price of the most expensive stock in the world: Berkshire Hathaway Inc. Class A (BRK.A).<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> While academics point to a large body of evidence in support of EMH, an equal amount of dissension also exists. For example, investors such as Warren Buffett have consistently beaten the market over long periods, which by definition is impossible according to the EMH. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Detractors of the EMH also point to events such as the 1987 stock market crash, when the Dow Jones Industrial Average (DJIA) fell by over 20% in a single day, and asset bubbles as evidence that stock prices can seriously deviate from their fair values.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_20-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_21-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The assumption that markets are efficient is a cornerstone of modern financial economics—one that has come under question in practice.</p></div></div></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Proponents of the Efficient Market Hypothesis conclude that, because of the randomness of the market, investors could do better by investing in a low-cost, passive portfolio. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Data compiled by Morningstar Inc., in its June 2019 Active/Passive Barometer study, supports the EMH. Morningstar compared active managers’ returns in all categories against a composite made of related index funds and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded funds (ETFs)</a>. The study found that over a 10 year period beginning June 2009, only 23% of active managers were able to outperform their passive peers. Better success rates were found in foreign equity funds and bond funds. Lower success rates were found in US large-cap funds. In general, investors have fared better by investing in low-cost index funds or ETFs.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> While a percentage of active managers do outperform passive funds at some point, the challenge for investors is being able to identify which ones will do so over the long term. Less than 25 percent of the top-performing active managers can consistently outperform their passive manager counterparts over time.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-what-does-it-mean-for-markets-to-be-efficient"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does It Mean for Markets to Be Efficient?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Market efficiency refers to how well prices reflect all available information. The efficient markets hypothesis (EMH) argues that markets are efficient, leaving no room to make excess profits by investing since everything is already fairly and accurately priced. This implies that there is little hope of beating the market, although you can match market returns through passive index investing.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-has-the-efficient-markets-hypothesis-any-validity"></span> <h2 class="mntl-sc-block-questionandanswer__question">Has the Efficient Markets Hypothesis Any Validity?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The validity of the EMH has been questioned on both theoretical and empirical grounds. There are investors who have beaten the market, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/01/071801.asp">Warren Buffett</a>, whose investment strategy focused on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/undervalued.asp">undervalued</a> stocks made billions and set an example for numerous followers. There are portfolio managers who have better track records than others, and there are investment houses with more renowned research analysis than others. EMH proponents, however, argue that those who outperform the market do so not out of skill but out of luck, due to the laws of probability: at any given time in a market with a large number of actors, some will outperform the mean, while others will <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underperform.asp">underperform</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-can-markets-be-inefficient"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Markets Be Inefficient?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are certainly some markets that are less efficient than others. An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inefficientmarket.asp">inefficient market</a> is one in which an asset's prices do not accurately reflect its true value, which may occur for several reasons. Market inefficiencies may exist due to information asymmetries, a lack of buyers and sellers (i.e. low liquidity), high transaction costs or delays, market psychology, and human emotion, among other reasons. Inefficiencies often lead to deadweight losses. In reality, most markets do display some level of inefficiencies, and in the extreme case, an inefficient market can be an example of a market failure.</p><p>Accepting the EMH in its purest (strong) form may be difficult as it states that all information in a market, whether public or private, is accounted for in a stock's price. However, modifications of EMH exist to reflect the degree to which it can be applied to markets:</p><ul><li>Semi-strong efficiency: This form of EMH implies all public (but not non-public) information is calculated into a stock's current share price. Neither fundamental nor technical analysis can be used to achieve superior gains.</li><li>Weak efficiency: This type of EMH claims that all past prices of a stock are reflected in today's stock price. Therefore, technical analysis cannot be used to predict and beat the market.</li></ul><p><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-what-can-make-a-market-more-efficient"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Can Make a Market More Efficient?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The more participants are engaged in a market, the more efficient it will become as more people compete and bring more and different types of information to bear on the price. As markets become more active and liquid, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/arbitrageur.asp">arbitrageurs</a> will also emerge, profiting by correcting small inefficiencies whenever they might arise and quickly restoring efficiency.</p></div> </div></div>

## What Is the Efficient Market Hypothesis (EMH)? The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a hypothesis that states that share prices reflect all available information and consistent [alpha](https://www.investopedia.com/terms/a/alpha.asp) generation is impossible. According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to outperform the overall market through expert stock selection or [market timing](https://www.investopedia.com/terms/m/markettiming.asp), and the only way an investor can obtain higher returns is by purchasing riskier investments. ### Key Takeaways * The efficient market hypothesis (EMH) or theory states that share prices reflect all information. * The EMH hypothesizes that stocks trade at their fair market value on exchanges. * Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio. * Opponents of EMH believe that it is possible to beat the market and that stocks can deviate from their fair market values. ![Efficient Market Hypothesis (EMH)]() :max_bytes(150000):strip_icc()/effientmarkethypothesis-Final-cf7dc9dd753847619cf023ca29248f78.jpg) Investopedia / Theresa Chiechi ## Understanding the Efficient Market Hypothesis (EMH) Although it is a cornerstone of modern financial theory, the [EMH is highly controversial](https://www.investopedia.com/articles/financial-theory/controversial-financial-theories.asp) and often disputed. Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp). Theoretically, neither technical nor fundamental analysis can produce risk-adjusted excess returns (alpha) consistently, and only inside information can result in outsized risk-adjusted returns. ### $599,090.00 The February 9, 2024 share price of the most expensive stock in the world: Berkshire Hathaway Inc. Class A (BRK.A). While academics point to a large body of evidence in support of EMH, an equal amount of dissension also exists. For example, investors such as Warren Buffett have consistently beaten the market over long periods, which by definition is impossible according to the EMH. Detractors of the EMH also point to events such as the 1987 stock market crash, when the Dow Jones Industrial Average (DJIA) fell by over 20% in a single day, and asset bubbles as evidence that stock prices can seriously deviate from their fair values. ### The assumption that markets are efficient is a cornerstone of modern financial economics—one that has come under question in practice. ## Special Considerations Proponents of the Efficient Market Hypothesis conclude that, because of the randomness of the market, investors could do better by investing in a low-cost, passive portfolio. Data compiled by Morningstar Inc., in its June 2019 Active/Passive Barometer study, supports the EMH. Morningstar compared active managers’ returns in all categories against a composite made of related index funds and [exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp). The study found that over a 10 year period beginning June 2009, only 23% of active managers were able to outperform their passive peers. Better success rates were found in foreign equity funds and bond funds. Lower success rates were found in US large-cap funds. In general, investors have fared better by investing in low-cost index funds or ETFs. While a percentage of active managers do outperform passive funds at some point, the challenge for investors is being able to identify which ones will do so over the long term. Less than 25 percent of the top-performing active managers can consistently outperform their passive manager counterparts over time. ## What Does It Mean for Markets to Be Efficient? Market efficiency refers to how well prices reflect all available information. The efficient markets hypothesis (EMH) argues that markets are efficient, leaving no room to make excess profits by investing since everything is already fairly and accurately priced. This implies that there is little hope of beating the market, although you can match market returns through passive index investing. ## Has the Efficient Markets Hypothesis Any Validity? The validity of the EMH has been questioned on both theoretical and empirical grounds. There are investors who have beaten the market, such as [Warren Buffett](https://www.investopedia.com/articles/01/071801.asp), whose investment strategy focused on [undervalued](https://www.investopedia.com/terms/u/undervalued.asp) stocks made billions and set an example for numerous followers. There are portfolio managers who have better track records than others, and there are investment houses with more renowned research analysis than others. EMH proponents, however, argue that those who outperform the market do so not out of skill but out of luck, due to the laws of probability: at any given time in a market with a large number of actors, some will outperform the mean, while others will [underperform](https://www.investopedia.com/terms/u/underperform.asp). ## Can Markets Be Inefficient? There are certainly some markets that are less efficient than others. An [inefficient market](https://www.investopedia.com/terms/i/inefficientmarket.asp) is one in which an asset's prices do not accurately reflect its true value, which may occur for several reasons. Market inefficiencies may exist due to information asymmetries, a lack of buyers and sellers (i.e. low liquidity), high transaction costs or delays, market psychology, and human emotion, among other reasons. Inefficiencies often lead to deadweight losses. In reality, most markets do display some level of inefficiencies, and in the extreme case, an inefficient market can be an example of a market failure. Accepting the EMH in its purest (strong) form may be difficult as it states that all information in a market, whether public or private, is accounted for in a stock's price. However, modifications of EMH exist to reflect the degree to which it can be applied to markets: * Semi-strong efficiency: This form of EMH implies all public (but not non-public) information is calculated into a stock's current share price. Neither fundamental nor technical analysis can be used to achieve superior gains. * Weak efficiency: This type of EMH claims that all past prices of a stock are reflected in today's stock price. Therefore, technical analysis cannot be used to predict and beat the market. ## What Can Make a Market More Efficient? The more participants are engaged in a market, the more efficient it will become as more people compete and bring more and different types of information to bear on the price. As markets become more active and liquid, [arbitrageurs](https://www.investopedia.com/terms/a/arbitrageur.asp) will also emerge, profiting by correcting small inefficiencies whenever they might arise and quickly restoring efficiency.

What Is the Efficient Market Hypothesis (EMH)? The efficient market hypothesis (EMH), alternatively known as the efficient market theory, is a hypothesis that states that share prices reflect all available information and consistent alpha generation is impossible. According to the EMH, stocks always trade at their fair value on exchanges, making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can obtain higher returns is by purchasing riskier investments. Key Takeaways The efficient market hypothesis (EMH) or theory states that share prices reflect all information.The EMH hypothesizes that stocks trade at their fair market value on exchanges.Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio.Opponents of EMH believe that it is possible to beat the market and that stocks can deviate from their fair market values. Investopedia / Theresa Chiechi Understanding the Efficient Market Hypothesis (EMH) Although it is a cornerstone of modern financial theory, the EMH is highly controversial and often disputed. Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis. Theoretically, neither technical nor fundamental analysis can produce risk-adjusted excess returns (alpha) consistently, and only inside information can result in outsized risk-adjusted returns. $599,090.00 The February 9, 2024 share price of the most expensive stock in the world: Berkshire Hathaway Inc. Class A (BRK.A). While academics point to a large body of evidence in support of EMH, an equal amount of dissension also exists. For example, investors such as Warren Buffett have consistently beaten the market over long periods, which by definition is impossible according to the EMH. Detractors of the EMH also point to events such as the 1987 stock market crash, when the Dow Jones Industrial Average (DJIA) fell by over 20% in a single day, and asset bubbles as evidence that stock prices can seriously deviate from their fair values. The assumption that markets are efficient is a cornerstone of modern financial economics—one that has come under question in practice. Special Considerations Proponents of the Efficient Market Hypothesis conclude that, because of the randomness of the market, investors could do better by investing in a low-cost, passive portfolio. Data compiled by Morningstar Inc., in its June 2019 Active/Passive Barometer study, supports the EMH. Morningstar compared active managers’ returns in all categories against a composite made of related index funds and exchange-traded funds (ETFs). The study found that over a 10 year period beginning June 2009, only 23% of active managers were able to outperform their passive peers. Better success rates were found in foreign equity funds and bond funds. Lower success rates were found in US large-cap funds. In general, investors have fared better by investing in low-cost index funds or ETFs. While a percentage of active managers do outperform passive funds at some point, the challenge for investors is being able to identify which ones will do so over the long term. Less than 25 percent of the top-performing active managers can consistently outperform their passive manager counterparts over time. What Does It Mean for Markets to Be Efficient? Market efficiency refers to how well prices reflect all available information. The efficient markets hypothesis (EMH) argues that markets are efficient, leaving no room to make excess profits by investing since everything is already fairly and accurately priced. This implies that there is little hope of beating the market, although you can match market returns through passive index investing. Has the Efficient Markets Hypothesis Any Validity? The validity of the EMH has been questioned on both theoretical and empirical grounds. There are investors who have beaten the market, such as Warren Buffett, whose investment strategy focused on undervalued stocks made billions and set an example for numerous followers. There are portfolio managers who have better track records than others, and there are investment houses with more renowned research analysis than others. EMH proponents, however, argue that those who outperform the market do so not out of skill but out of luck, due to the laws of probability: at any given time in a market with a large number of actors, some will outperform the mean, while others will underperform. Can Markets Be Inefficient? There are certainly some markets that are less efficient than others. An inefficient market is one in which an asset's prices do not accurately reflect its true value, which may occur for several reasons. Market inefficiencies may exist due to information asymmetries, a lack of buyers and sellers (i.e. low liquidity), high transaction costs or delays, market psychology, and human emotion, among other reasons. Inefficiencies often lead to deadweight losses. In reality, most markets do display some level of inefficiencies, and in the extreme case, an inefficient market can be an example of a market failure.Accepting the EMH in its purest (strong) form may be difficult as it states that all information in a market, whether public or private, is accounted for in a stock's price. However, modifications of EMH exist to reflect the degree to which it can be applied to markets:Semi-strong efficiency: This form of EMH implies all public (but not non-public) information is calculated into a stock's current share price. Neither fundamental nor technical analysis can be used to achieve superior gains.Weak efficiency: This type of EMH claims that all past prices of a stock are reflected in today's stock price. Therefore, technical analysis cannot be used to predict and beat the market. What Can Make a Market More Efficient? The more participants are engaged in a market, the more efficient it will become as more people compete and bring more and different types of information to bear on the price. As markets become more active and liquid, arbitrageurs will also emerge, profiting by correcting small inefficiencies whenever they might arise and quickly restoring efficiency.

https://www.investopedia.com/terms/r/reclamation.asp

Reclamation: What It Means, How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-reclamation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Reclamation? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Reclamation is the process of demanding the return of property to a former owner in the event of dormancy, non-payment, fraud, or some other irregularity. Reclamation may be sought in a number of contexts: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <li>In the financial markets, a trader may demand reclamation, or repayment, for stocks or other securities purchased, due to some error in the transaction.</li><li>Reclamation is sought to recover funds from neglected accounts.</li><li>It may also refer to the right of a seller to resume ownership of a property if the buyer fails to meet the terms of the purchase agreement.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> In an entirely different context, reclamation refers to restoring lands such as closed mine sites or defunct industrial areas to new productive uses. Land reclamation differs from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/landrehabilitation.asp">rehabilitation</a>, which involves restoring land to its natural state after it <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marginal-land.asp">has been damaged or degraded</a>.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Reclamation entails the recovery of property or payment when the other party to a transaction fails to meet the terms of the agreement.</li><li>Repossession of collateral is a reclamation process.</li><li>The return of holdings in dormant bank accounts also is a reclamation process.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-reclamation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Understanding Reclamation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Reclamation is the process of reclaiming property or payment if a counterparty to a deal doesn't deliver on their part of the agreement. In the securities industry, reclamation is minimized by cutting down the chances of bad delivery. This has been largely achieved by the modern system of registering and transferring securities in book or electronic form rather than exchanging paper certificates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> Foreclosure as Reclamation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreclosure.asp" rel="noopener noreferrer">foreclosure</a> process is an example of reclamation. In this case, the lending institution reclaims ownership of a real estate property when the buyer <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/default2.asp" rel="noopener noreferrer">defaults</a> on a mortgage repayment obligation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The office of the state comptroller is usually the place to start a process of reclamation of abandoned assets.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Repossession of property is also an example of reclamation. A car is a form of collateral that secures a car loan. If you do not pay the loan, the lender can reclaim the car. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> In the same way, an investor has the right to reclaim invested capital if delivery of the underlying security is not done properly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Reclaiming Property via Escheatment </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Property such as a dormant bank account is considered to be legally unclaimed beyond a certain <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dormant-account.asp" rel="noopener noreferrer">dormancy period</a>. The dormancy period is the length of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> After this period, dormant accounts become unclaimed property. States have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/escheat.asp" rel="noopener noreferrer">escheatment</a> statutes that govern the process of protecting unclaimed funds from reverting to the financial institutions that hold them. These laws require companies to transfer unclaimed property from dormant accounts to the state general fund. The state then takes the responsibility for record-keeping and returning lost or forgotten property to owners or their heirs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Owners can recoup unclaimed property by filing an application with the state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-subheading__text"> Other Assets that Can Be Reclaimed </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> There are a number of other types of assets that are subject to reclamation. Most involve property that has been abandoned by some mishap. Uncashed payroll checks, unclaimed CDs and IRAs, unpaid life insurance proceeds, court awards, and even state tax refunds are all subject to loss and reclamation by their rightful owners or heirs. All are also subject to escheatment. There is usually no time limit on the right to reclamation.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Reclamation of Federal Funds </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The government has a reclamation process used to recoup payments of Social Security and other types of benefits if they are not returned after the death of the beneficiary. This process is usually conducted between the U.S. Treasury and the financial institution that processes the payment for beneficiaries.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> How to Reclaim Property </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Every state has its own laws regarding the reclamation of lost or abandoned assets. There is no centralized resource for searching for lost property. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> In most cases, the website of the office of the state comptroller is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/111115/how-can-you-reclaim-escheated-or-unclaimed-property.asp" rel="noopener noreferrer">the best place to start</a> a reclamation process. The process of reclamation generally involves filing an application with a state agency. </p></div>

## What Is Reclamation? Reclamation is the process of demanding the return of property to a former owner in the event of dormancy, non-payment, fraud, or some other irregularity. Reclamation may be sought in a number of contexts: * In the financial markets, a trader may demand reclamation, or repayment, for stocks or other securities purchased, due to some error in the transaction. * Reclamation is sought to recover funds from neglected accounts. * It may also refer to the right of a seller to resume ownership of a property if the buyer fails to meet the terms of the purchase agreement. In an entirely different context, reclamation refers to restoring lands such as closed mine sites or defunct industrial areas to new productive uses. Land reclamation differs from [rehabilitation](https://www.investopedia.com/terms/l/landrehabilitation.asp), which involves restoring land to its natural state after it [has been damaged or degraded](https://www.investopedia.com/terms/m/marginal-land.asp).  ### Key Takeaways * Reclamation entails the recovery of property or payment when the other party to a transaction fails to meet the terms of the agreement. * Repossession of collateral is a reclamation process. * The return of holdings in dormant bank accounts also is a reclamation process. ## Understanding Reclamation Reclamation is the process of reclaiming property or payment if a counterparty to a deal doesn't deliver on their part of the agreement. In the securities industry, reclamation is minimized by cutting down the chances of bad delivery. This has been largely achieved by the modern system of registering and transferring securities in book or electronic form rather than exchanging paper certificates. ### Foreclosure as Reclamation The [foreclosure](https://www.investopedia.com/terms/f/foreclosure.asp) process is an example of reclamation. In this case, the lending institution reclaims ownership of a real estate property when the buyer [defaults](https://www.investopedia.com/terms/d/default2.asp) on a mortgage repayment obligation. ### The office of the state comptroller is usually the place to start a process of reclamation of abandoned assets. Repossession of property is also an example of reclamation. A car is a form of collateral that secures a car loan. If you do not pay the loan, the lender can reclaim the car. In the same way, an investor has the right to reclaim invested capital if delivery of the underlying security is not done properly. ### Reclaiming Property via Escheatment Property such as a dormant bank account is considered to be legally unclaimed beyond a certain [dormancy period](https://www.investopedia.com/terms/d/dormant-account.asp). The dormancy period is the length of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned. After this period, dormant accounts become unclaimed property. States have [escheatment](https://www.investopedia.com/terms/e/escheat.asp) statutes that govern the process of protecting unclaimed funds from reverting to the financial institutions that hold them. These laws require companies to transfer unclaimed property from dormant accounts to the state general fund. The state then takes the responsibility for record-keeping and returning lost or forgotten property to owners or their heirs. Owners can recoup unclaimed property by filing an application with the state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time. ### Other Assets that Can Be Reclaimed There are a number of other types of assets that are subject to reclamation. Most involve property that has been abandoned by some mishap. Uncashed payroll checks, unclaimed CDs and IRAs, unpaid life insurance proceeds, court awards, and even state tax refunds are all subject to loss and reclamation by their rightful owners or heirs. All are also subject to escheatment. There is usually no time limit on the right to reclamation. ### Reclamation of Federal Funds The government has a reclamation process used to recoup payments of Social Security and other types of benefits if they are not returned after the death of the beneficiary. This process is usually conducted between the U.S. Treasury and the financial institution that processes the payment for beneficiaries. ### How to Reclaim Property Every state has its own laws regarding the reclamation of lost or abandoned assets. There is no centralized resource for searching for lost property. In most cases, the website of the office of the state comptroller is [the best place to start](https://www.investopedia.com/ask/answers/111115/how-can-you-reclaim-escheated-or-unclaimed-property.asp) a reclamation process. The process of reclamation generally involves filing an application with a state agency.

What Is Reclamation? Reclamation is the process of demanding the return of property to a former owner in the event of dormancy, non-payment, fraud, or some other irregularity. Reclamation may be sought in a number of contexts: In the financial markets, a trader may demand reclamation, or repayment, for stocks or other securities purchased, due to some error in the transaction.Reclamation is sought to recover funds from neglected accounts.It may also refer to the right of a seller to resume ownership of a property if the buyer fails to meet the terms of the purchase agreement. In an entirely different context, reclamation refers to restoring lands such as closed mine sites or defunct industrial areas to new productive uses. Land reclamation differs from rehabilitation, which involves restoring land to its natural state after it has been damaged or degraded.  Key Takeaways Reclamation entails the recovery of property or payment when the other party to a transaction fails to meet the terms of the agreement.Repossession of collateral is a reclamation process.The return of holdings in dormant bank accounts also is a reclamation process. Understanding Reclamation Reclamation is the process of reclaiming property or payment if a counterparty to a deal doesn't deliver on their part of the agreement. In the securities industry, reclamation is minimized by cutting down the chances of bad delivery. This has been largely achieved by the modern system of registering and transferring securities in book or electronic form rather than exchanging paper certificates. Foreclosure as Reclamation The foreclosure process is an example of reclamation. In this case, the lending institution reclaims ownership of a real estate property when the buyer defaults on a mortgage repayment obligation. The office of the state comptroller is usually the place to start a process of reclamation of abandoned assets. Repossession of property is also an example of reclamation. A car is a form of collateral that secures a car loan. If you do not pay the loan, the lender can reclaim the car. In the same way, an investor has the right to reclaim invested capital if delivery of the underlying security is not done properly. Reclaiming Property via Escheatment Property such as a dormant bank account is considered to be legally unclaimed beyond a certain dormancy period. The dormancy period is the length of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned. After this period, dormant accounts become unclaimed property. States have escheatment statutes that govern the process of protecting unclaimed funds from reverting to the financial institutions that hold them. These laws require companies to transfer unclaimed property from dormant accounts to the state general fund. The state then takes the responsibility for record-keeping and returning lost or forgotten property to owners or their heirs. Owners can recoup unclaimed property by filing an application with the state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time. Other Assets that Can Be Reclaimed There are a number of other types of assets that are subject to reclamation. Most involve property that has been abandoned by some mishap. Uncashed payroll checks, unclaimed CDs and IRAs, unpaid life insurance proceeds, court awards, and even state tax refunds are all subject to loss and reclamation by their rightful owners or heirs. All are also subject to escheatment. There is usually no time limit on the right to reclamation. Reclamation of Federal Funds The government has a reclamation process used to recoup payments of Social Security and other types of benefits if they are not returned after the death of the beneficiary. This process is usually conducted between the U.S. Treasury and the financial institution that processes the payment for beneficiaries. How to Reclaim Property Every state has its own laws regarding the reclamation of lost or abandoned assets. There is no centralized resource for searching for lost property. In most cases, the website of the office of the state comptroller is the best place to start a reclamation process. The process of reclamation generally involves filing an application with a state agency.

https://www.investopedia.com/top-hotel-stocks-q2-2023-7499282

Top Hotel Stocks for Q2 2023

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Top hotel stocks for the second quarter include MGM Resorts International, Marriott International Inc., and H World Group Ltd., shares of which have outperformed their industry peers over the past year.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The hotel industry is split into two main categories of companies: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/c-corporation.asp">C-corporation</a> hotels and hotel <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reit.asp">real estate investment trusts (REITs)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> C-corporation hotels are generally engaged in hotel management, branding, and marketing, and are best represented by the S&amp;P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index, which had a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/totalreturn.asp">total return</a> over the past year of 7.9%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Hotel REITs are companies that focus on the acquisition, ownership, and operation of hotel real estate. These companies are best represented by the S&amp;P 1500 Hotel &amp; Resort REITs Sub-Industry Index, which has fallen 25.1% in the past year. Meanwhile, the Russell 1000 Index has risen 5.6%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Below we look at the top hotel stocks and the top hotel REITS for best value, fastest growth, and most momentum or best performance. All data below are as of May 3, 2023. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-best-value-hotel-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Best Value Hotel Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> These are the hotel stocks with the lowest 12-month trailing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">price-to-earnings (P/E)</a> ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_14-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Best Value Hotel Stocks</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">Market Capitalization (Market Cap)</a> ($B)</td> <td>12-Month Trailing P/E Ratio</td> </tr> <tr> <td>MGM Resorts International (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MGM">MGM</a>)</td> <td>43.74</td> <td>15.9</td> <td>9.3</td> </tr> <tr> <td>Hilton Grand Vacations Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HGV">HGV</a>)</td> <td>42.60</td> <td>4.7</td> <td>13.5</td> </tr> <tr> <td>Marriott Vacations Worldwide Corp. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=VAC">VAC</a>)</td> <td>134.66</td> <td>5.0</td> <td>15.5</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>} </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li><strong>MGM Resorts International: </strong>MGM Resorts operates gaming and entertainment resorts, providing accommodations, hospitality management, dining, and other services for casinos and non-casino properties around the world. The company's net revenue surged by 36% in the most recent quarter amid a rebound in casino travel and its acquisition of Cosmopolitan of Las Vegas.<span class="ql-inline-citation" data-cite="5"></span></li><li><strong>Hilton Grand Vacations Inc.: </strong>Hilton Grand Vacations markets, sells, and manages timeshare resorts. It also operates a points-based vacation club. Revenue increased about 20% in the most recent quarter, while shares of Hilton Grand Vacations have climbed by 5% in the last year.<span class="ql-inline-citation" data-cite="6"></span></li><li><strong>Marriott Vacations Worldwide Corp.: </strong>Marriott Vacations is a timeshare company that sells, rents, and manages properties. It also provides other timeshare companies with products and services. The company's stock has shed a tenth of its value in the last year amid inflation and rising interest rates.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-fastest-growing-hotel-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Fastest Growing Hotel Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> These are the top hotel stocks as ranked by a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/growthinvesting.asp">growth</a> model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> growth and most recent quarterly YOY EPS growth. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_25-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="5">Fastest Growing Hotel Stocks</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td>Market Cap ($B)</td> <td>EPS Growth (%)</td> <td>Revenue Growth (%)</td> </tr> <tr> <td>Marriott International Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MAR">MAR</a>)</td> <td>178.45</td> <td>54.1</td> <td>113.2</td> <td>33.7</td> </tr> <tr> <td>Hilton Worldwide Holdings Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HLT">HLT</a>)</td> <td>145.73</td> <td>38.6</td> <td>2.7</td> <td>33.3</td> </tr> <tr> <td>Hilton Grand Vacations Inc. (HGV)</td> <td>42.60</td> <td>4.7</td> <td>52.4</td> <td>19.9</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>} </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li><strong>Marriott International Inc.: </strong>Marriott operates a chain of hotels, timeshare properties, and residential properties worldwide. EPS more than doubled and revenue climbed by about a third for the latest quarter, driven by strong demand in the company's leisure and group segments.<span class="ql-inline-citation" data-cite="7"></span></li><li><strong>Hilton Worldwide Holdings Inc.: </strong>Hilton Worldwide Holdings is a global hospitality company. It owns and manages hotels, resorts, and timeshare properties throughout the world. Revenue grew by a third in the first quarter of 2023 amid a resurgence of travel demand to near pre-pandemic levels.<span class="ql-inline-citation" data-cite="8"></span></li><li><strong>Hilton Grand Vacations Inc.: </strong>See company description above.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-hotel-stocks-with-the-most-momentum"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Hotel Stocks With the Most Momentum </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> These are the hotel stocks that had the best returns over the past 12 months out of the companies we looked at. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_34-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Hotel Stocks With the Most Momentum</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td>Market Cap ($B)</td> <td>12-Month Trailing Total Return (%)</td> </tr> <tr> <td>H World Group Ltd. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HTHT">HTHT</a>)</td> <td>44.87</td> <td>14.3</td> <td>48.7</td> </tr> <tr> <td>Hyatt Hotels Corp. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=H">H</a>)</td> <td>118.20</td> <td>12.7</td> <td>32.1</td> </tr> <tr> <td>InterContinental Hotels Group (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=IHG">IHG</a>)</td> <td>69.91</td> <td>12.2</td> <td>9.3</td> </tr> <tr> <td>Russell 1000 Index</td> <td>N/A</td> <td>N/A</td> <td>5.6</td> </tr> <tr> <td>S&amp;P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index</td> <td>N/A</td> <td>N/A</td> <td>7.9</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>}<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li><strong>H World Group Ltd.: </strong>H World is a Chinese hotel operator and franchisor. It offers hotel leasing, operation, and co-development services worldwide. The company's stock climbed steadily from October to early March as the company posted better-than-expected financial results and investors anticipated an end to China's zero-COVID restrictions.<span class="ql-inline-citation" data-cite="9"></span></li> <li><strong>Hyatt Hotels Corp.: </strong>Hyatt Hotels is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/multinationalcorporation.asp">multinational</a> hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties. Hyatt shares have also benefited from reduced COVID restrictions in China, where the company is developing dozens of properties.<span class="ql-inline-citation" data-cite="10"></span></li> <li><strong>InterContinental Hotels Group: </strong>InterContinental Hotels is a British hospitality company operating worldwide hotel chains including Holiday Inn, Regent, and Crowne Plaza. The company's expansion into the luxury hotel space helped to drive momentum in the last several months.<span class="ql-inline-citation" data-cite="11"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <span class="heading-toc" id="toc-best-value-hotel-reits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Best Value Hotel REITs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> These are the hotel REITs with the lowest 12-month trailing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">price-to-earnings (P/E)</a> ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_43-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Best Value Hotel REITs</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td>Market Cap ($B)</td> <td>12-Month Trailing P/E Ratio</td> </tr> <tr> <td>Park Hotels &amp; Resorts Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PK">PK</a>)</td> <td>12.40</td> <td>2.7</td> <td>11.2</td> </tr> <tr> <td>Diamondrock Hospitality Co. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DRH">DRH</a>)</td> <td>8.22</td> <td>1.7</td> <td>17.9</td> </tr> <tr> <td>Host Hotels &amp; Resorts Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HST">HST</a>)</td> <td>16.27</td> <td>11.6</td> <td>18.5</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>} </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>Park Hotels &amp; Resorts Inc.: </strong>Park Hotels is a hotel REIT that owns and operates 46 properties across 15 states and Puerto Rico. Park has a larger footprint in California than in any other state, with half of those properties located in the San Francisco Bay Area.<span class="ql-inline-citation" data-cite="17"></span> The company has shed almost a quarter of its value in the last year amid recession fears and a tech industry slowdown.</li> <li><strong>Diamondrock Hospitality Co.: </strong>Diamondrock Hospitality is a self-advised hotel REIT that owns 35 luxury and upscale properties across 14 states. In the last two years, the REIT has joined the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/south-florida-office-boom-7108260">nationwide southward migration</a> and acquired 6 hotels, all of them in the South—4 in Florida, 1 in Texas, and 1 in Louisiana.<span class="ql-inline-citation" data-cite="18"></span> Diamondrock shares also plunged in the last year, falling almost 20%.</li> <li><strong>Host Hotels &amp; Resorts Inc.: </strong>Host Hotels &amp; Resorts owns 77 hotel properties across 21 states, Canada, and Brazil. It primarily acquires luxury and upper upscale hotels. Host shares are down about 13% over the last year.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-fastest-growing-hotel-reits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Fastest Growing Hotel REITs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> These are the hotel REITs with the highest YOY sales growth for the most recent quarter. Rising sales can help investors to both identify companies that are able to increase revenue through organic or new ways and find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_52-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Fastest Growing Hotel REITs</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td>Market Cap ($B)</td> <td>Revenue Growth (%)</td> </tr> <tr> <td>VICI Properties Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=VICI">VICI</a>)</td> <td>32.12</td> <td>32.3</td> <td>110.7</td> </tr> <tr> <td>Ryman Hospitality Properties Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=RHP">RHP</a>)</td> <td>90.99</td> <td>5.0</td> <td>64.4</td> </tr> <tr> <td>Sunstone Hotel Investors Inc. (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SHO">SHO</a>)</td> <td>9.68</td> <td>2.0</td> <td>41.3</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>} </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <li><strong>VICI Properties Inc.: </strong>VICI is a casino and hotel REIT. It owns a portfolio of gaming, hospitality, and entertainment properties including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. Revenue more than doubled for the first quarter of 2023 on rebounding casino business and the company's acquisition of four properties from PURE Canadian Gaming.<span class="ql-inline-citation" data-cite="12"></span></li><li><strong>Ryman Hospitality Properties Inc.: </strong>Ryman Hospitality is a convention and lodging REIT that owns convention center resorts and entertainment properties outside of the gaming industry. Its properties include Gaylord Opryland Resort &amp; Convention Center, Gaylord Palms Resort &amp; Convention Center, and many others. Revenue for the first quarter of 2023 reached record levels due to strength in room rates and outside-the-room spending.<span class="ql-inline-citation" data-cite="14"></span></li><li><strong>Sunstone Hotel Investors Inc.: </strong>Sunstone Hotel Investors is a lodging REIT that owns 15 primarily upscale hotels and resorts. Management attributed revenue gains in the most recent quarter to improved room, food, and drink sales.<span class="ql-inline-citation" data-cite="15"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <span class="heading-toc" id="toc-hotel-reits-with-the-best-performance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Hotel REITs With the Best Performance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> These are the hotel REITs that had the highest total return or smallest decline in total returns over the last 12 months. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_61-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Hotel REITs With the Best Performance</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> </td> <td>Price ($)</td> <td>Market Cap ($B)</td> <td>12-Month Trailing Total Return</td> </tr> <tr> <td>Service Properties Trust (<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SVC">SVC</a>)</td> <td>8.70</td> <td>1.4</td> <td>18.4</td> </tr> <tr> <td>VICI Properties Inc. (VICI)</td> <td>32.12</td> <td>32.3</td> <td>12.7</td> </tr> <tr> <td>Ryman Hospitality Properties Inc. (RHP)</td> <td>90.99</td> <td>5.0</td> <td>-1.1</td> </tr> <tr> <td>Russell 1000 Index</td> <td>N/A</td> <td>N/A</td> <td>5.6</td> </tr> <tr> <td>S&amp;P 1500 Hotel &amp; Resort REITs Sub-Industry Index</td> <td>N/A</td> <td>N/A</td> <td>-25.1</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> ^{Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ycharts.com/">YCharts</a>} </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <li><strong>Service Properties Trust: </strong>Service Properties is a REIT that owns 220 hotels across the U.S. and Canada. The company also owns service-focused retail properties. In May, Service Properties completed the sale of its TravelCenters of America locations to BP PLC (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BP">BP</a>) for over $379 million.<span class="ql-inline-citation" data-cite="16"></span></li> <li><strong>VICI Properties Inc.: </strong>See company description above.</li> <li><strong>Ryman Hospitality Properties Inc.: </strong>See company description above.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-the-impact-of-covid-19-on-hotel-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> The Impact of COVID-19 on Hotel Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Companies owning, operating, or investing in hotels had significant disruptions to their business throughout the early days of COVID-19. In a span of months, nearly five million hospitality and leisure jobs were lost across the U.S., and occupancy rates in the last months of 2020 fell to below 20% in many cases.<span class="ql-inline-citation" data-cite="2"></span> As of mid-2023, many businesses across the hospitality industry have largely recovered, with pent-up demand and other factors contributing to a significant rise in room prices in some cases.<span class="ql-inline-citation" data-cite="3"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> To be sure, the recovery has not been entirely even, and the pandemic will likely continue to impact the hotel industry for years to come. For example, certain travel destinations have seen stronger demand than others, with the entertainment and gaming city Las Vegas recovering faster than business hubs like New York City.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <span class="heading-toc" id="toc-risks-of-investing-in-hotel-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_72-0"> <span class="mntl-sc-block-heading__text"> Risks of Investing in Hotel Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Investing in companies that own and operate hotels comes with a number of risks, some of them significant. While some of the biggest hotel companies have thousands of locations around the world and benefit from global brand recognition, most other hotel businesses are less stable. Here are some of the risks to be aware of when considering an investment in hotel stocks:<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> <li><strong>Property: </strong>Property-related risk is a key factor to consider when making any investment in real estate, a REIT, or a company that owns or operates real estate. Hotels are subject to wear and tear, damage from guests, construction and renovation issues, and a host of other liabilities. These property-related risks exist during development as well as operation of a hotel.</li> <li><strong>Operation: </strong>Operational risks are associated with the day-to-day business and management of the hotel. A hotel must be able to maintain high levels of cash flow to continue to function properly. But factors such as poor planning and mismanagement can jeopardize this.</li> <li><strong>Market Factors: </strong>External factors also create significant risk within the hotel industry. The pandemic and its devastating impact on travel and hotel use is a notable example. Other factors include macroeconomic conditions such as inflation or a recession, political or regulatory changes, and competition from newer hospitality companies such as Airbnb Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ABNB">ABNB</a>).<br/></li> </ol> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

Top hotel stocks for the second quarter include MGM Resorts International, Marriott International Inc., and H World Group Ltd., shares of which have outperformed their industry peers over the past year. The hotel industry is split into two main categories of companies: [C-corporation](https://www.investopedia.com/terms/c/c-corporation.asp) hotels and hotel [real estate investment trusts (REITs)](https://www.investopedia.com/terms/r/reit.asp). C-corporation hotels are generally engaged in hotel management, branding, and marketing, and are best represented by the S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index, which had a [total return](https://www.investopedia.com/terms/t/totalreturn.asp) over the past year of 7.9%. Hotel REITs are companies that focus on the acquisition, ownership, and operation of hotel real estate. These companies are best represented by the S&P 1500 Hotel & Resort REITs Sub-Industry Index, which has fallen 25.1% in the past year. Meanwhile, the Russell 1000 Index has risen 5.6%. Below we look at the top hotel stocks and the top hotel REITS for best value, fastest growth, and most momentum or best performance. All data below are as of May 3, 2023. ## Best Value Hotel Stocks These are the hotel stocks with the lowest 12-month trailing [price-to-earnings (P/E)](https://www.investopedia.com/terms/p/price-earningsratio.asp) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. | Best Value Hotel Stocks | | | | | --- | --- | --- | --- | | | Price ($) | [Market Capitalization (Market Cap)](https://www.investopedia.com/terms/m/marketcapitalization.asp) ($B) | 12-Month Trailing P/E Ratio | | MGM Resorts International ([MGM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MGM)) | 43.74 | 15.9 | 9.3 | | Hilton Grand Vacations Inc. ([HGV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HGV)) | 42.60 | 4.7 | 13.5 | | Marriott Vacations Worldwide Corp. ([VAC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VAC)) | 134.66 | 5.0 | 15.5 | Source: [YCharts](https://ycharts.com/) * **MGM Resorts International:** MGM Resorts operates gaming and entertainment resorts, providing accommodations, hospitality management, dining, and other services for casinos and non-casino properties around the world. The company's net revenue surged by 36% in the most recent quarter amid a rebound in casino travel and its acquisition of Cosmopolitan of Las Vegas. * **Hilton Grand Vacations Inc.:** Hilton Grand Vacations markets, sells, and manages timeshare resorts. It also operates a points-based vacation club. Revenue increased about 20% in the most recent quarter, while shares of Hilton Grand Vacations have climbed by 5% in the last year. * **Marriott Vacations Worldwide Corp.:** Marriott Vacations is a timeshare company that sells, rents, and manages properties. It also provides other timeshare companies with products and services. The company's stock has shed a tenth of its value in the last year amid inflation and rising interest rates. ## Fastest Growing Hotel Stocks These are the top hotel stocks as ranked by a [growth](https://www.investopedia.com/terms/g/growthinvesting.asp) model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage [revenue](https://www.investopedia.com/terms/r/revenue.asp) growth and most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers. | Fastest Growing Hotel Stocks | | | | | | --- | --- | --- | --- | --- | | | Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | | Marriott International Inc. ([MAR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MAR)) | 178.45 | 54.1 | 113.2 | 33.7 | | Hilton Worldwide Holdings Inc. ([HLT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HLT)) | 145.73 | 38.6 | 2.7 | 33.3 | | Hilton Grand Vacations Inc. (HGV) | 42.60 | 4.7 | 52.4 | 19.9 | Source: [YCharts](https://ycharts.com/) * **Marriott International Inc.:** Marriott operates a chain of hotels, timeshare properties, and residential properties worldwide. EPS more than doubled and revenue climbed by about a third for the latest quarter, driven by strong demand in the company's leisure and group segments. * **Hilton Worldwide Holdings Inc.:** Hilton Worldwide Holdings is a global hospitality company. It owns and manages hotels, resorts, and timeshare properties throughout the world. Revenue grew by a third in the first quarter of 2023 amid a resurgence of travel demand to near pre-pandemic levels. * **Hilton Grand Vacations Inc.:** See company description above. ## Hotel Stocks With the Most Momentum These are the hotel stocks that had the best returns over the past 12 months out of the companies we looked at. | Hotel Stocks With the Most Momentum | | | | | --- | --- | --- | --- | | | Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | | H World Group Ltd. ([HTHT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HTHT)) | 44.87 | 14.3 | 48.7 | | Hyatt Hotels Corp. ([H](https://www.investopedia.com/markets/quote?tvwidgetsymbol=H)) | 118.20 | 12.7 | 32.1 | | InterContinental Hotels Group ([IHG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=IHG)) | 69.91 | 12.2 | 9.3 | | Russell 1000 Index | N/A | N/A | 5.6 | | S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index | N/A | N/A | 7.9 | Source: [YCharts](https://ycharts.com/) * **H World Group Ltd.:** H World is a Chinese hotel operator and franchisor. It offers hotel leasing, operation, and co-development services worldwide. The company's stock climbed steadily from October to early March as the company posted better-than-expected financial results and investors anticipated an end to China's zero-COVID restrictions. * **Hyatt Hotels Corp.:** Hyatt Hotels is a [multinational](https://www.investopedia.com/terms/m/multinationalcorporation.asp) hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties. Hyatt shares have also benefited from reduced COVID restrictions in China, where the company is developing dozens of properties. * **InterContinental Hotels Group:** InterContinental Hotels is a British hospitality company operating worldwide hotel chains including Holiday Inn, Regent, and Crowne Plaza. The company's expansion into the luxury hotel space helped to drive momentum in the last several months. ## Best Value Hotel REITs These are the hotel REITs with the lowest 12-month trailing [price-to-earnings (P/E)](https://www.investopedia.com/terms/p/price-earningsratio.asp) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. | Best Value Hotel REITs | | | | | --- | --- | --- | --- | | | Price ($) | Market Cap ($B) | 12-Month Trailing P/E Ratio | | Park Hotels & Resorts Inc. ([PK](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PK)) | 12.40 | 2.7 | 11.2 | | Diamondrock Hospitality Co. ([DRH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DRH)) | 8.22 | 1.7 | 17.9 | | Host Hotels & Resorts Inc. ([HST](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HST)) | 16.27 | 11.6 | 18.5 | Source: [YCharts](https://ycharts.com/) * **Park Hotels & Resorts Inc.:** Park Hotels is a hotel REIT that owns and operates 46 properties across 15 states and Puerto Rico. Park has a larger footprint in California than in any other state, with half of those properties located in the San Francisco Bay Area. The company has shed almost a quarter of its value in the last year amid recession fears and a tech industry slowdown. * **Diamondrock Hospitality Co.:** Diamondrock Hospitality is a self-advised hotel REIT that owns 35 luxury and upscale properties across 14 states. In the last two years, the REIT has joined the [nationwide southward migration](https://www.investopedia.com/south-florida-office-boom-7108260) and acquired 6 hotels, all of them in the South—4 in Florida, 1 in Texas, and 1 in Louisiana. Diamondrock shares also plunged in the last year, falling almost 20%. * **Host Hotels & Resorts Inc.:** Host Hotels & Resorts owns 77 hotel properties across 21 states, Canada, and Brazil. It primarily acquires luxury and upper upscale hotels. Host shares are down about 13% over the last year. ## Fastest Growing Hotel REITs These are the hotel REITs with the highest YOY sales growth for the most recent quarter. Rising sales can help investors to both identify companies that are able to increase revenue through organic or new ways and find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. | Fastest Growing Hotel REITs | | | | | --- | --- | --- | --- | | | Price ($) | Market Cap ($B) | Revenue Growth (%) | | VICI Properties Inc. ([VICI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VICI)) | 32.12 | 32.3 | 110.7 | | Ryman Hospitality Properties Inc. ([RHP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=RHP)) | 90.99 | 5.0 | 64.4 | | Sunstone Hotel Investors Inc. ([SHO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SHO)) | 9.68 | 2.0 | 41.3 | Source: [YCharts](https://ycharts.com/) * **VICI Properties Inc.:** VICI is a casino and hotel REIT. It owns a portfolio of gaming, hospitality, and entertainment properties including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. Revenue more than doubled for the first quarter of 2023 on rebounding casino business and the company's acquisition of four properties from PURE Canadian Gaming. * **Ryman Hospitality Properties Inc.:** Ryman Hospitality is a convention and lodging REIT that owns convention center resorts and entertainment properties outside of the gaming industry. Its properties include Gaylord Opryland Resort & Convention Center, Gaylord Palms Resort & Convention Center, and many others. Revenue for the first quarter of 2023 reached record levels due to strength in room rates and outside-the-room spending. * **Sunstone Hotel Investors Inc.:** Sunstone Hotel Investors is a lodging REIT that owns 15 primarily upscale hotels and resorts. Management attributed revenue gains in the most recent quarter to improved room, food, and drink sales. ## Hotel REITs With the Best Performance These are the hotel REITs that had the highest total return or smallest decline in total returns over the last 12 months. | Hotel REITs With the Best Performance | | | | | --- | --- | --- | --- | | | Price ($) | Market Cap ($B) | 12-Month Trailing Total Return | | Service Properties Trust ([SVC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SVC)) | 8.70 | 1.4 | 18.4 | | VICI Properties Inc. (VICI) | 32.12 | 32.3 | 12.7 | | Ryman Hospitality Properties Inc. (RHP) | 90.99 | 5.0 | -1.1 | | Russell 1000 Index | N/A | N/A | 5.6 | | S&P 1500 Hotel & Resort REITs Sub-Industry Index | N/A | N/A | -25.1 | Source: [YCharts](https://ycharts.com/) * **Service Properties Trust:** Service Properties is a REIT that owns 220 hotels across the U.S. and Canada. The company also owns service-focused retail properties. In May, Service Properties completed the sale of its TravelCenters of America locations to BP PLC ([BP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BP)) for over $379 million. * **VICI Properties Inc.:** See company description above. * **Ryman Hospitality Properties Inc.:** See company description above. ## The Impact of COVID-19 on Hotel Stocks Companies owning, operating, or investing in hotels had significant disruptions to their business throughout the early days of COVID-19. In a span of months, nearly five million hospitality and leisure jobs were lost across the U.S., and occupancy rates in the last months of 2020 fell to below 20% in many cases. As of mid-2023, many businesses across the hospitality industry have largely recovered, with pent-up demand and other factors contributing to a significant rise in room prices in some cases. To be sure, the recovery has not been entirely even, and the pandemic will likely continue to impact the hotel industry for years to come. For example, certain travel destinations have seen stronger demand than others, with the entertainment and gaming city Las Vegas recovering faster than business hubs like New York City. ## Risks of Investing in Hotel Stocks Investing in companies that own and operate hotels comes with a number of risks, some of them significant. While some of the biggest hotel companies have thousands of locations around the world and benefit from global brand recognition, most other hotel businesses are less stable. Here are some of the risks to be aware of when considering an investment in hotel stocks: 1. **Property:** Property-related risk is a key factor to consider when making any investment in real estate, a REIT, or a company that owns or operates real estate. Hotels are subject to wear and tear, damage from guests, construction and renovation issues, and a host of other liabilities. These property-related risks exist during development as well as operation of a hotel. 2. **Operation:** Operational risks are associated with the day-to-day business and management of the hotel. A hotel must be able to maintain high levels of cash flow to continue to function properly. But factors such as poor planning and mismanagement can jeopardize this. 3. **Market Factors:** External factors also create significant risk within the hotel industry. The pandemic and its devastating impact on travel and hotel use is a notable example. Other factors include macroeconomic conditions such as inflation or a recession, political or regulatory changes, and competition from newer hospitality companies such as Airbnb Inc. ([ABNB](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ABNB)). Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Top hotel stocks for the second quarter include MGM Resorts International, Marriott International Inc., and H World Group Ltd., shares of which have outperformed their industry peers over the past year. The hotel industry is split into two main categories of companies: C-corporation hotels and hotel real estate investment trusts (REITs). C-corporation hotels are generally engaged in hotel management, branding, and marketing, and are best represented by the S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index, which had a total return over the past year of 7.9%. Hotel REITs are companies that focus on the acquisition, ownership, and operation of hotel real estate. These companies are best represented by the S&P 1500 Hotel & Resort REITs Sub-Industry Index, which has fallen 25.1% in the past year. Meanwhile, the Russell 1000 Index has risen 5.6%. Below we look at the top hotel stocks and the top hotel REITS for best value, fastest growth, and most momentum or best performance. All data below are as of May 3, 2023. Best Value Hotel Stocks These are the hotel stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. Best Value Hotel Stocks   Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio MGM Resorts International (MGM) 43.74 15.9 9.3 Hilton Grand Vacations Inc. (HGV) 42.60 4.7 13.5 Marriott Vacations Worldwide Corp. (VAC) 134.66 5.0 15.5 Source: YCharts MGM Resorts International: MGM Resorts operates gaming and entertainment resorts, providing accommodations, hospitality management, dining, and other services for casinos and non-casino properties around the world. The company's net revenue surged by 36% in the most recent quarter amid a rebound in casino travel and its acquisition of Cosmopolitan of Las Vegas.Hilton Grand Vacations Inc.: Hilton Grand Vacations markets, sells, and manages timeshare resorts. It also operates a points-based vacation club. Revenue increased about 20% in the most recent quarter, while shares of Hilton Grand Vacations have climbed by 5% in the last year.Marriott Vacations Worldwide Corp.: Marriott Vacations is a timeshare company that sells, rents, and manages properties. It also provides other timeshare companies with products and services. The company's stock has shed a tenth of its value in the last year amid inflation and rising interest rates. Fastest Growing Hotel Stocks These are the top hotel stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY EPS growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers. Fastest Growing Hotel Stocks   Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%) Marriott International Inc. (MAR) 178.45 54.1 113.2 33.7 Hilton Worldwide Holdings Inc. (HLT) 145.73 38.6 2.7 33.3 Hilton Grand Vacations Inc. (HGV) 42.60 4.7 52.4 19.9 Source: YCharts Marriott International Inc.: Marriott operates a chain of hotels, timeshare properties, and residential properties worldwide. EPS more than doubled and revenue climbed by about a third for the latest quarter, driven by strong demand in the company's leisure and group segments.Hilton Worldwide Holdings Inc.: Hilton Worldwide Holdings is a global hospitality company. It owns and manages hotels, resorts, and timeshare properties throughout the world. Revenue grew by a third in the first quarter of 2023 amid a resurgence of travel demand to near pre-pandemic levels.Hilton Grand Vacations Inc.: See company description above. Hotel Stocks With the Most Momentum These are the hotel stocks that had the best returns over the past 12 months out of the companies we looked at. Hotel Stocks With the Most Momentum   Price ($) Market Cap ($B) 12-Month Trailing Total Return (%) H World Group Ltd. (HTHT) 44.87 14.3 48.7 Hyatt Hotels Corp. (H) 118.20 12.7 32.1 InterContinental Hotels Group (IHG) 69.91 12.2 9.3 Russell 1000 Index N/A N/A 5.6 S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index N/A N/A 7.9 Source: YCharts H World Group Ltd.: H World is a Chinese hotel operator and franchisor. It offers hotel leasing, operation, and co-development services worldwide. The company's stock climbed steadily from October to early March as the company posted better-than-expected financial results and investors anticipated an end to China's zero-COVID restrictions. Hyatt Hotels Corp.: Hyatt Hotels is a multinational hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties. Hyatt shares have also benefited from reduced COVID restrictions in China, where the company is developing dozens of properties. InterContinental Hotels Group: InterContinental Hotels is a British hospitality company operating worldwide hotel chains including Holiday Inn, Regent, and Crowne Plaza. The company's expansion into the luxury hotel space helped to drive momentum in the last several months. Best Value Hotel REITs These are the hotel REITs with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated. Best Value Hotel REITs   Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio Park Hotels & Resorts Inc. (PK) 12.40 2.7 11.2 Diamondrock Hospitality Co. (DRH) 8.22 1.7 17.9 Host Hotels & Resorts Inc. (HST) 16.27 11.6 18.5 Source: YCharts Park Hotels & Resorts Inc.: Park Hotels is a hotel REIT that owns and operates 46 properties across 15 states and Puerto Rico. Park has a larger footprint in California than in any other state, with half of those properties located in the San Francisco Bay Area. The company has shed almost a quarter of its value in the last year amid recession fears and a tech industry slowdown. Diamondrock Hospitality Co.: Diamondrock Hospitality is a self-advised hotel REIT that owns 35 luxury and upscale properties across 14 states. In the last two years, the REIT has joined the nationwide southward migration and acquired 6 hotels, all of them in the South—4 in Florida, 1 in Texas, and 1 in Louisiana. Diamondrock shares also plunged in the last year, falling almost 20%. Host Hotels & Resorts Inc.: Host Hotels & Resorts owns 77 hotel properties across 21 states, Canada, and Brazil. It primarily acquires luxury and upper upscale hotels. Host shares are down about 13% over the last year. Fastest Growing Hotel REITs These are the hotel REITs with the highest YOY sales growth for the most recent quarter. Rising sales can help investors to both identify companies that are able to increase revenue through organic or new ways and find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability. Fastest Growing Hotel REITs   Price ($) Market Cap ($B) Revenue Growth (%) VICI Properties Inc. (VICI) 32.12 32.3 110.7 Ryman Hospitality Properties Inc. (RHP) 90.99 5.0 64.4 Sunstone Hotel Investors Inc. (SHO) 9.68 2.0 41.3 Source: YCharts VICI Properties Inc.: VICI is a casino and hotel REIT. It owns a portfolio of gaming, hospitality, and entertainment properties including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. Revenue more than doubled for the first quarter of 2023 on rebounding casino business and the company's acquisition of four properties from PURE Canadian Gaming.Ryman Hospitality Properties Inc.: Ryman Hospitality is a convention and lodging REIT that owns convention center resorts and entertainment properties outside of the gaming industry. Its properties include Gaylord Opryland Resort & Convention Center, Gaylord Palms Resort & Convention Center, and many others. Revenue for the first quarter of 2023 reached record levels due to strength in room rates and outside-the-room spending.Sunstone Hotel Investors Inc.: Sunstone Hotel Investors is a lodging REIT that owns 15 primarily upscale hotels and resorts. Management attributed revenue gains in the most recent quarter to improved room, food, and drink sales. Hotel REITs With the Best Performance These are the hotel REITs that had the highest total return or smallest decline in total returns over the last 12 months. Hotel REITs With the Best Performance   Price ($) Market Cap ($B) 12-Month Trailing Total Return Service Properties Trust (SVC) 8.70 1.4 18.4 VICI Properties Inc. (VICI) 32.12 32.3 12.7 Ryman Hospitality Properties Inc. (RHP) 90.99 5.0 -1.1 Russell 1000 Index N/A N/A 5.6 S&P 1500 Hotel & Resort REITs Sub-Industry Index N/A N/A -25.1 Source: YCharts Service Properties Trust: Service Properties is a REIT that owns 220 hotels across the U.S. and Canada. The company also owns service-focused retail properties. In May, Service Properties completed the sale of its TravelCenters of America locations to BP PLC (BP) for over $379 million. VICI Properties Inc.: See company description above. Ryman Hospitality Properties Inc.: See company description above. The Impact of COVID-19 on Hotel Stocks Companies owning, operating, or investing in hotels had significant disruptions to their business throughout the early days of COVID-19. In a span of months, nearly five million hospitality and leisure jobs were lost across the U.S., and occupancy rates in the last months of 2020 fell to below 20% in many cases. As of mid-2023, many businesses across the hospitality industry have largely recovered, with pent-up demand and other factors contributing to a significant rise in room prices in some cases. To be sure, the recovery has not been entirely even, and the pandemic will likely continue to impact the hotel industry for years to come. For example, certain travel destinations have seen stronger demand than others, with the entertainment and gaming city Las Vegas recovering faster than business hubs like New York City. Risks of Investing in Hotel Stocks Investing in companies that own and operate hotels comes with a number of risks, some of them significant. While some of the biggest hotel companies have thousands of locations around the world and benefit from global brand recognition, most other hotel businesses are less stable. Here are some of the risks to be aware of when considering an investment in hotel stocks: Property: Property-related risk is a key factor to consider when making any investment in real estate, a REIT, or a company that owns or operates real estate. Hotels are subject to wear and tear, damage from guests, construction and renovation issues, and a host of other liabilities. These property-related risks exist during development as well as operation of a hotel. Operation: Operational risks are associated with the day-to-day business and management of the hotel. A hotel must be able to maintain high levels of cash flow to continue to function properly. But factors such as poor planning and mismanagement can jeopardize this. Market Factors: External factors also create significant risk within the hotel industry. The pandemic and its devastating impact on travel and hotel use is a notable example. Other factors include macroeconomic conditions such as inflation or a recession, political or regulatory changes, and competition from newer hospitality companies such as Airbnb Inc. (ABNB). Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/amex-adding-dining-credit-to-marriott-brilliant-card-5496410

American Express Adding a Dining Credit to Marriott Brilliant Card

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Today, American Express announced a new dining credit for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/marriott-bonvoy-brilliant-american-express-card-review-4796408">Marriott Bonvoy Brilliant American Express Card</a>. The premium hotel credit card, which offers a variety of benefits for a hefty annual fee, will offer a $25 monthly dining credit beginning September 22, 2022, replacing an existing credit on Marriott purchases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>American Express will be adding a dining credit to the Marriott Bonvoy Brilliant Card in September.</li><li>Cardholders will get up to $25 in monthly statement credits on eligible purchases and restaurants worldwide, for a total of $300 annually.</li><li>The new dining credit will replace one that cardholders can currently get on Marriott purchases.</li></ul></div></div></div> <span class="heading-toc" id="toc-marriott-bonvoy-brilliant-card-to-offer-a-permanent-dining-benefit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Marriott Bonvoy Brilliant Card to Offer a Permanent Dining Benefit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> In 2021, American Express launched a limited-time offer for select co-brand credit cards, including the Bonvoy Brilliant card, offering $20 per month in statement credits toward restaurant purchases. The benefit lasted through the end of that year.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Now, American Express is adding a permanent benefit to the Bonvoy Brilliant Card. Starting September 22, 2022, cardholders can receive up to $25 in statement credits each month for eligible purchases at restaurants worldwide, up to a total of $300 per year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The card issuer says the new benefit will be a replacement of an existing benefit worth $300 annually, so there won't be any change to the potential value the card offers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The existing benefit on the chopping block is a $300 annual Marriott Bonvoy credit, which cardholders can earn by making eligible purchases at participating Marriott Bonvoy hotels. Some cardholders may be disappointed to lose a valuable benefit they could use to book hotels at a discount or even for free, but if you already spend at least $25 per month at restaurants, the dollar value the card offers remains the same. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Additionally, the card still offers a free anniversary night certificate each year when you renew your card membership and pay the annual fee. The certificate for a one-night stay is worth up to 50,000 points.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

Today, American Express announced a new dining credit for the [Marriott Bonvoy Brilliant American Express Card](https://www.investopedia.com/marriott-bonvoy-brilliant-american-express-card-review-4796408). The premium hotel credit card, which offers a variety of benefits for a hefty annual fee, will offer a $25 monthly dining credit beginning September 22, 2022, replacing an existing credit on Marriott purchases. ### Key Takeaways * American Express will be adding a dining credit to the Marriott Bonvoy Brilliant Card in September. * Cardholders will get up to $25 in monthly statement credits on eligible purchases and restaurants worldwide, for a total of $300 annually. * The new dining credit will replace one that cardholders can currently get on Marriott purchases. ## Marriott Bonvoy Brilliant Card to Offer a Permanent Dining Benefit In 2021, American Express launched a limited-time offer for select co-brand credit cards, including the Bonvoy Brilliant card, offering $20 per month in statement credits toward restaurant purchases. The benefit lasted through the end of that year. Now, American Express is adding a permanent benefit to the Bonvoy Brilliant Card. Starting September 22, 2022, cardholders can receive up to $25 in statement credits each month for eligible purchases at restaurants worldwide, up to a total of $300 per year. The card issuer says the new benefit will be a replacement of an existing benefit worth $300 annually, so there won't be any change to the potential value the card offers. The existing benefit on the chopping block is a $300 annual Marriott Bonvoy credit, which cardholders can earn by making eligible purchases at participating Marriott Bonvoy hotels. Some cardholders may be disappointed to lose a valuable benefit they could use to book hotels at a discount or even for free, but if you already spend at least $25 per month at restaurants, the dollar value the card offers remains the same. Additionally, the card still offers a free anniversary night certificate each year when you renew your card membership and pay the annual fee. The certificate for a one-night stay is worth up to 50,000 points. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Today, American Express announced a new dining credit for the Marriott Bonvoy Brilliant American Express Card. The premium hotel credit card, which offers a variety of benefits for a hefty annual fee, will offer a $25 monthly dining credit beginning September 22, 2022, replacing an existing credit on Marriott purchases. Key Takeaways American Express will be adding a dining credit to the Marriott Bonvoy Brilliant Card in September.Cardholders will get up to $25 in monthly statement credits on eligible purchases and restaurants worldwide, for a total of $300 annually.The new dining credit will replace one that cardholders can currently get on Marriott purchases. Marriott Bonvoy Brilliant Card to Offer a Permanent Dining Benefit In 2021, American Express launched a limited-time offer for select co-brand credit cards, including the Bonvoy Brilliant card, offering $20 per month in statement credits toward restaurant purchases. The benefit lasted through the end of that year. Now, American Express is adding a permanent benefit to the Bonvoy Brilliant Card. Starting September 22, 2022, cardholders can receive up to $25 in statement credits each month for eligible purchases at restaurants worldwide, up to a total of $300 per year. The card issuer says the new benefit will be a replacement of an existing benefit worth $300 annually, so there won't be any change to the potential value the card offers. The existing benefit on the chopping block is a $300 annual Marriott Bonvoy credit, which cardholders can earn by making eligible purchases at participating Marriott Bonvoy hotels. Some cardholders may be disappointed to lose a valuable benefit they could use to book hotels at a discount or even for free, but if you already spend at least $25 per month at restaurants, the dollar value the card offers remains the same. Additionally, the card still offers a free anniversary night certificate each year when you renew your card membership and pay the annual fee. The certificate for a one-night stay is worth up to 50,000 points. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/best-ethereum-wallets-6830692

Best Ethereum Wallets

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Ethereum has emerged as one of the most vibrant blockchain ecosystems in the digital asset market. The smart contract-enabled layer-1 blockchain enables users to interact with a wide range of decentralized applications (dApps), ranging from decentralized finance (DeFi) protocols and play-to-earn (P2E) games to NFT (non-fungible token) marketplaces and more.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> To take part in the Ethereum ecosystem and securely store, send, and receive Ether (ETH) and other Ethereum-based crypto assets, you need an Ethereum wallet. Additionally, most of the best Ethereum wallets in the market also allow you to access Ethereum decentralized applications by connecting your wallet to the dApps’ smart contracts.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Ethereum Wallets of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Security:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://guarda.com/download/?utm_source=investopedia&amp;utm_medium=button&amp;utm_campaign=invstpd-affiliate&amp;utm_id=05088" rel="nofollow noskim noopener nocaes" target="_blank"> Guarda Wallet</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Beginners:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.exodus.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Exodus</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Convenience:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://metamask.io/" rel="nofollow noskim noopener nocaes" target="_blank"> MetaMask</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for a Wide Variety of Assets:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://trustwallet.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Trust Wallet</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Smart Contracts:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.myetherwallet.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Myetherwallet (MEW)</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-warning mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>While all leading cryptocurrency wallets provide a high level of security for safekeeping your crypto assets, improper security practices on behalf of the user can lead to a complete loss of funds. Crypto enthusiasts should take care to store the bulk of their assets meant for trading on exchanges using <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/030515/what-cold-storage-bitcoin.asp">cold storage methods</a>, and never share your wallet’s login details, recovery phrase, or private keys with anyone.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-warning mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Ethereum Wallets</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Ethereum Wallets" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Ethereum Wallets</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Guarda Wallet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Guarda Wallet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-security-guarda-wallet" rel="nocaes"> <span class="link__wrapper">Guarda Wallet</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Exodus" data-tracking-container="true" 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class="link__wrapper">MetaMask</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Trust Wallet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Trust Wallet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-a-wide-variety-of-assets-trust-wallet" rel="nocaes"> <span class="link__wrapper">Trust Wallet</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Myetherwallet (MEW)" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Myetherwallet (MEW)" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-smart-contracts-myetherwallet-mew" rel="nocaes"> <span class="link__wrapper">Myetherwallet (MEW)</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (2)</li><!-- 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mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare the Best Ethereum Wallets" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-ethereum-wallets" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare the Best Ethereum Wallets</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Want to learn more about digital currencies? You're not alone." data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-want-to-learn-more-about-digital-currencies-youre-not-alone" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Want to learn more about digital currencies? You're not alone.</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Makes a Great Ethereum Wallet?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-makes-a-great-ethereum-wallet" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">What Makes a Great Ethereum Wallet?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-for-security-guarda-wallet"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Security</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Guarda Wallet</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-portrait figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Guarda Wallet" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/K3wZThANYufwRv1clap1KUy52_o=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Guarda-34fe16d1841d4b64b05cee2e0de0cc66.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Guarda Wallet" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/K3wZThANYufwRv1clap1KUy52_o=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Guarda-34fe16d1841d4b64b05cee2e0de0cc66.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Guarda Wallet</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-portrait figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Top coins supported: </strong>Ethereum (ETH), Bitcoin (BTC), Tether USD (USDT), Cardano (ADA), Solana (SOL)</li><li><strong>Type of wallet:</strong> Non-custodial</li><li><strong>Price:</strong> Free</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://guarda.com/download/?utm_source=investopedia&amp;utm_medium=button&amp;utm_campaign=invstpd-affiliate&amp;utm_id=05088" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Guarda Wallet has established itself as a highly secure, multi-asset crypto wallet that enables users to securely store, send, and receive Ethereum (ETH) and Ethereum-based tokens.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>First-rate security</p></li> <li><p>Supports 400,000+ assets across 50+ blockchain networks</p></li> <li><p>Enables users to earn, borrow, and swap crypto</p></li> <li><p>Fiat on-ramp</p></li> <li><p>High-quality customer service</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>High in-app crypto purchase fees</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> Guarda Wallet was launched in 2017 by blockchain solutions company ​​Guardarian OÜ. With offices in Tallinn, Estonia and Lisbon, Portugal, the Guarda Wallet team has built one of the leading <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-crypto-software-wallets-5220762">cryptocurrency software wallets</a> on the market by providing a secure, feature-rich wallet that both beginners and advanced crypto users can utilize.<span class="ql-inline-citation" data-cite="1"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Guarda Wallet is a multi-platform wallet that enables users to access their coins and tokens on mobile (iOS and Android), on a web application, via a desktop application, and using a Chrome browser extension.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Additionally, Guarda Wallet is a non-custodial wallet, which means users have complete control over their funds, and the company cannot access user funds. Moreover, there have been no reports of security breaches at Guarda Wallet, thanks to the robust security features that have been put into place to safeguard user funds.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> In addition to Ethereum (ETH) and Ethereum-based tokens, Guarda Wallet users can store, send, and receive 400,000+ crypto assets across 50+ blockchains.<span class="ql-inline-citation" data-cite="2"></span> Using the Guarda Chrome extension, users can also interact with Ethereum-based <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp">dApps</a>.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> Guardarian OÜ is licensed in Estonia, enabling it to provide regulated virtual currency services, such as fiat-to-crypto purchases and prepaid card-related services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> Guarda Wallet is an excellent crypto wallet for investors looking to store a wide range of assets in a highly secure software wallet.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Read the Full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guarda-cryptocurrency-wallet-review-5221909">Guarda Wallet Review</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-beginners-exodus"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Beginners</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Exodus</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-15" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Exodus" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/2WBpISWq8DHnk45jw0b0YXRIQW0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Exodus-0c4aa171f9fd4b72b9bef248c7036f8d.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Exodus" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/2WBpISWq8DHnk45jw0b0YXRIQW0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Exodus-0c4aa171f9fd4b72b9bef248c7036f8d.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Exodus</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> <li><strong>Top coins supported: </strong>Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), Tether USD (USDT), Dogecoin (DOGE)</li><li><strong>Type of wallet:</strong> Non-custodial</li><li><strong>Price:</strong> Free</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-17"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.exodus.com/" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> Exodus Wallet is a beginner-friendly, multi-asset cryptocurrency wallet that enables investors to securely manage Ethereum (ETH) and a range of Ethereum-based tokens, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/non-fungible-tokens-nft-5115211">NFTs</a>, in one place.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-21"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>User-friendly interface</p></li> <li><p>Supports a wide range of Ethereum-based tokens</p></li> <li><p>Enables users to earn staking rewards</p></li> <li><p>Fiat-to-crypto on-ramp</p></li> <li><p>In-app asset swapping</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Not an open-source wallet</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Company Overview </span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> Exodus Wallet was launched in 2015 to enable crypto investors to securely store and manage their crypto investments.<span class="ql-inline-citation" data-cite="3"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> In addition to supporting 360+ digital currencies and tokens, the Nebraska-based company also enables users to manage their Ethereum-based NFTs as well as NFTs on Solana and a handful of other networks.<span class="ql-inline-citation" data-cite="4"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> Exodus users can also earn staking rewards, obtain interest payments by depositing their assets in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/decentralized-finance-defi-5113835">DeFi</a> lending protocol, and trade cryptocurrencies on the wallet’s built-in exchange.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> The popular multi-currency wallet stands out for having an exceptionally user-friendly desktop application that doesn’t overcomplicate an already complex space. The beginner-friendly user experience is also replicated in the Exodus mobile wallet, which makes managing your crypto on-the-go easy and accessible.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> Exodus is an excellent Ethereum wallet for beginners looking to expand their crypto investments beyond Bitcoin.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> Read the Full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/exodus-wallet-review-5221908">Exodus Wallet Review</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-convenience-metamask"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Convenience</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> MetaMask</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="MetaMask" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/v5K6POcZQXnjy1MhKNSNTghQ6jM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Metamask_logo-aca547fe6081482085662b03e2235f98.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="MetaMask" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/v5K6POcZQXnjy1MhKNSNTghQ6jM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Metamask_logo-aca547fe6081482085662b03e2235f98.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>MetaMask</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> <li><strong>Top coins supported: </strong>Ethereum (ETH), Shiba Inu (SHIB), Uniswap (UNI), Aave (AAVE), Dai (DAI)</li><li><strong>Type of wallet:</strong> Non-custodial</li><li><strong>Price:</strong> Free</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-31"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://metamask.io/" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> MetaMask is one of the most popular Ethereum wallets in the market, with over 30 million users globally utilizing the wallet to manage their Ethereum-based assets and interact with dApps in the Ethereum ecosystem.<span class="ql-inline-citation" data-cite="5"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-35"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Supports all Ethereum tokens</p></li> <li><p>Supports NFTs</p></li> <li><p>Beginner-friendly interface</p></li> <li><p>Access to decentralized applications</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Doesn’t support Bitcoin</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> MetaMask was launched in 2016 by New York-based Ethereum development company Consensys to enable Ethereum users to securely store and manage their Ethereum-based tokens.<span class="ql-inline-citation" data-cite="6"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> MetaMask is a non-custodial wallet that supports Ethereum and a wide range of EMV-compatible blockchains, enabling crypto users to explore <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/web-20-web-30-5208698">web3</a>, NFTs, and the DeFi market using one single wallet.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> Available as a browser extension for Google Chrome browser and as a mobile wallet for iOS and Android, MetaMask has managed to establish itself as one of the go-to wallets for Ethereum users around the world. In addition to the Chrome extension, it supports use in the Chrome browser, Firefox, Brave, Edge, and Opera browsers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> MetaMask enables users to buy Ethereum (ETH) and other Ethereum tokens with fiat currency and allows users to swap tokens directly within the app by taking them into decentralized trading pools.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> MetaMask is an excellent wallet for first-time Ethereum users who want to explore the world of NFTs, DeFi, and dApps using a user-friendly wallet.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> Read the Full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/metamask-cryptocurrency-wallet-review-5235562">MetaMask Review</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-a-wide-variety-of-assets-trust-wallet"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for a Wide Variety of Assets</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Trust Wallet</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-43" style="--imgWidth: 243px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Trust Wallet" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/wS9_OpwarOsUSa5g5rB0pFpSlKo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Trust_Wallet_logo-aa471e18a7844e38b608a3e8da560fe3.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Trust Wallet" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/wS9_OpwarOsUSa5g5rB0pFpSlKo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Trust_Wallet_logo-aa471e18a7844e38b608a3e8da560fe3.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>Trust Wallet</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> <li><strong>Top coins supported: </strong>Ethereum (ETH), Bitcoin (BTC), Binance Coin (BNB), Solana (SOL), Litecoin (LTC)</li><li><strong>Type of wallet:</strong> Non-custodial</li><li><strong>Price:</strong> Free</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-45"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://trustwallet.com/" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> Trust Wallet is a popular multi-asset mobile crypto wallet that supports over 10 million digital assets across 70+ blockchains. Additionally, Trust Wallet comes with a mobile dApp browser that enables users to explore the Ethereum dApp ecosystem, including DeFi and NFTs, on the go.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-49"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Easy-to-use mobile wallet</p></li> <li><p>Supports over 10 million digital currencies and tokens</p></li> <li><p>In-app staking</p></li> <li><p>Access decentralized applications on the go</p></li> <li><p>Fiat on-ramp and token swapping</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No desktop wallet</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51"> Trust Wallet was launched in 2017 with the primary purpose of enabling crypto investors to store all their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp">initial coin offerings (ICO)</a>  tokens in one wallet.<span class="ql-inline-citation" data-cite="8"></span> At the time, the vast majority of ICOs were taking place on Ethereum, resulting in Trust Wallet’s initial focus on the leading smart contract network. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> A year later, Trust Wallet was acquired by Binance, and later started to add support for further blockchains to enable investors to store and use a wide range of digital currencies and tokens on the go.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Trust Wallet enables users to buy and swap crypto directly within the app and provides an in-app staking feature that currently allows users to earn staking rewards for 23+ cryptocurrencies.<span class="ql-inline-citation" data-cite="9"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> Moreover, users can access Ethereum dApps using the mobile dApp browser and manage their Ethereum and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/binance-coin-bnb.asp">Binance Coin (BNB)</a> Smart Chain NFT collections. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> The non-custodial wallet gives users complete control over their funds as the company doesn’t have access to users’ private keys, ensuring a high level of security and privacy for Trust Wallet users.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> Trust Wallet is most suitable for crypto users and investors who want to manage all their digital assets in one easily accessible place.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Read the Full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/trust-wallet-cryptocurrency-wallet-review-5270400">Trust Wallet Review</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-smart-contracts-myetherwallet-mew"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Smart Contracts</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Myetherwallet (MEW)</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-58" style="--imgWidth: 317px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="MyEtherWallet logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/SxBRzCEQwLrE-OFxg0eQXbFgG4c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MEW-logo-467cd866f59a4bb4b833364ceefaa3ca.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="MyEtherWallet logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/SxBRzCEQwLrE-OFxg0eQXbFgG4c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MEW-logo-467cd866f59a4bb4b833364ceefaa3ca.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p>MyEtherWallet </p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> <li><strong>Top coins supported: </strong>Ethereum (ETH), Tether USD (USDT), Dai (DAI), Shiba Inu (SHIB), Wrapped Bitcoin (WBTC)</li><li><strong>Type of wallet:</strong> Non-custodial</li><li><strong>Price:</strong> Free</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-60"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.myetherwallet.com/" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> MyEtherWallet (MEW) is a popular <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/open-source.asp">open-source</a>, client-side Ethereum wallet that stands out for its broad functionalities around the creation, development, and use of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/smart-contracts.asp">smart contracts</a>.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-64"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Extensive smart contract functionality</p></li> <li><p>Supports all Ethereum tokens</p></li> <li><p>Ethereum NFT support</p></li> <li><p>In-app asset swapping</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Somewhat advanced for beginners</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> MyEtherWallet was launched in 2015 to provide Ethereum users with an open-source, client-side interface that enables them to interact with the Ethereum ecosystem.<span class="ql-inline-citation" data-cite="10"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> In the early years of Ethereum, Los Angeles-based MyEtherWallet managed to become the go-to Ethereum wallet, especially for ICO investors looking to store multiple <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/what-erc20-and-what-does-it-mean-ethereum/">ERC-20 tokens</a> in one wallet.<span class="ql-inline-citation" data-cite="10"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> Today, MEW allows users to deploy smart contracts, trade Ethereum-based assets, stake Ethereum (ETH), manage their NFT collection, and store all their Ethereum tokens in one place.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> Additionally, MEW also supports a selection of EVM-compatible blockchains. An EVM-compatible blockchain allows developers to create smart contracts that are compatible with the Ethereum Virtual Machine (EVM) to facilitate blockchain interoperability by enabling dApps to be easily deployed on other blockchains as well. Moreover, crypto assets stored on EVM-compatible blockchains can typically be transfers to other EVM chains via cross-chain bridges. Leading examples of EVM-compatible chains include BNB Smart Chain and Polygon.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> MyEtherWallet is ideal for more advanced users who are fully immersed in the Ethereum ecosystem.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> Read the Full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/myetherwallet-cryptocurrency-wallet-review-5235425">MyEtherWallet Review</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Choosing the best Ethereum wallet for you depends on your needs as an Ethereum user or investor. If you want to actively interact with Ethereum-powered decentralized applications online, you probably want to go with the MetaMask or Guarda browser extensions.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> Conversely, if you prefer to access dApps, DeFi applications, and NFT marketplaces on the go, Trust Wallet is probably the better option.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> On the other hand, if you are actively managing your crypto portfolio and want to invest in the top Ethereum-based tokens, Exodus Wallet, with its built-in exchange, could be the right option for you.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> Finally, if you are looking for a more advanced wallet that enables you to deploy Ethereum smart contracts, MyEtherWallet is your best choice.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-ethereum-wallets"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> Compare the Best Ethereum Wallets </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-6"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Asset Type</b></th> <th><b>Number of Currencies Supported</b> </th> <th><b>NFT Support</b> </th> <th><b>Incorporated Exchange</b> </th> <th><b>dApp Support</b> </th> <th><b>Compatible</b> <b>Hardware</b> </th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://guarda.com/download/?utm_source=investopedia&amp;utm_medium=button&amp;utm_campaign=invstpd-affiliate&amp;utm_id=05088" rel="nofollow">Guarda Wallet</a> Best for Security</td> <td>400,000+</td> <td>Yes</td> <td>Yes</td> <td>Yes</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.exodus.com/" rel="sponsored nofollow">Exodus Wallet</a> Best for Beginners </td> <td>360+ </td> <td>Yes </td> <td>Yes </td> <td>Yes </td> <td>Yes </td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://metamask.io/" rel="nofollow">MetaMask</a> Best for Convenience </td> <td>ETH and all ETH based cryptocurrencies and tokens</td> <td>Yes </td> <td>Yes </td> <td>Yes </td> <td>Yes </td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://trustwallet.com/" rel="nofollow">Trust Wallet</a> Best for Wide Variety </td> <td>10,000,000+ </td> <td>Yes </td> <td>Yes </td> <td>Yes </td> <td>No</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.myetherwallet.com/" rel="nofollow">Myetherwallet</a> Best for  Smart Contracts </td> <td>ETH and all ERC-20 tokens plus additional cryptocurrencies and blockchains via an extension</td> <td>Yes </td> <td>Yes </td> <td>Yes </td> <td>Yes </td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-want-to-learn-more-about-digital-currencies-youre-not-alone"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-7"> <span class="mntl-sc-block-heading__text"> Want to learn more about digital currencies? You're not alone.<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-8"> Most adults have a beginner's understanding of cryptocurrency, but plan on using such assets as a key source of retirement funds, according to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-literacy-survey-5223919">2022 Investopedia Financial Literacy Survey.</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_4-0-9"> <iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp lazyload mntl-sc-block-iframe__uri mntl-block" data-src="https://datawrapper.dwcdn.net/ZBnW1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="1"></iframe><!-- end: comp lazyload mntl-sc-block-iframe__uri mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block --> <span class="heading-toc" id="toc-what-makes-a-great-ethereum-wallet"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-10"> <span class="mntl-sc-block-heading__text"> What Makes a Great Ethereum Wallet? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-11"> An excellent Ethereum wallet should provide a high level of security, be user-friendly, and allow users to interact with the entire Ethereum ecosystem.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> To be more specific, an Ethereum wallet should be non-custodial, enabling you to hold your own private keys to give you complete control over your funds. Moreover, despite the technical knowledge that is required to buy, store, and use cryptocurrency, a wallet should make the process as simple and beginner-friendly as possible.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> Additionally, an Ethereum wallet should allow you to store all types of Ethereum-based tokens, including ERC-20 tokens, like Ether (ETH), and NFTs. And finally, it should provide you with the ability to interact with decentralized applications (dApps), such as DeFi protocols and play-to-earn (P2E) games, within the Ethereum ecosystem.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-frequently-asked-questions"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-14"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-15"> <span class="heading-toc" id="toc-what-is-ethereum"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Ethereum?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Ethereum is a distributed peer-to-peer computing platform that enables developers to build smart contract-powered decentralized products and services. </p><p>Founded in 2013 and launched during an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp">initial coin offering (ICO)</a> in 2015, Ethereum has established itself as the second-largest crypto network after Bitcoin, and the leading smart contract-enabled layer-1 blockchain.<span class="ql-inline-citation" data-cite="11"></span></p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-16"> <span class="heading-toc" id="toc-how-is-ethereum-mined"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Is Ethereum Mined?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In September 2022, Ethereum changed its consensus protocol from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/proof-work.asp">proof-of-work (PoW)</a> to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/proof-stake-pos.asp">proof-of-stake (PoS)</a>, alleviating the ability for miners to take part in the Ethereum network. </p><p>Instead, validators now stake a share of their ETH tokens by depositing them into a validator program to help secure the network and validate transactions.<span class="ql-inline-citation" data-cite="12"></span></p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-17"> <span class="heading-toc" id="toc-what-is-ethereum-staking"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Ethereum Staking?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Ethereum users have the ability to stake ETH tokens to take part in the protocol’s consensus mechanism in exchange for staking rewards paid in ETH. </p><p>To start staking Ether, you will need a minimum of 32 ETH. However, there are also liquidity staking providers that enable you to take part in Ethereum staking with less than the required minimum to become a full validator.<span class="ql-inline-citation" data-cite="13"></span></p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-18"> <span class="heading-toc" id="toc-how-can-someone-buy-ethereum"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Someone Buy Ethereum?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can buy Ether (ETH) on a wide range of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-crypto-exchanges-5071855">crypto exchanges</a> using different payment methods, including wire transfer, debit card, and credit card. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-19"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-20"> One of the most important things to consider before you transact in and store Ethereum is that you have a suitable Ethereum wallet in place. To help determine the wallet that works best for you, we conducted a comprehensive review process of the top Ethereum software wallets. With your digital holdings at stake, the most crucial consideration is the reputation and security of the wallet you choose. Our top Ethereum wallets were selected after we reviewed 24 companies based on their security, reputation, features, fees, and customer service.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Exchanging money via smart phones" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/FFPWQgBtn_UVUQVTvkm9R33Er24=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg" srcset="https://www.investopedia.com/thmb/I4SGU7LyYME7b6QZEIZT1NOc50E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPMAAMmnTcarVNW2c+qyo8avwcD7uerXi+rJtu3MvfPHvMnG/cvP/v///8mnTcmnTcmnTSwAAAAACgAHAEMIKQAXCCxAsIDAgwUJBhB4IAGDhAYPLkgocaIAAAUPEkhooIAChBAHIAgIADs=')" width="1500"/> <noscript> <img alt="Exchanging money via smart phones" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/FFPWQgBtn_UVUQVTvkm9R33Er24=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg" srcset="https://www.investopedia.com/thmb/I4SGU7LyYME7b6QZEIZT1NOc50E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>PM Images / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>Guarda. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://guarda.com/about/">About Us</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>Guarda. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://guarda.com/coins/">More Than 400K+ Assets Supported</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>Exodus. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.exodus.com/about/" rel="nofollow sponsored">Exodus Empowers People to Control Their Wealth</a>."</p></li> <li class="mntl-sources__source" id="citation-4"><p>Exodus. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.exodus.com/status/#assets" rel="nofollow sponsored">Cryptocurrency Coins Status &amp; Assets</a>."</p></li> <li class="mntl-sources__source" id="citation-5"><p>MetaMask. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://metamask.io/">A Crypto Wallet &amp; Gateway to Blockchain Apps</a>."</p></li> <li class="mntl-sources__source" id="citation-6"><p>Crunchbase. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crunchbase.com/organization/metamask">MetaMask</a>."</p></li> <li class="mntl-sources__source" id="citation-8"><p>Trust Wallet. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://trustwallet.com/blog/trustwallet-founder-viktor-radchenko-motivation">Trust Wallet’s Founder Viktor Radchenko on His Motivation and Philosophy</a>."</p></li> <li class="mntl-sources__source" id="citation-9"><p>Trust Wallet. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://trustwallet.com/staking">What Is Staking Coins?</a>"</p></li> <li class="mntl-sources__source" id="citation-10"><p>Crunchbase. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crunchbase.com/organization/myetherwallet">MyEtherWallet</a>."</p></li> <li class="mntl-sources__source" id="citation-11"><p>Plus500. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.plus500.com/en-PL/Instruments/ETHUSD/The-History-of-Ethereum~4">The History of Ethereum</a>."</p></li> <li class="mntl-sources__source" id="citation-12"><p>TechCrunch. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://techcrunch.com/2022/09/15/ethereum-switches-to-proof-of-stake-consensus-after-completing-the-merge/" rel="nofollow sponsored">Ethereum Switches to Proof-of-Stake Consensus After Completing the Merge</a>."</p></li> <li class="mntl-sources__source" id="citation-13"><p>Ethereum. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ethereum.org/en/staking/">Earn Rewards While Securing Ethereum</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5220762" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-crypto-software-wallets-5220762" id="mntl-card-list-items_1-0"> 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Ethereum has emerged as one of the most vibrant blockchain ecosystems in the digital asset market. The smart contract-enabled layer-1 blockchain enables users to interact with a wide range of decentralized applications (dApps), ranging from decentralized finance (DeFi) protocols and play-to-earn (P2E) games to NFT (non-fungible token) marketplaces and more.   To take part in the Ethereum ecosystem and securely store, send, and receive Ether (ETH) and other Ethereum-based crypto assets, you need an Ethereum wallet. Additionally, most of the best Ethereum wallets in the market also allow you to access Ethereum decentralized applications by connecting your wallet to the dApps’ smart contracts.   ## Best Ethereum Wallets of 2024 * **Best for Security:** [Guarda Wallet](https://guarda.com/download/?utm_source=investopedia&utm_medium=button&utm_campaign=invstpd-affiliate&utm_id=05088) * **Best for Beginners:** [Exodus](https://www.exodus.com/) * **Best for Convenience:** [MetaMask](https://metamask.io/) * **Best for a Wide Variety of Assets:** [Trust Wallet](https://trustwallet.com/) * **Best for Smart Contracts:** [Myetherwallet (MEW)](https://www.myetherwallet.com/) While all leading cryptocurrency wallets provide a high level of security for safekeeping your crypto assets, improper security practices on behalf of the user can lead to a complete loss of funds. Crypto enthusiasts should take care to store the bulk of their assets meant for trading on exchanges using [cold storage methods](https://www.investopedia.com/articles/investing/030515/what-cold-storage-bitcoin.asp), and never share your wallet’s login details, recovery phrase, or private keys with anyone. Best Ethereum Wallets Expand Best Ethereum Wallets * [Our Top Picks](#summary-list) * [Guarda Wallet](#toc-best-for-security-guarda-wallet) * [Exodus](#toc-best-for-beginners-exodus) * [MetaMask](#toc-best-for-convenience-metamask) * [Trust Wallet](#toc-best-for-a-wide-variety-of-assets-trust-wallet) * [Myetherwallet (MEW)](#toc-best-for-smart-contracts-myetherwallet-mew) * See More (2) * [Final Verdict](#toc-final-verdict) * [Compare the Best Ethereum Wallets](#toc-compare-the-best-ethereum-wallets) * [Want to learn more about digital currencies? You're not alone.](#toc-want-to-learn-more-about-digital-currencies-youre-not-alone) * [What Makes a Great Ethereum Wallet?](#toc-what-makes-a-great-ethereum-wallet) * [Frequently Asked Questions](#toc-frequently-asked-questions) * [Methodology](#toc-methodology) ### Best for Security : Guarda Wallet --- ![Guarda Wallet]() :fill(white):max_bytes(150000):strip_icc()/Guarda-34fe16d1841d4b64b05cee2e0de0cc66.jpg) Guarda Wallet * **Top coins supported:** Ethereum (ETH), Bitcoin (BTC), Tether USD (USDT), Cardano (ADA), Solana (SOL) * **Type of wallet:** Non-custodial * **Price:** Free [Learn More](https://guarda.com/download/?utm_source=investopedia&utm_medium=button&utm_campaign=invstpd-affiliate&utm_id=05088) Why We Chose It Guarda Wallet has established itself as a highly secure, multi-asset crypto wallet that enables users to securely store, send, and receive Ethereum (ETH) and Ethereum-based tokens.  Pros & Cons Pros * First-rate security * Supports 400,000+ assets across 50+ blockchain networks * Enables users to earn, borrow, and swap crypto * Fiat on-ramp * High-quality customer service Cons * High in-app crypto purchase fees Company Overview Guarda Wallet was launched in 2017 by blockchain solutions company ​​Guardarian OÜ. With offices in Tallinn, Estonia and Lisbon, Portugal, the Guarda Wallet team has built one of the leading [cryptocurrency software wallets](https://www.investopedia.com/best-crypto-software-wallets-5220762) on the market by providing a secure, feature-rich wallet that both beginners and advanced crypto users can utilize.  Guarda Wallet is a multi-platform wallet that enables users to access their coins and tokens on mobile (iOS and Android), on a web application, via a desktop application, and using a Chrome browser extension.  Additionally, Guarda Wallet is a non-custodial wallet, which means users have complete control over their funds, and the company cannot access user funds. Moreover, there have been no reports of security breaches at Guarda Wallet, thanks to the robust security features that have been put into place to safeguard user funds.  In addition to Ethereum (ETH) and Ethereum-based tokens, Guarda Wallet users can store, send, and receive 400,000+ crypto assets across 50+ blockchains. Using the Guarda Chrome extension, users can also interact with Ethereum-based [dApps](https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp).  Guardarian OÜ is licensed in Estonia, enabling it to provide regulated virtual currency services, such as fiat-to-crypto purchases and prepaid card-related services. Guarda Wallet is an excellent crypto wallet for investors looking to store a wide range of assets in a highly secure software wallet.  Read the Full [Guarda Wallet Review](https://www.investopedia.com/guarda-cryptocurrency-wallet-review-5221909) ### Best for Beginners : Exodus --- ![Exodus]() :fill(white):max_bytes(150000):strip_icc()/Exodus-0c4aa171f9fd4b72b9bef248c7036f8d.jpg) Exodus * **Top coins supported:** Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), Tether USD (USDT), Dogecoin (DOGE) * **Type of wallet:** Non-custodial * **Price:** Free [Learn More](https://www.exodus.com/) Why We Chose It Exodus Wallet is a beginner-friendly, multi-asset cryptocurrency wallet that enables investors to securely manage Ethereum (ETH) and a range of Ethereum-based tokens, including [NFTs](https://www.investopedia.com/non-fungible-tokens-nft-5115211), in one place.  Pros & Cons Pros * User-friendly interface * Supports a wide range of Ethereum-based tokens * Enables users to earn staking rewards * Fiat-to-crypto on-ramp * In-app asset swapping Cons * Not an open-source wallet Company Overview  Exodus Wallet was launched in 2015 to enable crypto investors to securely store and manage their crypto investments. In addition to supporting 360+ digital currencies and tokens, the Nebraska-based company also enables users to manage their Ethereum-based NFTs as well as NFTs on Solana and a handful of other networks.  Exodus users can also earn staking rewards, obtain interest payments by depositing their assets in a [DeFi](https://www.investopedia.com/decentralized-finance-defi-5113835) lending protocol, and trade cryptocurrencies on the wallet’s built-in exchange.  The popular multi-currency wallet stands out for having an exceptionally user-friendly desktop application that doesn’t overcomplicate an already complex space. The beginner-friendly user experience is also replicated in the Exodus mobile wallet, which makes managing your crypto on-the-go easy and accessible.  Exodus is an excellent Ethereum wallet for beginners looking to expand their crypto investments beyond Bitcoin.  Read the Full [Exodus Wallet Review](https://www.investopedia.com/exodus-wallet-review-5221908) ### Best for Convenience : MetaMask --- ![MetaMask]() :fill(white):max_bytes(150000):strip_icc()/Metamask_logo-aca547fe6081482085662b03e2235f98.jpg) MetaMask * **Top coins supported:** Ethereum (ETH), Shiba Inu (SHIB), Uniswap (UNI), Aave (AAVE), Dai (DAI) * **Type of wallet:** Non-custodial * **Price:** Free [Learn More](https://metamask.io/) Why We Chose It MetaMask is one of the most popular Ethereum wallets in the market, with over 30 million users globally utilizing the wallet to manage their Ethereum-based assets and interact with dApps in the Ethereum ecosystem. Pros & Cons Pros * Supports all Ethereum tokens * Supports NFTs * Beginner-friendly interface * Access to decentralized applications Cons * Doesn’t support Bitcoin Company Overview MetaMask was launched in 2016 by New York-based Ethereum development company Consensys to enable Ethereum users to securely store and manage their Ethereum-based tokens.  MetaMask is a non-custodial wallet that supports Ethereum and a wide range of EMV-compatible blockchains, enabling crypto users to explore [web3](https://www.investopedia.com/web-20-web-30-5208698), NFTs, and the DeFi market using one single wallet.  Available as a browser extension for Google Chrome browser and as a mobile wallet for iOS and Android, MetaMask has managed to establish itself as one of the go-to wallets for Ethereum users around the world. In addition to the Chrome extension, it supports use in the Chrome browser, Firefox, Brave, Edge, and Opera browsers. MetaMask enables users to buy Ethereum (ETH) and other Ethereum tokens with fiat currency and allows users to swap tokens directly within the app by taking them into decentralized trading pools.  MetaMask is an excellent wallet for first-time Ethereum users who want to explore the world of NFTs, DeFi, and dApps using a user-friendly wallet.  Read the Full [MetaMask Review](https://www.investopedia.com/metamask-cryptocurrency-wallet-review-5235562) ### Best for a Wide Variety of Assets : Trust Wallet --- ![Trust Wallet]() :fill(white):max_bytes(150000):strip_icc()/Trust_Wallet_logo-aa471e18a7844e38b608a3e8da560fe3.jpg) Trust Wallet * **Top coins supported:** Ethereum (ETH), Bitcoin (BTC), Binance Coin (BNB), Solana (SOL), Litecoin (LTC) * **Type of wallet:** Non-custodial * **Price:** Free [Learn More](https://trustwallet.com/) Why We Chose It Trust Wallet is a popular multi-asset mobile crypto wallet that supports over 10 million digital assets across 70+ blockchains. Additionally, Trust Wallet comes with a mobile dApp browser that enables users to explore the Ethereum dApp ecosystem, including DeFi and NFTs, on the go.  Pros & Cons Pros * Easy-to-use mobile wallet * Supports over 10 million digital currencies and tokens * In-app staking * Access decentralized applications on the go * Fiat on-ramp and token swapping Cons * No desktop wallet Company Overview Trust Wallet was launched in 2017 with the primary purpose of enabling crypto investors to store all their [initial coin offerings (ICO)](https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp)  tokens in one wallet. At the time, the vast majority of ICOs were taking place on Ethereum, resulting in Trust Wallet’s initial focus on the leading smart contract network. A year later, Trust Wallet was acquired by Binance, and later started to add support for further blockchains to enable investors to store and use a wide range of digital currencies and tokens on the go.  Trust Wallet enables users to buy and swap crypto directly within the app and provides an in-app staking feature that currently allows users to earn staking rewards for 23+ cryptocurrencies.  Moreover, users can access Ethereum dApps using the mobile dApp browser and manage their Ethereum and [Binance Coin (BNB)](https://www.investopedia.com/terms/b/binance-coin-bnb.asp) Smart Chain NFT collections. The non-custodial wallet gives users complete control over their funds as the company doesn’t have access to users’ private keys, ensuring a high level of security and privacy for Trust Wallet users.  Trust Wallet is most suitable for crypto users and investors who want to manage all their digital assets in one easily accessible place.  Read the Full [Trust Wallet Review](https://www.investopedia.com/trust-wallet-cryptocurrency-wallet-review-5270400) ### Best for Smart Contracts : Myetherwallet (MEW) --- ![MyEtherWallet logo]() :fill(white):max_bytes(150000):strip_icc()/MEW-logo-467cd866f59a4bb4b833364ceefaa3ca.jpg) MyEtherWallet  * **Top coins supported:** Ethereum (ETH), Tether USD (USDT), Dai (DAI), Shiba Inu (SHIB), Wrapped Bitcoin (WBTC) * **Type of wallet:** Non-custodial * **Price:** Free [Learn More](https://www.myetherwallet.com/) Why We Chose It MyEtherWallet (MEW) is a popular [open-source](https://www.investopedia.com/terms/o/open-source.asp), client-side Ethereum wallet that stands out for its broad functionalities around the creation, development, and use of [smart contracts](https://www.investopedia.com/terms/s/smart-contracts.asp).   Pros & Cons Pros * Extensive smart contract functionality * Supports all Ethereum tokens * Ethereum NFT support * In-app asset swapping Cons * Somewhat advanced for beginners Company Overview MyEtherWallet was launched in 2015 to provide Ethereum users with an open-source, client-side interface that enables them to interact with the Ethereum ecosystem.  In the early years of Ethereum, Los Angeles-based MyEtherWallet managed to become the go-to Ethereum wallet, especially for ICO investors looking to store multiple [ERC-20 tokens](https://www.investopedia.com/news/what-erc20-and-what-does-it-mean-ethereum/) in one wallet.  Today, MEW allows users to deploy smart contracts, trade Ethereum-based assets, stake Ethereum (ETH), manage their NFT collection, and store all their Ethereum tokens in one place.  Additionally, MEW also supports a selection of EVM-compatible blockchains. An EVM-compatible blockchain allows developers to create smart contracts that are compatible with the Ethereum Virtual Machine (EVM) to facilitate blockchain interoperability by enabling dApps to be easily deployed on other blockchains as well. Moreover, crypto assets stored on EVM-compatible blockchains can typically be transfers to other EVM chains via cross-chain bridges. Leading examples of EVM-compatible chains include BNB Smart Chain and Polygon.  MyEtherWallet is ideal for more advanced users who are fully immersed in the Ethereum ecosystem.  Read the Full [MyEtherWallet Review](https://www.investopedia.com/myetherwallet-cryptocurrency-wallet-review-5235425) ## Final Verdict Choosing the best Ethereum wallet for you depends on your needs as an Ethereum user or investor. If you want to actively interact with Ethereum-powered decentralized applications online, you probably want to go with the MetaMask or Guarda browser extensions.  Conversely, if you prefer to access dApps, DeFi applications, and NFT marketplaces on the go, Trust Wallet is probably the better option.  On the other hand, if you are actively managing your crypto portfolio and want to invest in the top Ethereum-based tokens, Exodus Wallet, with its built-in exchange, could be the right option for you.  Finally, if you are looking for a more advanced wallet that enables you to deploy Ethereum smart contracts, MyEtherWallet is your best choice.  ## Compare the Best Ethereum Wallets | **Asset Type** | **Number of Currencies Supported** | **NFT Support** | **Incorporated Exchange** | **dApp Support** | **Compatible** **Hardware** | | --- | --- | --- | --- | --- | --- | | [Guarda Wallet](https://guarda.com/download/?utm_source=investopedia&utm_medium=button&utm_campaign=invstpd-affiliate&utm_id=05088) Best for Security | 400,000+ | Yes | Yes | Yes | Yes | | [Exodus Wallet](https://www.exodus.com/) Best for Beginners | 360+ | Yes | Yes | Yes | Yes | | [MetaMask](https://metamask.io/) Best for Convenience | ETH and all ETH based cryptocurrencies and tokens | Yes | Yes | Yes | Yes | | [Trust Wallet](https://trustwallet.com/) Best for Wide Variety | 10,000,000+ | Yes | Yes | Yes | No | | [Myetherwallet](https://www.myetherwallet.com/) Best for  Smart Contracts | ETH and all ERC-20 tokens plus additional cryptocurrencies and blockchains via an extension | Yes | Yes | Yes | Yes | ## Want to learn more about digital currencies? You're not alone. Most adults have a beginner's understanding of cryptocurrency, but plan on using such assets as a key source of retirement funds, according to the [2022 Investopedia Financial Literacy Survey.](https://www.investopedia.com/financial-literacy-survey-5223919) ## What Makes a Great Ethereum Wallet? An excellent Ethereum wallet should provide a high level of security, be user-friendly, and allow users to interact with the entire Ethereum ecosystem.  To be more specific, an Ethereum wallet should be non-custodial, enabling you to hold your own private keys to give you complete control over your funds. Moreover, despite the technical knowledge that is required to buy, store, and use cryptocurrency, a wallet should make the process as simple and beginner-friendly as possible.  Additionally, an Ethereum wallet should allow you to store all types of Ethereum-based tokens, including ERC-20 tokens, like Ether (ETH), and NFTs. And finally, it should provide you with the ability to interact with decentralized applications (dApps), such as DeFi protocols and play-to-earn (P2E) games, within the Ethereum ecosystem.  ## Frequently Asked Questions ## What Is Ethereum? Ethereum is a distributed peer-to-peer computing platform that enables developers to build smart contract-powered decentralized products and services.  Founded in 2013 and launched during an [initial coin offering (ICO)](https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp) in 2015, Ethereum has established itself as the second-largest crypto network after Bitcoin, and the leading smart contract-enabled layer-1 blockchain. ## How Is Ethereum Mined? In September 2022, Ethereum changed its consensus protocol from [proof-of-work (PoW)](https://www.investopedia.com/terms/p/proof-work.asp) to [proof-of-stake (PoS)](https://www.investopedia.com/terms/p/proof-stake-pos.asp), alleviating the ability for miners to take part in the Ethereum network.  Instead, validators now stake a share of their ETH tokens by depositing them into a validator program to help secure the network and validate transactions. ## What Is Ethereum Staking? Ethereum users have the ability to stake ETH tokens to take part in the protocol’s consensus mechanism in exchange for staking rewards paid in ETH.  To start staking Ether, you will need a minimum of 32 ETH. However, there are also liquidity staking providers that enable you to take part in Ethereum staking with less than the required minimum to become a full validator. ## How Can Someone Buy Ethereum? You can buy Ether (ETH) on a wide range of [crypto exchanges](https://www.investopedia.com/best-crypto-exchanges-5071855) using different payment methods, including wire transfer, debit card, and credit card.  ## Methodology One of the most important things to consider before you transact in and store Ethereum is that you have a suitable Ethereum wallet in place. To help determine the wallet that works best for you, we conducted a comprehensive review process of the top Ethereum software wallets. With your digital holdings at stake, the most crucial consideration is the reputation and security of the wallet you choose. Our top Ethereum wallets were selected after we reviewed 24 companies based on their security, reputation, features, fees, and customer service. :max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg) :max_bytes(150000):strip_icc()/Primary-Image-Block-Chain-f697f1bb9a474b368d77aa5468ba0514.jpg) PM Images / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Guarda. "[About Us](https://guarda.com/about/)." 2. Guarda. "[More Than 400K+ Assets Supported](https://guarda.com/coins/)." 3. Exodus. "[Exodus Empowers People to Control Their Wealth](https://www.exodus.com/about/)." 4. Exodus. "[Cryptocurrency Coins Status & Assets](https://www.exodus.com/status/#assets)." 5. MetaMask. "[A Crypto Wallet & Gateway to Blockchain Apps](https://metamask.io/)." 6. Crunchbase. "[MetaMask](https://www.crunchbase.com/organization/metamask)." 7. Trust Wallet. "[Trust Wallet’s Founder Viktor Radchenko on His Motivation and Philosophy](https://trustwallet.com/blog/trustwallet-founder-viktor-radchenko-motivation)." 8. Trust Wallet. "[What Is Staking Coins?](https://trustwallet.com/staking)" 9. Crunchbase. "[MyEtherWallet](https://www.crunchbase.com/organization/myetherwallet)." 10. Plus500. "[The History of Ethereum](https://www.plus500.com/en-PL/Instruments/ETHUSD/The-History-of-Ethereum~4)." 11. TechCrunch. "[Ethereum Switches to Proof-of-Stake Consensus After Completing the Merge](https://techcrunch.com/2022/09/15/ethereum-switches-to-proof-of-stake-consensus-after-completing-the-merge/)." 12. Ethereum. "[Earn Rewards While Securing Ethereum](https://ethereum.org/en/staking/)." 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Ethereum smart contracts support a variety of distributed apps across the blockchain ecosystem. [more](https://www.investopedia.com/terms/e/ethereum.asp) [What Is OpenSea?](https://www.investopedia.com/what-is-opensea-6362477) OpenSea is the largest non-fungible token (NFT) marketplace, offering the ability to buy, sell, create, and trade. It has more than 2.4 million active users. [more](https://www.investopedia.com/what-is-opensea-6362477) [Decentralized Applications (dApps): Definition, Uses, Pros and Cons](https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp) Decentralized applications, or dApps, are software programs that run on a blockchain or P2P network of computers instead of a single computer. [more](https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp) [Cronos (CRO): Overview and Examples in Cryptocurrency](https://www.investopedia.com/terms/m/monaco-mco-cryptocurrency.asp) Cronos is the blockchain for the Crypto.com exchange's CRO token and decentralized apps (dApps), particularly for decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse. [more](https://www.investopedia.com/terms/m/monaco-mco-cryptocurrency.asp) [Cardano (ADA): What It Is, How It Differs From Bitcoin](https://www.investopedia.com/cardano-definition-4683961) Cardano is a blockchain and smart contract platform whose native token is called Ada. Find out how Cardano works and how to earn rewards. [more](https://www.investopedia.com/cardano-definition-4683961) [Gas (Ethereum): How Gas Fees Work on the Ethereum Blockchain](https://www.investopedia.com/terms/g/gas-ethereum.asp) Gas is the payment required to conduct a transaction or execute a contract on the Ethereum blockchain platform. [more](https://www.investopedia.com/terms/g/gas-ethereum.asp)

Ethereum has emerged as one of the most vibrant blockchain ecosystems in the digital asset market. The smart contract-enabled layer-1 blockchain enables users to interact with a wide range of decentralized applications (dApps), ranging from decentralized finance (DeFi) protocols and play-to-earn (P2E) games to NFT (non-fungible token) marketplaces and more.   To take part in the Ethereum ecosystem and securely store, send, and receive Ether (ETH) and other Ethereum-based crypto assets, you need an Ethereum wallet. Additionally, most of the best Ethereum wallets in the market also allow you to access Ethereum decentralized applications by connecting your wallet to the dApps’ smart contracts.   Best Ethereum Wallets of 2024 Best for Security: Guarda Wallet Best for Beginners: Exodus Best for Convenience: MetaMask Best for a Wide Variety of Assets: Trust Wallet Best for Smart Contracts: Myetherwallet (MEW) While all leading cryptocurrency wallets provide a high level of security for safekeeping your crypto assets, improper security practices on behalf of the user can lead to a complete loss of funds. Crypto enthusiasts should take care to store the bulk of their assets meant for trading on exchanges using cold storage methods, and never share your wallet’s login details, recovery phrase, or private keys with anyone. Best Ethereum Wallets Expand Best Ethereum Wallets Our Top Picks Guarda Wallet Exodus MetaMask Trust Wallet Myetherwallet (MEW) See More (2) Final Verdict Compare the Best Ethereum Wallets Want to learn more about digital currencies? You're not alone. What Makes a Great Ethereum Wallet? Frequently Asked Questions Methodology Best for Security : Guarda Wallet Guarda Wallet Top coins supported: Ethereum (ETH), Bitcoin (BTC), Tether USD (USDT), Cardano (ADA), Solana (SOL)Type of wallet: Non-custodialPrice: Free Learn More Why We Chose It Guarda Wallet has established itself as a highly secure, multi-asset crypto wallet that enables users to securely store, send, and receive Ethereum (ETH) and Ethereum-based tokens.  Pros & Cons Pros First-rate security Supports 400,000+ assets across 50+ blockchain networks Enables users to earn, borrow, and swap crypto Fiat on-ramp High-quality customer service Cons High in-app crypto purchase fees Company Overview Guarda Wallet was launched in 2017 by blockchain solutions company ​​Guardarian OÜ. With offices in Tallinn, Estonia and Lisbon, Portugal, the Guarda Wallet team has built one of the leading cryptocurrency software wallets on the market by providing a secure, feature-rich wallet that both beginners and advanced crypto users can utilize.  Guarda Wallet is a multi-platform wallet that enables users to access their coins and tokens on mobile (iOS and Android), on a web application, via a desktop application, and using a Chrome browser extension.  Additionally, Guarda Wallet is a non-custodial wallet, which means users have complete control over their funds, and the company cannot access user funds. Moreover, there have been no reports of security breaches at Guarda Wallet, thanks to the robust security features that have been put into place to safeguard user funds.  In addition to Ethereum (ETH) and Ethereum-based tokens, Guarda Wallet users can store, send, and receive 400,000+ crypto assets across 50+ blockchains. Using the Guarda Chrome extension, users can also interact with Ethereum-based dApps.  Guardarian OÜ is licensed in Estonia, enabling it to provide regulated virtual currency services, such as fiat-to-crypto purchases and prepaid card-related services. Guarda Wallet is an excellent crypto wallet for investors looking to store a wide range of assets in a highly secure software wallet.  Read the Full Guarda Wallet Review Best for Beginners : Exodus Exodus Top coins supported: Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), Tether USD (USDT), Dogecoin (DOGE)Type of wallet: Non-custodialPrice: Free Learn More Why We Chose It Exodus Wallet is a beginner-friendly, multi-asset cryptocurrency wallet that enables investors to securely manage Ethereum (ETH) and a range of Ethereum-based tokens, including NFTs, in one place.  Pros & Cons Pros User-friendly interface Supports a wide range of Ethereum-based tokens Enables users to earn staking rewards Fiat-to-crypto on-ramp In-app asset swapping Cons Not an open-source wallet Company Overview  Exodus Wallet was launched in 2015 to enable crypto investors to securely store and manage their crypto investments. In addition to supporting 360+ digital currencies and tokens, the Nebraska-based company also enables users to manage their Ethereum-based NFTs as well as NFTs on Solana and a handful of other networks.  Exodus users can also earn staking rewards, obtain interest payments by depositing their assets in a DeFi lending protocol, and trade cryptocurrencies on the wallet’s built-in exchange.  The popular multi-currency wallet stands out for having an exceptionally user-friendly desktop application that doesn’t overcomplicate an already complex space. The beginner-friendly user experience is also replicated in the Exodus mobile wallet, which makes managing your crypto on-the-go easy and accessible.  Exodus is an excellent Ethereum wallet for beginners looking to expand their crypto investments beyond Bitcoin.  Read the Full Exodus Wallet Review Best for Convenience : MetaMask MetaMask Top coins supported: Ethereum (ETH), Shiba Inu (SHIB), Uniswap (UNI), Aave (AAVE), Dai (DAI)Type of wallet: Non-custodialPrice: Free Learn More Why We Chose It MetaMask is one of the most popular Ethereum wallets in the market, with over 30 million users globally utilizing the wallet to manage their Ethereum-based assets and interact with dApps in the Ethereum ecosystem. Pros & Cons Pros Supports all Ethereum tokens Supports NFTs Beginner-friendly interface Access to decentralized applications Cons Doesn’t support Bitcoin Company Overview MetaMask was launched in 2016 by New York-based Ethereum development company Consensys to enable Ethereum users to securely store and manage their Ethereum-based tokens.  MetaMask is a non-custodial wallet that supports Ethereum and a wide range of EMV-compatible blockchains, enabling crypto users to explore web3, NFTs, and the DeFi market using one single wallet.  Available as a browser extension for Google Chrome browser and as a mobile wallet for iOS and Android, MetaMask has managed to establish itself as one of the go-to wallets for Ethereum users around the world. In addition to the Chrome extension, it supports use in the Chrome browser, Firefox, Brave, Edge, and Opera browsers. MetaMask enables users to buy Ethereum (ETH) and other Ethereum tokens with fiat currency and allows users to swap tokens directly within the app by taking them into decentralized trading pools.  MetaMask is an excellent wallet for first-time Ethereum users who want to explore the world of NFTs, DeFi, and dApps using a user-friendly wallet.  Read the Full MetaMask Review Best for a Wide Variety of Assets : Trust Wallet Trust Wallet Top coins supported: Ethereum (ETH), Bitcoin (BTC), Binance Coin (BNB), Solana (SOL), Litecoin (LTC)Type of wallet: Non-custodialPrice: Free Learn More Why We Chose It Trust Wallet is a popular multi-asset mobile crypto wallet that supports over 10 million digital assets across 70+ blockchains. Additionally, Trust Wallet comes with a mobile dApp browser that enables users to explore the Ethereum dApp ecosystem, including DeFi and NFTs, on the go.  Pros & Cons Pros Easy-to-use mobile wallet Supports over 10 million digital currencies and tokens In-app staking Access decentralized applications on the go Fiat on-ramp and token swapping Cons No desktop wallet Company Overview Trust Wallet was launched in 2017 with the primary purpose of enabling crypto investors to store all their initial coin offerings (ICO)  tokens in one wallet. At the time, the vast majority of ICOs were taking place on Ethereum, resulting in Trust Wallet’s initial focus on the leading smart contract network. A year later, Trust Wallet was acquired by Binance, and later started to add support for further blockchains to enable investors to store and use a wide range of digital currencies and tokens on the go.  Trust Wallet enables users to buy and swap crypto directly within the app and provides an in-app staking feature that currently allows users to earn staking rewards for 23+ cryptocurrencies.  Moreover, users can access Ethereum dApps using the mobile dApp browser and manage their Ethereum and Binance Coin (BNB) Smart Chain NFT collections. The non-custodial wallet gives users complete control over their funds as the company doesn’t have access to users’ private keys, ensuring a high level of security and privacy for Trust Wallet users.  Trust Wallet is most suitable for crypto users and investors who want to manage all their digital assets in one easily accessible place.  Read the Full Trust Wallet Review Best for Smart Contracts : Myetherwallet (MEW) MyEtherWallet  Top coins supported: Ethereum (ETH), Tether USD (USDT), Dai (DAI), Shiba Inu (SHIB), Wrapped Bitcoin (WBTC)Type of wallet: Non-custodialPrice: Free Learn More Why We Chose It MyEtherWallet (MEW) is a popular open-source, client-side Ethereum wallet that stands out for its broad functionalities around the creation, development, and use of smart contracts.   Pros & Cons Pros Extensive smart contract functionality Supports all Ethereum tokens Ethereum NFT support In-app asset swapping Cons Somewhat advanced for beginners Company Overview MyEtherWallet was launched in 2015 to provide Ethereum users with an open-source, client-side interface that enables them to interact with the Ethereum ecosystem.  In the early years of Ethereum, Los Angeles-based MyEtherWallet managed to become the go-to Ethereum wallet, especially for ICO investors looking to store multiple ERC-20 tokens in one wallet.  Today, MEW allows users to deploy smart contracts, trade Ethereum-based assets, stake Ethereum (ETH), manage their NFT collection, and store all their Ethereum tokens in one place.  Additionally, MEW also supports a selection of EVM-compatible blockchains. An EVM-compatible blockchain allows developers to create smart contracts that are compatible with the Ethereum Virtual Machine (EVM) to facilitate blockchain interoperability by enabling dApps to be easily deployed on other blockchains as well. Moreover, crypto assets stored on EVM-compatible blockchains can typically be transfers to other EVM chains via cross-chain bridges. Leading examples of EVM-compatible chains include BNB Smart Chain and Polygon.  MyEtherWallet is ideal for more advanced users who are fully immersed in the Ethereum ecosystem.  Read the Full MyEtherWallet Review Final Verdict Choosing the best Ethereum wallet for you depends on your needs as an Ethereum user or investor. If you want to actively interact with Ethereum-powered decentralized applications online, you probably want to go with the MetaMask or Guarda browser extensions.  Conversely, if you prefer to access dApps, DeFi applications, and NFT marketplaces on the go, Trust Wallet is probably the better option.  On the other hand, if you are actively managing your crypto portfolio and want to invest in the top Ethereum-based tokens, Exodus Wallet, with its built-in exchange, could be the right option for you.  Finally, if you are looking for a more advanced wallet that enables you to deploy Ethereum smart contracts, MyEtherWallet is your best choice.  Compare the Best Ethereum Wallets Asset Type Number of Currencies Supported  NFT Support  Incorporated Exchange  dApp Support  Compatible Hardware  Guarda Wallet Best for Security 400,000+ Yes Yes Yes Yes Exodus Wallet Best for Beginners  360+  Yes  Yes  Yes  Yes  MetaMask Best for Convenience  ETH and all ETH based cryptocurrencies and tokens Yes  Yes  Yes  Yes  Trust Wallet Best for Wide Variety  10,000,000+  Yes  Yes  Yes  No Myetherwallet Best for  Smart Contracts  ETH and all ERC-20 tokens plus additional cryptocurrencies and blockchains via an extension Yes  Yes  Yes  Yes  Want to learn more about digital currencies? You're not alone. Most adults have a beginner's understanding of cryptocurrency, but plan on using such assets as a key source of retirement funds, according to the 2022 Investopedia Financial Literacy Survey. What Makes a Great Ethereum Wallet? An excellent Ethereum wallet should provide a high level of security, be user-friendly, and allow users to interact with the entire Ethereum ecosystem.  To be more specific, an Ethereum wallet should be non-custodial, enabling you to hold your own private keys to give you complete control over your funds. Moreover, despite the technical knowledge that is required to buy, store, and use cryptocurrency, a wallet should make the process as simple and beginner-friendly as possible.  Additionally, an Ethereum wallet should allow you to store all types of Ethereum-based tokens, including ERC-20 tokens, like Ether (ETH), and NFTs. And finally, it should provide you with the ability to interact with decentralized applications (dApps), such as DeFi protocols and play-to-earn (P2E) games, within the Ethereum ecosystem.  Frequently Asked Questions What Is Ethereum? Ethereum is a distributed peer-to-peer computing platform that enables developers to build smart contract-powered decentralized products and services. Founded in 2013 and launched during an initial coin offering (ICO) in 2015, Ethereum has established itself as the second-largest crypto network after Bitcoin, and the leading smart contract-enabled layer-1 blockchain. How Is Ethereum Mined? In September 2022, Ethereum changed its consensus protocol from proof-of-work (PoW) to proof-of-stake (PoS), alleviating the ability for miners to take part in the Ethereum network. Instead, validators now stake a share of their ETH tokens by depositing them into a validator program to help secure the network and validate transactions. What Is Ethereum Staking? Ethereum users have the ability to stake ETH tokens to take part in the protocol’s consensus mechanism in exchange for staking rewards paid in ETH. To start staking Ether, you will need a minimum of 32 ETH. However, there are also liquidity staking providers that enable you to take part in Ethereum staking with less than the required minimum to become a full validator. How Can Someone Buy Ethereum? You can buy Ether (ETH) on a wide range of crypto exchanges using different payment methods, including wire transfer, debit card, and credit card.  Methodology One of the most important things to consider before you transact in and store Ethereum is that you have a suitable Ethereum wallet in place. To help determine the wallet that works best for you, we conducted a comprehensive review process of the top Ethereum software wallets. With your digital holdings at stake, the most crucial consideration is the reputation and security of the wallet you choose. Our top Ethereum wallets were selected after we reviewed 24 companies based on their security, reputation, features, fees, and customer service. PM Images / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Guarda. "About Us." Guarda. "More Than 400K+ Assets Supported." Exodus. "Exodus Empowers People to Control Their Wealth." Exodus. "Cryptocurrency Coins Status & Assets." MetaMask. "A Crypto Wallet & Gateway to Blockchain Apps." Crunchbase. "MetaMask." Trust Wallet. "Trust Wallet’s Founder Viktor Radchenko on His Motivation and Philosophy." Trust Wallet. "What Is Staking Coins?" Crunchbase. "MyEtherWallet." Plus500. "The History of Ethereum." TechCrunch. "Ethereum Switches to Proof-of-Stake Consensus After Completing the Merge." Ethereum. "Earn Rewards While Securing Ethereum." Related Articles Best Crypto Software Wallets for May 2024 Best Solana Wallets MetaMask Cryptocurrency Wallet Review The Best Bitcoin Wallets for May 2024 Trust Cryptocurrency Wallet Review Exodus Cryptocurrency Wallet Review Related Terms What Is Ethereum and How Does It Work? Ethereum is a blockchain-based software platform with a native token, ether. Ethereum smart contracts support a variety of distributed apps across the blockchain ecosystem. more What Is OpenSea? OpenSea is the largest non-fungible token (NFT) marketplace, offering the ability to buy, sell, create, and trade. It has more than 2.4 million active users. more Decentralized Applications (dApps): Definition, Uses, Pros and Cons Decentralized applications, or dApps, are software programs that run on a blockchain or P2P network of computers instead of a single computer. more Cronos (CRO): Overview and Examples in Cryptocurrency Cronos is the blockchain for the Crypto.com exchange's CRO token and decentralized apps (dApps), particularly for decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse. more Cardano (ADA): What It Is, How It Differs From Bitcoin Cardano is a blockchain and smart contract platform whose native token is called Ada. Find out how Cardano works and how to earn rewards. more Gas (Ethereum): How Gas Fees Work on the Ethereum Blockchain Gas is the payment required to conduct a transaction or execute a contract on the Ethereum blockchain platform. more

https://www.investopedia.com/ask/answers/04/052704.asp

Averaging Down: What It Is and When to Use It

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Deciding whether or not to purchase additional shares of a stock that is falling in price is an interesting question, and the answer has two parts. On the one hand, you can add more to a good position when prices are relatively cheaper. On the other, you may be compounding a losing position. So, should you <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buy-the-dips.asp">buy the dip</a>? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> First, let's address the concept underlying the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/averagedown.asp">average down</a> strategy, and then discuss the validity of this strategy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takweaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Averaging down is a strategy to buy more of an asset as its price falls, resulting in a lower overall average purchase price.</li><li>It is sometimes known as buying the dip.</li><li>Adding to a position when the price drops, or buying the dips, can be profitable during secular bull markets.</li><li>However, it can also compound losses during downtrends.</li><li>Adding more shares increases risk exposure and inexperienced investors may not be able to tell the difference between a value and a warning sign when share prices drop.</li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-what-is-averaging-down"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is Averaging Down? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Buying more shares at a lower price than what you previously paid is known as averaging down, or lowering the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/averageprice.asp">average price</a> at which you purchased a company's shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> For example, say you bought 100 shares of the TSJ Sports Conglomerate at $20 per share. If the stock fell to $10, and you bought another 100 shares, your average price per share would be $15. You would be decreasing the price at which you originally owned the stock by $5. This is sometimes called "buying the dip." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> However, even though your average <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/purchaseprice.asp">purchase price</a> would've gone down, you would've had an equal loss on your original stock—a $10 decrease on 100 shares renders a total loss of $1,000. Purchasing more shares to average down the price wouldn't change that fact, so do not misinterpret averaging down as a means to magically decrease your loss. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Averaging down is considered to be a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valueinvesting.asp">value-oriented</a> investing strategy.</p></div></div></div> <span class="heading-toc" id="toc-when-to-apply-averaging-down"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> When to Apply Averaging Down </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> There are no hard-and-fast rules. You must re-evaluate the company you own and determine the reasons for the fall in price. If you feel the stock has fallen because the market has overreacted to something, then buying more shares may be a good thing. Likewise, if you feel there has been no fundamental change to the company, then a lower <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/061615/how-companys-share-price-determined.asp">share price</a> may be a great opportunity to scoop up some more stock at a bargain. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The problem is that the average investor has very little ability to distinguish between a temporary drop in price and a warning signal that prices are about to go much lower. While there may be unrecognized intrinsic value, buying additional shares simply to lower an average cost of ownership may not be a good reason to increase the percentage of the investor's portfolio exposed to the price action of that one stock. Proponents of the technique view averaging down as a cost-effective approach to wealth accumulation; opponents view it as a recipe for disaster. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The strategy is often favored by investors who have a long-term investment horizon and a value-driven approach to investing. Investors that follow carefully constructed models they trust might find that adding exposure to a stock that is undervalued, using careful <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskmanagement.asp">risk-management</a> techniques, can represent a worthwhile opportunity over time. Many professional investors who follow value-oriented strategies, including Warren Buffett, have successfully used averaging down as part of a larger strategy carefully executed over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Averaging down is similar to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dollarcostaveraging.asp">dollar-cost averaging</a> (DCA), an investment strategy where one divides up the total amount to be invested across periodic purchases. With averaging down, however, new purchases are only made on dips.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_25-0"><span class="heading-toc" id="toc-when-is-averaging-down-a-good-idea"></span> <h2 class="mntl-sc-block-questionandanswer__question">When Is Averaging Down a Good Idea?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Averaging down works best when you are confident that an investment is a long-run winner. As such, buying the dips will have you accumulating your position at progressively better prices, making your ultimate profit potential greater.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_27-0"><span class="heading-toc" id="toc-can-you-lose-money-averaging-down"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Lose Money Averaging Down?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. If you keep buying more shares a stock sinks without bouncing back, you will end up holding a larger position at a loss.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-what-is-averaging-up"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Averaging Up?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Opposite from averaging down, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/averageup.asp">averaging up</a> involves buying more shares as a stock rises. This increases the average price paid for a position, but if you are buying into an up-trend, it can amplify your returns. Like averaging down, an average-up strategy could result in larger losses if the stock falls sharply from a peak.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> It's important to realize that it is not advisable to simply buy shares of any company whose shares have just declined. Even though you are averaging down, you may still be buying into an ailing company that will continue its downslide. Sometimes the best thing to do when your company's stock has fallen is to dump the shares you already have and cut your losses. </p></div>

Deciding whether or not to purchase additional shares of a stock that is falling in price is an interesting question, and the answer has two parts. On the one hand, you can add more to a good position when prices are relatively cheaper. On the other, you may be compounding a losing position. So, should you [buy the dip](https://www.investopedia.com/terms/b/buy-the-dips.asp)? First, let's address the concept underlying the [average down](https://www.investopedia.com/terms/a/averagedown.asp) strategy, and then discuss the validity of this strategy. ### Key Takweaways * Averaging down is a strategy to buy more of an asset as its price falls, resulting in a lower overall average purchase price. * It is sometimes known as buying the dip. * Adding to a position when the price drops, or buying the dips, can be profitable during secular bull markets. * However, it can also compound losses during downtrends. * Adding more shares increases risk exposure and inexperienced investors may not be able to tell the difference between a value and a warning sign when share prices drop. ## What Is Averaging Down? Buying more shares at a lower price than what you previously paid is known as averaging down, or lowering the [average price](https://www.investopedia.com/terms/a/averageprice.asp) at which you purchased a company's shares. For example, say you bought 100 shares of the TSJ Sports Conglomerate at $20 per share. If the stock fell to $10, and you bought another 100 shares, your average price per share would be $15. You would be decreasing the price at which you originally owned the stock by $5. This is sometimes called "buying the dip." However, even though your average [purchase price](https://www.investopedia.com/terms/p/purchaseprice.asp) would've gone down, you would've had an equal loss on your original stock—a $10 decrease on 100 shares renders a total loss of $1,000. Purchasing more shares to average down the price wouldn't change that fact, so do not misinterpret averaging down as a means to magically decrease your loss. ### Averaging down is considered to be a [value-oriented](https://www.investopedia.com/terms/v/valueinvesting.asp) investing strategy. ## When to Apply Averaging Down There are no hard-and-fast rules. You must re-evaluate the company you own and determine the reasons for the fall in price. If you feel the stock has fallen because the market has overreacted to something, then buying more shares may be a good thing. Likewise, if you feel there has been no fundamental change to the company, then a lower [share price](https://www.investopedia.com/ask/answers/061615/how-companys-share-price-determined.asp) may be a great opportunity to scoop up some more stock at a bargain. The problem is that the average investor has very little ability to distinguish between a temporary drop in price and a warning signal that prices are about to go much lower. While there may be unrecognized intrinsic value, buying additional shares simply to lower an average cost of ownership may not be a good reason to increase the percentage of the investor's portfolio exposed to the price action of that one stock. Proponents of the technique view averaging down as a cost-effective approach to wealth accumulation; opponents view it as a recipe for disaster. The strategy is often favored by investors who have a long-term investment horizon and a value-driven approach to investing. Investors that follow carefully constructed models they trust might find that adding exposure to a stock that is undervalued, using careful [risk-management](https://www.investopedia.com/terms/r/riskmanagement.asp) techniques, can represent a worthwhile opportunity over time. Many professional investors who follow value-oriented strategies, including Warren Buffett, have successfully used averaging down as part of a larger strategy carefully executed over time. ### Averaging down is similar to [dollar-cost averaging](https://www.investopedia.com/terms/d/dollarcostaveraging.asp) (DCA), an investment strategy where one divides up the total amount to be invested across periodic purchases. With averaging down, however, new purchases are only made on dips. ## When Is Averaging Down a Good Idea? Averaging down works best when you are confident that an investment is a long-run winner. As such, buying the dips will have you accumulating your position at progressively better prices, making your ultimate profit potential greater. ## Can You Lose Money Averaging Down? Yes. If you keep buying more shares a stock sinks without bouncing back, you will end up holding a larger position at a loss. ## What Is Averaging Up? Opposite from averaging down, [averaging up](https://www.investopedia.com/terms/a/averageup.asp) involves buying more shares as a stock rises. This increases the average price paid for a position, but if you are buying into an up-trend, it can amplify your returns. Like averaging down, an average-up strategy could result in larger losses if the stock falls sharply from a peak. ## The Bottom Line It's important to realize that it is not advisable to simply buy shares of any company whose shares have just declined. Even though you are averaging down, you may still be buying into an ailing company that will continue its downslide. Sometimes the best thing to do when your company's stock has fallen is to dump the shares you already have and cut your losses.

Deciding whether or not to purchase additional shares of a stock that is falling in price is an interesting question, and the answer has two parts. On the one hand, you can add more to a good position when prices are relatively cheaper. On the other, you may be compounding a losing position. So, should you buy the dip? First, let's address the concept underlying the average down strategy, and then discuss the validity of this strategy. Key Takweaways Averaging down is a strategy to buy more of an asset as its price falls, resulting in a lower overall average purchase price.It is sometimes known as buying the dip.Adding to a position when the price drops, or buying the dips, can be profitable during secular bull markets.However, it can also compound losses during downtrends.Adding more shares increases risk exposure and inexperienced investors may not be able to tell the difference between a value and a warning sign when share prices drop. What Is Averaging Down? Buying more shares at a lower price than what you previously paid is known as averaging down, or lowering the average price at which you purchased a company's shares. For example, say you bought 100 shares of the TSJ Sports Conglomerate at $20 per share. If the stock fell to $10, and you bought another 100 shares, your average price per share would be $15. You would be decreasing the price at which you originally owned the stock by $5. This is sometimes called "buying the dip." However, even though your average purchase price would've gone down, you would've had an equal loss on your original stock—a $10 decrease on 100 shares renders a total loss of $1,000. Purchasing more shares to average down the price wouldn't change that fact, so do not misinterpret averaging down as a means to magically decrease your loss. Averaging down is considered to be a value-oriented investing strategy. When to Apply Averaging Down There are no hard-and-fast rules. You must re-evaluate the company you own and determine the reasons for the fall in price. If you feel the stock has fallen because the market has overreacted to something, then buying more shares may be a good thing. Likewise, if you feel there has been no fundamental change to the company, then a lower share price may be a great opportunity to scoop up some more stock at a bargain. The problem is that the average investor has very little ability to distinguish between a temporary drop in price and a warning signal that prices are about to go much lower. While there may be unrecognized intrinsic value, buying additional shares simply to lower an average cost of ownership may not be a good reason to increase the percentage of the investor's portfolio exposed to the price action of that one stock. Proponents of the technique view averaging down as a cost-effective approach to wealth accumulation; opponents view it as a recipe for disaster. The strategy is often favored by investors who have a long-term investment horizon and a value-driven approach to investing. Investors that follow carefully constructed models they trust might find that adding exposure to a stock that is undervalued, using careful risk-management techniques, can represent a worthwhile opportunity over time. Many professional investors who follow value-oriented strategies, including Warren Buffett, have successfully used averaging down as part of a larger strategy carefully executed over time. Averaging down is similar to dollar-cost averaging (DCA), an investment strategy where one divides up the total amount to be invested across periodic purchases. With averaging down, however, new purchases are only made on dips. When Is Averaging Down a Good Idea? Averaging down works best when you are confident that an investment is a long-run winner. As such, buying the dips will have you accumulating your position at progressively better prices, making your ultimate profit potential greater. Can You Lose Money Averaging Down? Yes. If you keep buying more shares a stock sinks without bouncing back, you will end up holding a larger position at a loss. What Is Averaging Up? Opposite from averaging down, averaging up involves buying more shares as a stock rises. This increases the average price paid for a position, but if you are buying into an up-trend, it can amplify your returns. Like averaging down, an average-up strategy could result in larger losses if the stock falls sharply from a peak. The Bottom Line It's important to realize that it is not advisable to simply buy shares of any company whose shares have just declined. Even though you are averaging down, you may still be buying into an ailing company that will continue its downslide. Sometimes the best thing to do when your company's stock has fallen is to dump the shares you already have and cut your losses.

https://www.investopedia.com/articles/active-trading/013015/worst-mistakes-beginner-traders-make.asp

Common Investor and Trader Blunders

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Making mistakes is part of the learning process when it comes to trading or investing. Investors are typically involved in longer-term holdings and will trade in stocks, exchange-traded funds, and other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">securities</a>. Traders generally buy and sell futures and options, hold those positions for shorter periods, and are involved in a greater number of transactions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> While traders and investors use two different types of trading transactions, they often are guilty of making the same types of mistakes. Some mistakes are more harmful to the investor, and others cause more harm to the trader. Both would do well to remember these common blunders and try to avoid them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <span class="heading-toc" id="toc-no-trading-plan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> No Trading Plan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Experienced traders get into a trade with a well-defined plan. They know their exact entry and exit points, the amount of capital to invest in the trade and the maximum loss they are willing to take. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Beginner traders may not have a trading plan in place before they commence trading. Even if they have a plan, they may be more prone to stray from the defined plan than would seasoned traders. Novice traders may reverse course altogether. For example, going <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/short.asp">short</a> after initially buying securities because the share price is declining—only to end up getting <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/whipsaw.asp">whipsawed</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <span class="heading-toc" id="toc-chasing-after-performance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Chasing After Performance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Many investors or traders will select asset classes, strategies, managers, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fund.asp">funds</a> based on a current strong performance. The feeling that "I'm missing out on great <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a>" has probably led to more bad investment decisions than any other single factor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> If a particular <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp">asset class</a>, strategy, or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/surprising-benefits-when-brokers-grade-their-customers/">dumb money</a> is pouring in. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-not-regaining-balance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Not Regaining Balance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rebalancing.asp">Rebalancing</a> is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/peak.asp">market peaks</a> and underweighted at market lows—a formula for poor performance. Rebalance religiously and reap the long-term rewards. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-ignoring-risk-aversion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Ignoring Risk Aversion </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Do not lose sight of your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a> or your capacity to take on risk. Some investors can’t stomach volatility and the ups and downs associated with the stock market or more speculative trades. Other investors may need secure, regular interest income. These low-risk tolerance investors would be better off investing in the blue-chip stocks of established firms and should stay away from more volatile growth and startup companies shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Remember that any investment return comes with a risk. The lowest risk investment available is U.S. Treasury bonds, bills, and notes. From there, various types of investments move up in the risk ladder, and will also offer larger returns to compensate for the higher risk undertaken. If an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investing.asp">investment</a> offers very attractive returns, also look at its risk profile and see how much money you could lose if things go wrong. Never invest more than you can afford to lose. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-forgetting-your-time-horizon"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Forgetting Your Time Horizon </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Don’t invest without a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timehorizon.asp">time horizon</a> in mind. Think about if you will need the funds you are locking up into an investment before entering the trade. Also, determine how long—the time horizon—you have to save up for your retirement, a downpayment on a home, or a college education for your child. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> If you are planning to accumulate money to buy a house, that could be more of a medium-term time frame. However, if you are investing to finance a young child’s college education, that is more of a long-term investment. If you are saving for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/retirement-planning-4689695">retirement</a> 30 years hence, what the stock market does this year or next shouldn't be the biggest concern. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Once you understand your horizon, you can find investments that match that profile. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-not-using-stop-loss-orders"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Not Using Stop-Loss Orders  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> A big sign that you don't have a trading plan is not using <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stop-lossorder.asp">stop-loss orders</a>. Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole.<span class="ql-inline-citation" data-cite="3"></span> These orders will execute automatically once perimeters you set are met. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Tight stop losses generally mean that losses are capped before they become sizeable. However, there is a risk that a stop order on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/long.asp">long</a> positions may be implemented at levels below those specified should the security suddenly gap lower—as happened to many investors during the Flash Crash. Even with that thought in mind, the benefits of stop orders far outweigh the risk of stopping out at an unplanned price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <span class="heading-toc" id="toc-letting-losses-grow"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Letting Losses Grow </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> One of the defining characteristics of successful investors and traders is their ability to take a small loss quickly if a trade is not working out and move on to the next trade idea. Unsuccessful traders, on the other hand, can become paralyzed if a trade goes against them. Rather than taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out. A losing trade can tie up trading capital for a long time and may result in mounting losses and severe depletion of capital. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-averaging-down-or-up"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Averaging Down or Up </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/averagedown.asp">Averaging down</a> on a long position in a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bluechipstock.asp">blue-chip stock</a> may work for an investor who has a long investment horizon, but it may be fraught with peril for a trader who is trading volatile and riskier securities. Some of the biggest trading losses in history have occurred because a trader kept adding to a losing position, and was eventually forced to cut the entire position when the magnitude of the loss became untenable. Traders also go short more often than conservative investors and tend toward averaging up, because the security is advancing rather than declining. This is an equally risky move that is another common mistake made by a novice trader. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-the-importance-of-accepting-losses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> The Importance of Accepting Losses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Far too often investors fail to accept the simple fact that they are human and prone to making mistakes just as the greatest investors do. Whether you made a stock purchase in haste or one of your long-time big earners has suddenly taken a turn for the worse, the best thing you can do is accept it. The worst thing you can do is let your pride take priority over your pocketbook and hold on to a losing investment. Or worse yet, buy more shares of the stock as it is much cheaper now. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> This is a very common mistake, and those who commit it do so by comparing the current share price with the 52-week high of the stock. Many people using this gauge assume that a fallen share price represents a good buy. However, there was a reason behind that drop and price and it is up to you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock-analysis.asp">analyze</a> why the price dropped. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <span class="heading-toc" id="toc-believing-false-buy-signals"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> Believing False Buy Signals </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Deteriorating fundamentals, the resignation of a chief executive officer (CEO), or increased competition are all possible reasons for a lower stock price. These same reasons also provide good clues to suspect that the stock might not increase anytime soon. A company may be worth less now for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentals.asp">fundamental</a> reasons. It is important to always have a critical eye, as a low share price might be a false buy signal. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Avoid buying stocks in the bargain basement. In many instances, there is a strong fundamental reason for a price decline. Do your homework and analyze a stock's outlook before you invest in it. You want to invest in companies that will experience sustained growth in the future. A company's future <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialperformance.asp">operating performance</a> has nothing to do with the price at which you happened to buy its shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-buying-with-too-much-margin"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> Buying With Too Much Margin </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/margin.asp">Margin</a> — using borrowed money from your broker to purchase securities, usually futures and options. While margin can help you make more money, it can also exaggerate your losses just as much. Make sure you understand how the margin works and when your broker could require you to sell any positions you hold. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> The worst thing you can do as a new trader is become carried away with what seems like free money. If you use margin and your investment doesn't go the way you planned, then you end up with a large debt obligation for nothing. Ask yourself if you would buy stocks with your credit card. Of course, you wouldn't. Using margin excessively is essentially the same thing, albeit likely at a lower interest rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Further, using margin requires you to monitor your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/position.asp">positions</a> much more closely. Exaggerated gains and losses that accompany small movements in price can spell disaster. If you don't have the time or knowledge to keep a close eye on and make decisions about your positions you could experience a margin call. If the value of your positions drop sharply enough then your stock may be automatically sold by the broker to recover any losses you have accrued. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> As a new trader use margin sparingly, if at all, and only if you understand all of its aspects and dangers. It can force you to sell all your positions at the bottom, the point at which you should be in the market for the big turnaround. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <span class="heading-toc" id="toc-running-with-leverage"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> Running With Leverage </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> According to a well-known investment cliché, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp">leverage</a> is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Just as anyone would warn you not to run with scissors, you should warn yourself not to rush into using leverage. Beginner traders may get dazzled by the degree of leverage they possess—especially in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forex.asp">forex (FX)</a> trading—but may soon discover that excessive leverage can destroy trading capital in a flash. If a leverage ratio of 50:1 is employed—which is not uncommon in retail forex trading—all it takes is a 2% adverse move to wipe out one's capital. Forex brokers like <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ig-review-4587903">IG Group</a> must disclose each quarter the percentage of traders that lose money in retail forex customer accounts. For the quarter ending June 30, 2021, 69% of IG Group active non-discretionary trading accounts were unprofitable.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-following-the-herd"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> Following the Herd </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much for hot stocks or may initiate short positions in securities that have already plunged and may be on the verge of turning around. While experienced traders follow the dictum of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/forex/09/trade-with-the-trend.asp">the trend is your friend</a>, they are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to take a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/contrarian.asp">contrarian approach</a> when required. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-keeping-all-your-eggs-in-one-basket"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> Keeping All Your Eggs in One Basket </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">Diversification</a> is a way to avoid overexposure to any one investment. Having a portfolio made up of multiple investments protects you if one of them loses money. It also helps protect against volatility and extreme price movements in any one investment. Also, when one asset class is underperforming, another asset class may be performing better. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Many studies have proved that most managers and mutual funds underperform their benchmarks.<span class="ql-inline-citation" data-cite="4"></span> Over the long term, low-cost <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indexfund.asp">index funds</a> are typically upper second-quartile performers or better than 65%-to-75% of actively managed funds. Despite all of the evidence in favor of indexing, the desire to invest with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">active managers</a> remains strong. John Bogle, the founder of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/about-us-5093223">Vanguard</a>, says it's because: "Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] "I can do better.'" </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Index all or a large portion (70%-to-80%) of your traditional asset classes. If you can't resist the excitement of pursuing the next great performer, then set aside about 20%-to-30% of each <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp">asset class</a> to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-shirking-your-homework"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> Shirking Your Homework </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> New traders are often guilty of not doing their homework or not conducting adequate research, or due diligence, before initiating a trade. Doing homework is critical because beginning traders do not have the knowledge of seasonal trends, or the timing of data releases, and trading patterns that experienced traders possess. For a new trader, the urgency to make a trade often overwhelms the need for undertaking some research, but this may ultimately result in an expensive lesson. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> It is a mistake not to research an investment that interests you. Research helps you understand a financial instrument and know what you are getting into. If you are investing in a stock, for instance, research the company and its business plans. Do not act on the premise that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp">markets are efficient</a> and you can’t make money by identifying good investments. While this is not an easy task, and every other investor has access to the same information as you do, it is possible to identify good investments by doing the research. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <span class="heading-toc" id="toc-buying-unfounded-tips"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_82-0"> <span class="mntl-sc-block-heading__text"> Buying Unfounded Tips </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> Everyone probably makes this mistake at one point or another in their investing career. You may hear your relatives or friends talking about a stock that they heard will get bought out, have killer earnings or soon release a groundbreaking new product. Even if these things are true, they do not necessarily mean that the stock is "the next big thing" and that you should rush into your online brokerage account to place a buy order. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_84-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_85-0"> Other unfounded tips come from investment professionals on television and social media who often tout a specific stock as though it's a must-buy, but really is nothing more than the flavor of the day. These stock tips often don't pan out and go straight down after you buy them. Remember, buying on media tips is often founded on nothing more than a speculative gamble. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_86-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> This isn't to say that you should balk at every stock tip. If one really grabs your attention, the first thing to do is consider the source. The next thing is to do your own homework so that you know what you are buying and why. For example, buying a tech stock with some proprietary technology should be based on whether it's the right investment for you, not solely on what a mutual fund manager said in a media interview. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_88-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_89-0"> Next time you're tempted to buy based on a hot tip, don't do so until you've got all the facts and are comfortable with the company. Ideally, obtain a second opinion from other investors or unbiased financial advisors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_90-0"></div> <span class="heading-toc" id="toc-watching-too-much-financial-tv"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_91-0"> <span class="mntl-sc-block-heading__text"> Watching Too Much Financial TV </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> There is almost nothing on financial news shows that can help you achieve your goals. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_94-0"> If anyone really had profitable stock tips, trading advice, or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No. They'd keep their mouth shut, make their millions and not need to sell a newsletter to make a living. Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating—and sticking to—your investment plan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <span class="heading-toc" id="toc-not-seeing-the-big-picture"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_96-0"> <span class="mntl-sc-block-heading__text"> Not Seeing the Big Picture </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_97-0"> For a long-term investor, one of the most important but often overlooked things to do is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/qualitativeanalysis.asp">qualitative analysis</a> or to look at the big picture. Legendary investor and author <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/peterlynch.asp">Peter Lynch</a> once stated that he found the best investments by looking at his children's toys and the trends they would take on. The brand name is also very valuable. Think about how almost everyone in the world knows Coke; the financial value of the name alone is, therefore, measured in the billions of dollars. Whether it's about iPhones or Big Macs, no one can argue against real life. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> So pouring over financial statements or attempting to identify buy and sell opportunities with complex technical analysis may work a great deal of the time, but if the world is changing against your company, sooner or later, you will lose. After all, a typewriter company in the late 1980s could have outperformed any company in its industry, but once personal computers started to become commonplace, an investor in typewriters of that era would have done well to assess the bigger picture and pivot away. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_100-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_101-0"> Assessing a company from a qualitative standpoint is as important as looking at its sales and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp">earnings</a>. Qualitative analysis is a strategy that is one of the easiest and most effective for evaluating a potential investment without <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/texas-sharpshooter-fallacy.asp">falling prey to investment fallacies</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_102-0"></div> <span class="heading-toc" id="toc-trading-multiple-markets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_103-0"> <span class="mntl-sc-block-heading__text"> Trading Multiple Markets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_104-0"> Beginning traders may tend to flit from market to market—that is, from stocks to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/option.asp">options</a> to currencies to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodityfuturescontract.asp">commodity futures</a>, and so on. Trading multiple markets can be a huge distraction and may prevent the novice trader from gaining the experience necessary to excel in one market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <span class="heading-toc" id="toc-forgetting-about-uncle-sam"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_106-0"> <span class="mntl-sc-block-heading__text"> Forgetting About Uncle Sam </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_107-0"> Keep in mind the tax consequences before you invest. You will get a tax break on some investments such as municipal bonds. Before you invest, look at what your return will be after adjusting for tax, taking into account the investment, your tax bracket, and your investment time horizon. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_108-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_109-0"> Do not pay more than you need to on trading and brokerage fees. By holding on to your investment and not trading frequently, you will save money on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/forex/041515/how-forex-brokers-make-money.asp">broker fees</a>. Also, shop around and find a broker that doesn't charge excessive fees so you can keep more of the return you generate from your investment. Investopedia has put together a list of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-brokers-for-low-costs-4587874">best discount brokers</a> to make your choice of a broker easier. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_110-0"></div> <span class="heading-toc" id="toc-the-danger-of-over-confidence"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_111-0"> <span class="mntl-sc-block-heading__text"> The Danger of Over-Confidence </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_112-0"> Trading is a very demanding occupation, but the "beginner's luck" experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches. Such overconfidence is dangerous as it breeds complacency and encourages <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">excessive risk-taking</a> that may culminate in a trading disaster. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_113-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_114-0"> From numerous studies, including Burton Malkiel's 1995 study entitled: "Returns From Investing In Equity Mutual Funds," we know that most managers will underperform their benchmarks.<span class="ql-inline-citation" data-cite="2"></span> We also know that there's no consistent way to select, in advance, those managers that will outperform. We also know that very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and/or select outperforming managers? <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/about-us-5093223">Fidelity</a> guru Peter Lynch once observed: "There are no market timers in the Forbes 400." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_115-0"></div> <span class="heading-toc" id="toc-inexperienced-day-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_116-0"> <span class="mntl-sc-block-heading__text"> Inexperienced Day Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_117-0"> If you insist on becoming an active trader, think twice before <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/05/011705.asp">day trading</a>. Day trading can be a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader may gain an advantage with access to special equipment that is less readily available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the tens of thousands of dollars? You'll also need a sizable amount of trading money to maintain an efficient day-trading strategy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_119-0"> The need for speed is the main reason you can't effectively start day trading with the extra $5,000 in your bank account. Online brokers' systems are not quite fast enough to service the true day trader; literally, pennies per share can make the difference between a profitable and losing trade. Most brokerages recommend that investors take day-trading courses before getting started. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_120-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_121-0"> Unless you have the expertise, a platform, and access to speedy order execution, think twice before day trading. If you aren't very good at dealing with risk and stress, there are much better options for an investor who's looking to build wealth. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_122-0"></div> <span class="heading-toc" id="toc-underestimating-your-abilities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_123-0"> <span class="mntl-sc-block-heading__text"> Underestimating Your Abilities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_124-0"> Some investors tend to believe that they can never excel at investing because stock market success is reserved for sophisticated investors only. This perception has no truth at all. While any commission-based mutual fund salesmen will probably tell you otherwise, most professional money managers don't make the grade either, and the vast majority underperform the broad market. With a little time devoted to learning and research, investors can become well-equipped to control their own portfolios and investing decisions, all while being profitable. Remember, much of investing is sticking to common sense and rationality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_125-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_126-0"> Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs of large institutional investors. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better than the so-called investment gurus. Don't assume that you are unable to successfully participate in the financial markets simply because you have a day job. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_127-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_128-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_129-0"> If you have the money to invest and are able to avoid these beginner mistakes, you could make your investments pay off, taking you one step closer to your financial goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_130-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_131-0"> With the stock market's penchant for producing large gains (and losses), there is no shortage of faulty advice and irrational decision making. As an individual investor, the best thing you can do to pad your portfolio for the long term is to implement a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentstrategy.asp">rational investment strategy</a> that you are comfortable with and willing to stick to. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_132-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_133-0"> If you are looking to make a big win by betting your money on your gut feelings, try a casino. Take pride in your investment decisions, and in the long run, your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a> will grow to reflect the soundness of your actions. </p></div>

Making mistakes is part of the learning process when it comes to trading or investing. Investors are typically involved in longer-term holdings and will trade in stocks, exchange-traded funds, and other [securities](https://www.investopedia.com/terms/s/security.asp). Traders generally buy and sell futures and options, hold those positions for shorter periods, and are involved in a greater number of transactions. While traders and investors use two different types of trading transactions, they often are guilty of making the same types of mistakes. Some mistakes are more harmful to the investor, and others cause more harm to the trader. Both would do well to remember these common blunders and try to avoid them. ## No Trading Plan Experienced traders get into a trade with a well-defined plan. They know their exact entry and exit points, the amount of capital to invest in the trade and the maximum loss they are willing to take. Beginner traders may not have a trading plan in place before they commence trading. Even if they have a plan, they may be more prone to stray from the defined plan than would seasoned traders. Novice traders may reverse course altogether. For example, going [short](https://www.investopedia.com/terms/s/short.asp) after initially buying securities because the share price is declining—only to end up getting [whipsawed](https://www.investopedia.com/terms/w/whipsaw.asp). ## Chasing After Performance Many investors or traders will select asset classes, strategies, managers, and [funds](https://www.investopedia.com/terms/f/fund.asp) based on a current strong performance. The feeling that "I'm missing out on great [returns](https://www.investopedia.com/terms/r/return.asp)" has probably led to more bad investment decisions than any other single factor. If a particular [asset class](https://www.investopedia.com/terms/a/assetclasses.asp), strategy, or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the [dumb money](https://www.investopedia.com/investing/surprising-benefits-when-brokers-grade-their-customers/) is pouring in. ## Not Regaining Balance [Rebalancing](https://www.investopedia.com/terms/r/rebalancing.asp) is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors. However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at [market peaks](https://www.investopedia.com/terms/p/peak.asp) and underweighted at market lows—a formula for poor performance. Rebalance religiously and reap the long-term rewards. ## Ignoring Risk Aversion Do not lose sight of your [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp) or your capacity to take on risk. Some investors can’t stomach volatility and the ups and downs associated with the stock market or more speculative trades. Other investors may need secure, regular interest income. These low-risk tolerance investors would be better off investing in the blue-chip stocks of established firms and should stay away from more volatile growth and startup companies shares. Remember that any investment return comes with a risk. The lowest risk investment available is U.S. Treasury bonds, bills, and notes. From there, various types of investments move up in the risk ladder, and will also offer larger returns to compensate for the higher risk undertaken. If an [investment](https://www.investopedia.com/terms/i/investing.asp) offers very attractive returns, also look at its risk profile and see how much money you could lose if things go wrong. Never invest more than you can afford to lose. ## Forgetting Your Time Horizon Don’t invest without a [time horizon](https://www.investopedia.com/terms/t/timehorizon.asp) in mind. Think about if you will need the funds you are locking up into an investment before entering the trade. Also, determine how long—the time horizon—you have to save up for your retirement, a downpayment on a home, or a college education for your child. If you are planning to accumulate money to buy a house, that could be more of a medium-term time frame. However, if you are investing to finance a young child’s college education, that is more of a long-term investment. If you are saving for [retirement](https://www.investopedia.com/retirement-planning-4689695) 30 years hence, what the stock market does this year or next shouldn't be the biggest concern. Once you understand your horizon, you can find investments that match that profile. ## Not Using Stop-Loss Orders A big sign that you don't have a trading plan is not using [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp). Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole. These orders will execute automatically once perimeters you set are met. Tight stop losses generally mean that losses are capped before they become sizeable. However, there is a risk that a stop order on [long](https://www.investopedia.com/terms/l/long.asp) positions may be implemented at levels below those specified should the security suddenly gap lower—as happened to many investors during the Flash Crash. Even with that thought in mind, the benefits of stop orders far outweigh the risk of stopping out at an unplanned price. A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse. ## Letting Losses Grow One of the defining characteristics of successful investors and traders is their ability to take a small loss quickly if a trade is not working out and move on to the next trade idea. Unsuccessful traders, on the other hand, can become paralyzed if a trade goes against them. Rather than taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out. A losing trade can tie up trading capital for a long time and may result in mounting losses and severe depletion of capital. ## Averaging Down or Up [Averaging down](https://www.investopedia.com/terms/a/averagedown.asp) on a long position in a [blue-chip stock](https://www.investopedia.com/terms/b/bluechipstock.asp) may work for an investor who has a long investment horizon, but it may be fraught with peril for a trader who is trading volatile and riskier securities. Some of the biggest trading losses in history have occurred because a trader kept adding to a losing position, and was eventually forced to cut the entire position when the magnitude of the loss became untenable. Traders also go short more often than conservative investors and tend toward averaging up, because the security is advancing rather than declining. This is an equally risky move that is another common mistake made by a novice trader. ## The Importance of Accepting Losses Far too often investors fail to accept the simple fact that they are human and prone to making mistakes just as the greatest investors do. Whether you made a stock purchase in haste or one of your long-time big earners has suddenly taken a turn for the worse, the best thing you can do is accept it. The worst thing you can do is let your pride take priority over your pocketbook and hold on to a losing investment. Or worse yet, buy more shares of the stock as it is much cheaper now. This is a very common mistake, and those who commit it do so by comparing the current share price with the 52-week high of the stock. Many people using this gauge assume that a fallen share price represents a good buy. However, there was a reason behind that drop and price and it is up to you to [analyze](https://www.investopedia.com/terms/s/stock-analysis.asp) why the price dropped. ## Believing False Buy Signals Deteriorating fundamentals, the resignation of a chief executive officer (CEO), or increased competition are all possible reasons for a lower stock price. These same reasons also provide good clues to suspect that the stock might not increase anytime soon. A company may be worth less now for [fundamental](https://www.investopedia.com/terms/f/fundamentals.asp) reasons. It is important to always have a critical eye, as a low share price might be a false buy signal. Avoid buying stocks in the bargain basement. In many instances, there is a strong fundamental reason for a price decline. Do your homework and analyze a stock's outlook before you invest in it. You want to invest in companies that will experience sustained growth in the future. A company's future [operating performance](https://www.investopedia.com/terms/f/financialperformance.asp) has nothing to do with the price at which you happened to buy its shares. ## Buying With Too Much Margin [Margin](https://www.investopedia.com/terms/m/margin.asp) — using borrowed money from your broker to purchase securities, usually futures and options. While margin can help you make more money, it can also exaggerate your losses just as much. Make sure you understand how the margin works and when your broker could require you to sell any positions you hold. The worst thing you can do as a new trader is become carried away with what seems like free money. If you use margin and your investment doesn't go the way you planned, then you end up with a large debt obligation for nothing. Ask yourself if you would buy stocks with your credit card. Of course, you wouldn't. Using margin excessively is essentially the same thing, albeit likely at a lower interest rate. Further, using margin requires you to monitor your [positions](https://www.investopedia.com/terms/p/position.asp) much more closely. Exaggerated gains and losses that accompany small movements in price can spell disaster. If you don't have the time or knowledge to keep a close eye on and make decisions about your positions you could experience a margin call. If the value of your positions drop sharply enough then your stock may be automatically sold by the broker to recover any losses you have accrued. As a new trader use margin sparingly, if at all, and only if you understand all of its aspects and dangers. It can force you to sell all your positions at the bottom, the point at which you should be in the market for the big turnaround. ## Running With Leverage According to a well-known investment cliché, [leverage](https://www.investopedia.com/terms/l/leverage.asp) is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Just as anyone would warn you not to run with scissors, you should warn yourself not to rush into using leverage. Beginner traders may get dazzled by the degree of leverage they possess—especially in [forex (FX)](https://www.investopedia.com/terms/f/forex.asp) trading—but may soon discover that excessive leverage can destroy trading capital in a flash. If a leverage ratio of 50:1 is employed—which is not uncommon in retail forex trading—all it takes is a 2% adverse move to wipe out one's capital. Forex brokers like [IG Group](https://www.investopedia.com/ig-review-4587903) must disclose each quarter the percentage of traders that lose money in retail forex customer accounts. For the quarter ending June 30, 2021, 69% of IG Group active non-discretionary trading accounts were unprofitable. ## Following the Herd Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much for hot stocks or may initiate short positions in securities that have already plunged and may be on the verge of turning around. While experienced traders follow the dictum of [the trend is your friend](https://www.investopedia.com/articles/forex/09/trade-with-the-trend.asp), they are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to take a [contrarian approach](https://www.investopedia.com/terms/c/contrarian.asp) when required. ## Keeping All Your Eggs in One Basket [Diversification](https://www.investopedia.com/terms/d/diversification.asp) is a way to avoid overexposure to any one investment. Having a portfolio made up of multiple investments protects you if one of them loses money. It also helps protect against volatility and extreme price movements in any one investment. Also, when one asset class is underperforming, another asset class may be performing better. Many studies have proved that most managers and mutual funds underperform their benchmarks. Over the long term, low-cost [index funds](https://www.investopedia.com/terms/i/indexfund.asp) are typically upper second-quartile performers or better than 65%-to-75% of actively managed funds. Despite all of the evidence in favor of indexing, the desire to invest with [active managers](https://www.investopedia.com/terms/a/activemanagement.asp) remains strong. John Bogle, the founder of [Vanguard](https://www.investopedia.com/about-us-5093223), says it's because: "Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] "I can do better.'" Index all or a large portion (70%-to-80%) of your traditional asset classes. If you can't resist the excitement of pursuing the next great performer, then set aside about 20%-to-30% of each [asset class](https://www.investopedia.com/terms/a/assetclasses.asp) to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio. ## Shirking Your Homework New traders are often guilty of not doing their homework or not conducting adequate research, or due diligence, before initiating a trade. Doing homework is critical because beginning traders do not have the knowledge of seasonal trends, or the timing of data releases, and trading patterns that experienced traders possess. For a new trader, the urgency to make a trade often overwhelms the need for undertaking some research, but this may ultimately result in an expensive lesson. It is a mistake not to research an investment that interests you. Research helps you understand a financial instrument and know what you are getting into. If you are investing in a stock, for instance, research the company and its business plans. Do not act on the premise that [markets are efficient](https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp) and you can’t make money by identifying good investments. While this is not an easy task, and every other investor has access to the same information as you do, it is possible to identify good investments by doing the research. ## Buying Unfounded Tips Everyone probably makes this mistake at one point or another in their investing career. You may hear your relatives or friends talking about a stock that they heard will get bought out, have killer earnings or soon release a groundbreaking new product. Even if these things are true, they do not necessarily mean that the stock is "the next big thing" and that you should rush into your online brokerage account to place a buy order. Other unfounded tips come from investment professionals on television and social media who often tout a specific stock as though it's a must-buy, but really is nothing more than the flavor of the day. These stock tips often don't pan out and go straight down after you buy them. Remember, buying on media tips is often founded on nothing more than a speculative gamble. This isn't to say that you should balk at every stock tip. If one really grabs your attention, the first thing to do is consider the source. The next thing is to do your own homework so that you know what you are buying and why. For example, buying a tech stock with some proprietary technology should be based on whether it's the right investment for you, not solely on what a mutual fund manager said in a media interview. Next time you're tempted to buy based on a hot tip, don't do so until you've got all the facts and are comfortable with the company. Ideally, obtain a second opinion from other investors or unbiased financial advisors. ## Watching Too Much Financial TV There is almost nothing on financial news shows that can help you achieve your goals. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance? If anyone really had profitable stock tips, trading advice, or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No. They'd keep their mouth shut, make their millions and not need to sell a newsletter to make a living. Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating—and sticking to—your investment plan. ## Not Seeing the Big Picture For a long-term investor, one of the most important but often overlooked things to do is a [qualitative analysis](https://www.investopedia.com/terms/q/qualitativeanalysis.asp) or to look at the big picture. Legendary investor and author [Peter Lynch](https://www.investopedia.com/terms/p/peterlynch.asp) once stated that he found the best investments by looking at his children's toys and the trends they would take on. The brand name is also very valuable. Think about how almost everyone in the world knows Coke; the financial value of the name alone is, therefore, measured in the billions of dollars. Whether it's about iPhones or Big Macs, no one can argue against real life. So pouring over financial statements or attempting to identify buy and sell opportunities with complex technical analysis may work a great deal of the time, but if the world is changing against your company, sooner or later, you will lose. After all, a typewriter company in the late 1980s could have outperformed any company in its industry, but once personal computers started to become commonplace, an investor in typewriters of that era would have done well to assess the bigger picture and pivot away. Assessing a company from a qualitative standpoint is as important as looking at its sales and [earnings](https://www.investopedia.com/terms/e/earnings.asp). Qualitative analysis is a strategy that is one of the easiest and most effective for evaluating a potential investment without [falling prey to investment fallacies](https://www.investopedia.com/terms/t/texas-sharpshooter-fallacy.asp). ## Trading Multiple Markets Beginning traders may tend to flit from market to market—that is, from stocks to [options](https://www.investopedia.com/terms/o/option.asp) to currencies to [commodity futures](https://www.investopedia.com/terms/c/commodityfuturescontract.asp), and so on. Trading multiple markets can be a huge distraction and may prevent the novice trader from gaining the experience necessary to excel in one market. ## Forgetting About Uncle Sam Keep in mind the tax consequences before you invest. You will get a tax break on some investments such as municipal bonds. Before you invest, look at what your return will be after adjusting for tax, taking into account the investment, your tax bracket, and your investment time horizon. Do not pay more than you need to on trading and brokerage fees. By holding on to your investment and not trading frequently, you will save money on [broker fees](https://www.investopedia.com/articles/forex/041515/how-forex-brokers-make-money.asp). Also, shop around and find a broker that doesn't charge excessive fees so you can keep more of the return you generate from your investment. Investopedia has put together a list of the [best discount brokers](https://www.investopedia.com/best-brokers-for-low-costs-4587874) to make your choice of a broker easier. ## The Danger of Over-Confidence Trading is a very demanding occupation, but the "beginner's luck" experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches. Such overconfidence is dangerous as it breeds complacency and encourages [excessive risk-taking](https://www.investopedia.com/terms/r/risktolerance.asp) that may culminate in a trading disaster. From numerous studies, including Burton Malkiel's 1995 study entitled: "Returns From Investing In Equity Mutual Funds," we know that most managers will underperform their benchmarks. We also know that there's no consistent way to select, in advance, those managers that will outperform. We also know that very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and/or select outperforming managers? [Fidelity](https://www.investopedia.com/about-us-5093223) guru Peter Lynch once observed: "There are no market timers in the Forbes 400." ## Inexperienced Day Trading If you insist on becoming an active trader, think twice before [day trading](https://www.investopedia.com/articles/trading/05/011705.asp). Day trading can be a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader may gain an advantage with access to special equipment that is less readily available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the tens of thousands of dollars? You'll also need a sizable amount of trading money to maintain an efficient day-trading strategy. The need for speed is the main reason you can't effectively start day trading with the extra $5,000 in your bank account. Online brokers' systems are not quite fast enough to service the true day trader; literally, pennies per share can make the difference between a profitable and losing trade. Most brokerages recommend that investors take day-trading courses before getting started. Unless you have the expertise, a platform, and access to speedy order execution, think twice before day trading. If you aren't very good at dealing with risk and stress, there are much better options for an investor who's looking to build wealth. ## Underestimating Your Abilities Some investors tend to believe that they can never excel at investing because stock market success is reserved for sophisticated investors only. This perception has no truth at all. While any commission-based mutual fund salesmen will probably tell you otherwise, most professional money managers don't make the grade either, and the vast majority underperform the broad market. With a little time devoted to learning and research, investors can become well-equipped to control their own portfolios and investing decisions, all while being profitable. Remember, much of investing is sticking to common sense and rationality. Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs of large institutional investors. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better than the so-called investment gurus. Don't assume that you are unable to successfully participate in the financial markets simply because you have a day job. ## The Bottom Line If you have the money to invest and are able to avoid these beginner mistakes, you could make your investments pay off, taking you one step closer to your financial goals. With the stock market's penchant for producing large gains (and losses), there is no shortage of faulty advice and irrational decision making. As an individual investor, the best thing you can do to pad your portfolio for the long term is to implement a [rational investment strategy](https://www.investopedia.com/terms/i/investmentstrategy.asp) that you are comfortable with and willing to stick to. If you are looking to make a big win by betting your money on your gut feelings, try a casino. Take pride in your investment decisions, and in the long run, your [portfolio](https://www.investopedia.com/terms/p/portfolio.asp) will grow to reflect the soundness of your actions.

Making mistakes is part of the learning process when it comes to trading or investing. Investors are typically involved in longer-term holdings and will trade in stocks, exchange-traded funds, and other securities. Traders generally buy and sell futures and options, hold those positions for shorter periods, and are involved in a greater number of transactions. While traders and investors use two different types of trading transactions, they often are guilty of making the same types of mistakes. Some mistakes are more harmful to the investor, and others cause more harm to the trader. Both would do well to remember these common blunders and try to avoid them. No Trading Plan Experienced traders get into a trade with a well-defined plan. They know their exact entry and exit points, the amount of capital to invest in the trade and the maximum loss they are willing to take. Beginner traders may not have a trading plan in place before they commence trading. Even if they have a plan, they may be more prone to stray from the defined plan than would seasoned traders. Novice traders may reverse course altogether. For example, going short after initially buying securities because the share price is declining—only to end up getting whipsawed. Chasing After Performance Many investors or traders will select asset classes, strategies, managers, and funds based on a current strong performance. The feeling that "I'm missing out on great returns" has probably led to more bad investment decisions than any other single factor. If a particular asset class, strategy, or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in. Not Regaining Balance Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors. However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows—a formula for poor performance. Rebalance religiously and reap the long-term rewards. Ignoring Risk Aversion Do not lose sight of your risk tolerance or your capacity to take on risk. Some investors can’t stomach volatility and the ups and downs associated with the stock market or more speculative trades. Other investors may need secure, regular interest income. These low-risk tolerance investors would be better off investing in the blue-chip stocks of established firms and should stay away from more volatile growth and startup companies shares. Remember that any investment return comes with a risk. The lowest risk investment available is U.S. Treasury bonds, bills, and notes. From there, various types of investments move up in the risk ladder, and will also offer larger returns to compensate for the higher risk undertaken. If an investment offers very attractive returns, also look at its risk profile and see how much money you could lose if things go wrong. Never invest more than you can afford to lose. Forgetting Your Time Horizon Don’t invest without a time horizon in mind. Think about if you will need the funds you are locking up into an investment before entering the trade. Also, determine how long—the time horizon—you have to save up for your retirement, a downpayment on a home, or a college education for your child. If you are planning to accumulate money to buy a house, that could be more of a medium-term time frame. However, if you are investing to finance a young child’s college education, that is more of a long-term investment. If you are saving for retirement 30 years hence, what the stock market does this year or next shouldn't be the biggest concern. Once you understand your horizon, you can find investments that match that profile. Not Using Stop-Loss Orders  A big sign that you don't have a trading plan is not using stop-loss orders. Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole. These orders will execute automatically once perimeters you set are met. Tight stop losses generally mean that losses are capped before they become sizeable. However, there is a risk that a stop order on long positions may be implemented at levels below those specified should the security suddenly gap lower—as happened to many investors during the Flash Crash. Even with that thought in mind, the benefits of stop orders far outweigh the risk of stopping out at an unplanned price. A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse. Letting Losses Grow One of the defining characteristics of successful investors and traders is their ability to take a small loss quickly if a trade is not working out and move on to the next trade idea. Unsuccessful traders, on the other hand, can become paralyzed if a trade goes against them. Rather than taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out. A losing trade can tie up trading capital for a long time and may result in mounting losses and severe depletion of capital. Averaging Down or Up Averaging down on a long position in a blue-chip stock may work for an investor who has a long investment horizon, but it may be fraught with peril for a trader who is trading volatile and riskier securities. Some of the biggest trading losses in history have occurred because a trader kept adding to a losing position, and was eventually forced to cut the entire position when the magnitude of the loss became untenable. Traders also go short more often than conservative investors and tend toward averaging up, because the security is advancing rather than declining. This is an equally risky move that is another common mistake made by a novice trader. The Importance of Accepting Losses Far too often investors fail to accept the simple fact that they are human and prone to making mistakes just as the greatest investors do. Whether you made a stock purchase in haste or one of your long-time big earners has suddenly taken a turn for the worse, the best thing you can do is accept it. The worst thing you can do is let your pride take priority over your pocketbook and hold on to a losing investment. Or worse yet, buy more shares of the stock as it is much cheaper now. This is a very common mistake, and those who commit it do so by comparing the current share price with the 52-week high of the stock. Many people using this gauge assume that a fallen share price represents a good buy. However, there was a reason behind that drop and price and it is up to you to analyze why the price dropped. Believing False Buy Signals Deteriorating fundamentals, the resignation of a chief executive officer (CEO), or increased competition are all possible reasons for a lower stock price. These same reasons also provide good clues to suspect that the stock might not increase anytime soon. A company may be worth less now for fundamental reasons. It is important to always have a critical eye, as a low share price might be a false buy signal. Avoid buying stocks in the bargain basement. In many instances, there is a strong fundamental reason for a price decline. Do your homework and analyze a stock's outlook before you invest in it. You want to invest in companies that will experience sustained growth in the future. A company's future operating performance has nothing to do with the price at which you happened to buy its shares. Buying With Too Much Margin Margin — using borrowed money from your broker to purchase securities, usually futures and options. While margin can help you make more money, it can also exaggerate your losses just as much. Make sure you understand how the margin works and when your broker could require you to sell any positions you hold. The worst thing you can do as a new trader is become carried away with what seems like free money. If you use margin and your investment doesn't go the way you planned, then you end up with a large debt obligation for nothing. Ask yourself if you would buy stocks with your credit card. Of course, you wouldn't. Using margin excessively is essentially the same thing, albeit likely at a lower interest rate. Further, using margin requires you to monitor your positions much more closely. Exaggerated gains and losses that accompany small movements in price can spell disaster. If you don't have the time or knowledge to keep a close eye on and make decisions about your positions you could experience a margin call. If the value of your positions drop sharply enough then your stock may be automatically sold by the broker to recover any losses you have accrued. As a new trader use margin sparingly, if at all, and only if you understand all of its aspects and dangers. It can force you to sell all your positions at the bottom, the point at which you should be in the market for the big turnaround. Running With Leverage According to a well-known investment cliché, leverage is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Just as anyone would warn you not to run with scissors, you should warn yourself not to rush into using leverage. Beginner traders may get dazzled by the degree of leverage they possess—especially in forex (FX) trading—but may soon discover that excessive leverage can destroy trading capital in a flash. If a leverage ratio of 50:1 is employed—which is not uncommon in retail forex trading—all it takes is a 2% adverse move to wipe out one's capital. Forex brokers like IG Group must disclose each quarter the percentage of traders that lose money in retail forex customer accounts. For the quarter ending June 30, 2021, 69% of IG Group active non-discretionary trading accounts were unprofitable. Following the Herd Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much for hot stocks or may initiate short positions in securities that have already plunged and may be on the verge of turning around. While experienced traders follow the dictum of the trend is your friend, they are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to take a contrarian approach when required. Keeping All Your Eggs in One Basket Diversification is a way to avoid overexposure to any one investment. Having a portfolio made up of multiple investments protects you if one of them loses money. It also helps protect against volatility and extreme price movements in any one investment. Also, when one asset class is underperforming, another asset class may be performing better. Many studies have proved that most managers and mutual funds underperform their benchmarks. Over the long term, low-cost index funds are typically upper second-quartile performers or better than 65%-to-75% of actively managed funds. Despite all of the evidence in favor of indexing, the desire to invest with active managers remains strong. John Bogle, the founder of Vanguard, says it's because: "Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] "I can do better.'" Index all or a large portion (70%-to-80%) of your traditional asset classes. If you can't resist the excitement of pursuing the next great performer, then set aside about 20%-to-30% of each asset class to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio. Shirking Your Homework New traders are often guilty of not doing their homework or not conducting adequate research, or due diligence, before initiating a trade. Doing homework is critical because beginning traders do not have the knowledge of seasonal trends, or the timing of data releases, and trading patterns that experienced traders possess. For a new trader, the urgency to make a trade often overwhelms the need for undertaking some research, but this may ultimately result in an expensive lesson. It is a mistake not to research an investment that interests you. Research helps you understand a financial instrument and know what you are getting into. If you are investing in a stock, for instance, research the company and its business plans. Do not act on the premise that markets are efficient and you can’t make money by identifying good investments. While this is not an easy task, and every other investor has access to the same information as you do, it is possible to identify good investments by doing the research. Buying Unfounded Tips Everyone probably makes this mistake at one point or another in their investing career. You may hear your relatives or friends talking about a stock that they heard will get bought out, have killer earnings or soon release a groundbreaking new product. Even if these things are true, they do not necessarily mean that the stock is "the next big thing" and that you should rush into your online brokerage account to place a buy order. Other unfounded tips come from investment professionals on television and social media who often tout a specific stock as though it's a must-buy, but really is nothing more than the flavor of the day. These stock tips often don't pan out and go straight down after you buy them. Remember, buying on media tips is often founded on nothing more than a speculative gamble. This isn't to say that you should balk at every stock tip. If one really grabs your attention, the first thing to do is consider the source. The next thing is to do your own homework so that you know what you are buying and why. For example, buying a tech stock with some proprietary technology should be based on whether it's the right investment for you, not solely on what a mutual fund manager said in a media interview. Next time you're tempted to buy based on a hot tip, don't do so until you've got all the facts and are comfortable with the company. Ideally, obtain a second opinion from other investors or unbiased financial advisors. Watching Too Much Financial TV There is almost nothing on financial news shows that can help you achieve your goals. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance? If anyone really had profitable stock tips, trading advice, or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No. They'd keep their mouth shut, make their millions and not need to sell a newsletter to make a living. Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating—and sticking to—your investment plan. Not Seeing the Big Picture For a long-term investor, one of the most important but often overlooked things to do is a qualitative analysis or to look at the big picture. Legendary investor and author Peter Lynch once stated that he found the best investments by looking at his children's toys and the trends they would take on. The brand name is also very valuable. Think about how almost everyone in the world knows Coke; the financial value of the name alone is, therefore, measured in the billions of dollars. Whether it's about iPhones or Big Macs, no one can argue against real life. So pouring over financial statements or attempting to identify buy and sell opportunities with complex technical analysis may work a great deal of the time, but if the world is changing against your company, sooner or later, you will lose. After all, a typewriter company in the late 1980s could have outperformed any company in its industry, but once personal computers started to become commonplace, an investor in typewriters of that era would have done well to assess the bigger picture and pivot away. Assessing a company from a qualitative standpoint is as important as looking at its sales and earnings. Qualitative analysis is a strategy that is one of the easiest and most effective for evaluating a potential investment without falling prey to investment fallacies. Trading Multiple Markets Beginning traders may tend to flit from market to market—that is, from stocks to options to currencies to commodity futures, and so on. Trading multiple markets can be a huge distraction and may prevent the novice trader from gaining the experience necessary to excel in one market. Forgetting About Uncle Sam Keep in mind the tax consequences before you invest. You will get a tax break on some investments such as municipal bonds. Before you invest, look at what your return will be after adjusting for tax, taking into account the investment, your tax bracket, and your investment time horizon. Do not pay more than you need to on trading and brokerage fees. By holding on to your investment and not trading frequently, you will save money on broker fees. Also, shop around and find a broker that doesn't charge excessive fees so you can keep more of the return you generate from your investment. Investopedia has put together a list of the best discount brokers to make your choice of a broker easier. The Danger of Over-Confidence Trading is a very demanding occupation, but the "beginner's luck" experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches. Such overconfidence is dangerous as it breeds complacency and encourages excessive risk-taking that may culminate in a trading disaster. From numerous studies, including Burton Malkiel's 1995 study entitled: "Returns From Investing In Equity Mutual Funds," we know that most managers will underperform their benchmarks. We also know that there's no consistent way to select, in advance, those managers that will outperform. We also know that very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and/or select outperforming managers? Fidelity guru Peter Lynch once observed: "There are no market timers in the Forbes 400." Inexperienced Day Trading If you insist on becoming an active trader, think twice before day trading. Day trading can be a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader may gain an advantage with access to special equipment that is less readily available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the tens of thousands of dollars? You'll also need a sizable amount of trading money to maintain an efficient day-trading strategy. The need for speed is the main reason you can't effectively start day trading with the extra $5,000 in your bank account. Online brokers' systems are not quite fast enough to service the true day trader; literally, pennies per share can make the difference between a profitable and losing trade. Most brokerages recommend that investors take day-trading courses before getting started. Unless you have the expertise, a platform, and access to speedy order execution, think twice before day trading. If you aren't very good at dealing with risk and stress, there are much better options for an investor who's looking to build wealth. Underestimating Your Abilities Some investors tend to believe that they can never excel at investing because stock market success is reserved for sophisticated investors only. This perception has no truth at all. While any commission-based mutual fund salesmen will probably tell you otherwise, most professional money managers don't make the grade either, and the vast majority underperform the broad market. With a little time devoted to learning and research, investors can become well-equipped to control their own portfolios and investing decisions, all while being profitable. Remember, much of investing is sticking to common sense and rationality. Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs of large institutional investors. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better than the so-called investment gurus. Don't assume that you are unable to successfully participate in the financial markets simply because you have a day job. The Bottom Line If you have the money to invest and are able to avoid these beginner mistakes, you could make your investments pay off, taking you one step closer to your financial goals. With the stock market's penchant for producing large gains (and losses), there is no shortage of faulty advice and irrational decision making. As an individual investor, the best thing you can do to pad your portfolio for the long term is to implement a rational investment strategy that you are comfortable with and willing to stick to. If you are looking to make a big win by betting your money on your gut feelings, try a casino. Take pride in your investment decisions, and in the long run, your portfolio will grow to reflect the soundness of your actions.

https://www.investopedia.com/best-cancel-for-any-reason-travel-insurance-7561959

Best Cancel for Any Reason Travel Insurance of 2024

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> The best cancel for any reason (CFAR) travel insurance provider is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usiaffinity.com/attorneyspreferred/lpl/" rel="nofollow">USI Affinity</a>, which offers seven cancel for any reason plans and the cheapest premiums of all the companies we researched. To help you choose the best cancel for any reason travel insurance, we evaluated 18 companies based on 28 criteria. Some of the factors we looked at include the maximum CFAR reimbursement rates (20% of the score), premiums (17.5%), number of policy types available (7.5%), and trip cancellation coverage amounts (5%). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> If you’re a frequent traveler, having <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-travel-insurance-4842641">travel insurance</a> can be valuable. But if you need to cancel a trip, your policy will only refund your prepaid expenses due to certain circumstances. Adding cancel for any reason travel insurance to your policy covers many reasons for canceling that normally are not covered, like last-minute work obligations or safety concerns.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Cancel for Any Reason Travel Insurance of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.usiaffinity.com/attorneyspreferred/lpl/" rel="nofollow noskim noopener nocaes" target="_blank"> USI Affinity</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Reimbursement Rate:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="data1=${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.allianztravelinsurance.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Allianz Travel Insurance</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Most Affordable Premiums for Upgraded Plans:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.tinleg.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Tin Leg</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Trip Interruption Reimbursement:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="src=${DOC_ID}&amp;tag=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.squaremouth.com/travel-insurance-providers/hth-worldwide?aid=22543-4415" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> HTH</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Travel Delay Coverage:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="src=${DOC_ID}&amp;tag=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.squaremouth.com/travel-insurance-providers/trawick-international?aid=22543-4415" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Trawick International</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>All premiums mentioned are based on a $3,500, 10-day trip from Florida to Costa Rica for two same-aged travelers. We gathered quotes for four different ages: 28, 40, 55, and 70.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="false" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Cancel for Any Reason Travel Insurance of 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Cancel for Any Reason Travel Insurance of 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Cancel for Any Reason Travel Insurance of 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-USI Affinity" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-USI Affinity" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-usi-affinity" rel="nocaes"> <span class="link__wrapper">USI Affinity</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Allianz Travel Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Allianz Travel Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-reimbursement-rate-allianz-travel-insurance" rel="nocaes"> <span class="link__wrapper">Allianz Travel Insurance</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Tin Leg" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Tin Leg" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-most-affordable-premiums-for-upgraded-plans-tin-leg" rel="nocaes"> <span class="link__wrapper">Tin Leg</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-HTH" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-HTH" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-trip-interruption-reimbursement-hth" rel="nocaes"> <span class="link__wrapper">HTH</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Trawick International" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Trawick International" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-travel-delay-coverage-trawick-international" rel="nocaes"> <span class="link__wrapper">Trawick International</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (2)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions-05acab7c-b79e-4b96-a01a-b71a12e1b152" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-usi-affinity"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> USI Affinity</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="USI Affinity" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/6pR_OKjzviIjZCs7LbU8u5iC6vQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/USIAffinity-c6b7ad1feb014ad28f1790f5d9f11e20.jpeg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="USI Affinity" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/6pR_OKjzviIjZCs7LbU8u5iC6vQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/USIAffinity-c6b7ad1feb014ad28f1790f5d9f11e20.jpeg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <svg class="icon icon-camera figure-article-caption-icon"> <use xlink:href="#icon-camera" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> <span class="figure-article-caption-text">USI Affinity.</span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.usiaffinity.com/attorneyspreferred/lpl/" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> With seven cancel for any reason plans available and the cheapest CFAR plan premiums, USI Affinity is our top choice for travelers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-5"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lowest premiums for CFAR policies</p></li> <li><p>Offers seven CFAR policy options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No pet medical coverage</p></li> <li><p>Kids aren’t covered for free</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> USI Affinity offered the most CFAR policy options—seven—out of the 18 cancel for any reason travel insurance companies we reviewed. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> Additionally, USI Affinity offered the lowest CFAR premium of any company we researched: $121. The company’s highest plan premium was $200, which is also among the lowest rates we found during our research. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> CFAR plans from USI Affinity include 75% reimbursement, with a maximum trip cancellation reimbursement of $150,000 for covered events and up to $250,000 in medical coverage per person, per trip.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plan Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> <li><strong>Lowest CFAR premium:</strong> $121</li><li><strong>Highest CFAR premium:</strong> $200</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-reimbursement-rate-allianz-travel-insurance"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Reimbursement Rate</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Allianz Travel Insurance</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-12" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Allianz Travel Insurance" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/ra--VVqKSc9igZs41-D74dspWzY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/allianz-travel-3dd61447249141dab5329f8f4e6ba160.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Allianz Travel Insurance" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/ra--VVqKSc9igZs41-D74dspWzY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/allianz-travel-3dd61447249141dab5329f8f4e6ba160.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Allianz Travel Insurance</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-13"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="data1=${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.allianztravelinsurance.com/" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> <strong><span class="ql-cursor"></span></strong>Cancel for any reason travel insurance from Allianz will provide up to 80% reimbursement for non-refundable travel costs.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-17"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Maximum reimbursement of 80%</p></li> <li><p>Kids under 17 are covered for free</p></li> <li><p>$200,000 limit for covered cancellations</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Low coverage limit for travel delays</p></li> <li><p>No pet medical coverage</p></li> <li><p>Limited coverage for medical expenses</p></li> <li><p>No missed connections coverage</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> If you spend a lot of money on trips, a CFAR plan from Allianz can be a good choice. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> Allianz offers up to 80% reimbursement for eligible travel expenses if you need to cancel for uncovered reasons, which was the highest rate of any of the insurers we analyzed. Additionally, Allianz’s  $200,000 trip cancellation coverage (for covered cancellations) was among the highest we found during research. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Although Allianz offers the most coverage for trip reimbursement, its CFAR plans have some limitations worth noting. For example, there’s no coverage for missed connections or pet medical expenses. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-22"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Allianz will only provide CFAR insurance if you insure the full cost of your trip within 14 days of making your first trip payment.<span class="ql-inline-citation" data-cite="1"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plan Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> <li><strong>Lowest CFAR premium</strong>:<strong> </strong>$261</li><li><strong>Highest CFAR premium</strong>:<strong> </strong>$315</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-most-affordable-premiums-for-upgraded-plans-tin-leg"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Most Affordable Premiums for Upgraded Plans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Tin Leg</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-25" style="--imgWidth: 254px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="TinLeg logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/Z-0K-cG1nP1mEDRNfbq4rZ13aLY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Tin-Leg-logo-ca16207f5c824c8b84313e64ee02aa3d.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="TinLeg logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/Z-0K-cG1nP1mEDRNfbq4rZ13aLY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Tin-Leg-logo-ca16207f5c824c8b84313e64ee02aa3d.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>TinLeg</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-26"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.tinleg.com/" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> If you want a cancel for any reason travel insurance policy with the best features and the most coverage, Tin Leg is a great choice because it offers the lowest premiums for its upgraded plans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-30"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lowest premium for upgraded plans</p></li> <li><p>Up to $500,000 in medical coverage</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No pet medical coverage</p></li> <li><p>Doesn’t offer multi-trip coverage</p></li> <li><p>No annual plans</p></li> <li><p>Kids aren’t covered for free</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> Out of the best CFAR companies on our list, Tin Leg has the lowest premiums for its upgraded CFAR plans. The highest plan premium from Tin Leg is just under $200.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> Another thing we like about Tin Leg is that it has the highest amount of coverage for medical expenses. The maximum amount of medical coverage is $500,000 per person, per trip. There were only six insurers we reviewed that offered that much coverage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> Despite the benefits of Tin Leg, this CFAR insurance provider also has some downsides. The plans don’t include pet medical coverage, and kids aren’t covered for free.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-35"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>Berkshire Hathaway offered a slightly lower premium than Tin Leg for its top-tier plan. However, the company’s overall score was below average and higher than just five of the other 17 companies. Therefore, we kept the insurer out of our rankings. </p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plan Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> <li><strong>Lowest CFAR premium:</strong> $145.55</li><li><strong>Highest CFAR premium:</strong> $199.50</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-trip-interruption-reimbursement-hth"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Trip Interruption Reimbursement</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> HTH</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-38" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="HTH Worldwide" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/rPueTgZAtsZ3U2Km6AA4JSgsk7s=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/hth-176f22433f0a405e833100456b2204e4.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="HTH Worldwide" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/rPueTgZAtsZ3U2Km6AA4JSgsk7s=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/hth-176f22433f0a405e833100456b2204e4.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <svg class="icon icon-camera figure-article-caption-icon"> <use xlink:href="#icon-camera" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> <span class="figure-article-caption-text">HTH Worldwide.</span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-39"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="src=${DOC_ID}&amp;tag=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.squaremouth.com/travel-insurance-providers/hth-worldwide?aid=22543-4415" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> HTH’s cancel for any reason travel insurance plan reimburses up to 200% of your trip interruption costs, which is the highest reimbursement limit out of the “best” companies we reviewed. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-43"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Highest trip interruption reimbursement limit</p></li> <li><p>Plan includes pet medical coverage</p></li> <li><p>Provides up to $500,000 in medical coverage</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Only one CFAR plan available</p></li> <li><p>Only reimburses $50,000 for covered cancellations</p></li> <li><p>No multi-trip coverage</p></li> <li><p>No annual plans</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> HTH only offers one CFAR plan, but it provides excellent coverage, including 200% reimbursement for your trip interruption costs (covered interruptions include 14 scenarios, including sickness and natural disasters).<span class="ql-inline-citation" data-cite="2"></span> Additionally, the plan includes $500,000 in medical coverage per person, per trip, as well as pet medical expenses coverage. HTH’s CFAR plan provides a maximum reimbursement of 75% for prepaid travel expenses, which is the typical rate. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-46"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>Thirteen of the 18 companies we analyzed offered a 75% CFAR reimbursement rate.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> HTH will only reimburse a maximum of $50,000 in trip cancellation costs for covered events, which is the lowest coverage limit out of the best companies on our list. In addition, it doesn’t offer annual plans, and the one CFAR travel insurance plan available doesn’t cover multiple trips. Additionally, the premium for HTH’s CFAR plan was  $301.82, which was around $31 more than the average for top-tier plans and nearly $80 more than the average for low-tier plans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plan Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> <li><strong>Lowest CFAR premium</strong>:<strong> </strong>$301.82</li><li><strong>Highest CFAR premium</strong>:<strong> </strong>$301.82</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-travel-delay-coverage-trawick-international"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Travel Delay Coverage</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Trawick International</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-50" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Trawick International" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/iwSwlgbxtjnxcsb5CoZFvD2Wnb0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/TrawickInternational-5270914e2661488db946dce067612973.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Trawick International" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/iwSwlgbxtjnxcsb5CoZFvD2Wnb0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/TrawickInternational-5270914e2661488db946dce067612973.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <svg class="icon icon-camera figure-article-caption-icon"> <use xlink:href="#icon-camera" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> <span class="figure-article-caption-text">Trawick International.</span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-51"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="src=${DOC_ID}&amp;tag=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.squaremouth.com/travel-insurance-providers/trawick-international?aid=22543-4415" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Trawick International’s cancel for any reason travel insurance plans provide $3,000 in travel delay coverage, which is the highest amount of delay coverage out of the companies on this list. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-55"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Highest amount of travel delay coverage</p></li> <li><p>Five CFAR plan options</p></li> <li><p>Affordable premiums</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Plans don’t include pet medical coverage</p></li> <li><p>No free coverage for kids</p></li> <li><p>Free-look period is only 10 days</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Trawick International offers the most travel delay coverage out of the 18 CFAR travel insurance companies we evaluated. Plans include a maximum of $3,000 in travel delay coverage in case you need to get a hotel or rent a car due to unexpected travel delays. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> Trawick International has five CFAR plans, and the premiums are pretty affordable. The lowest plan premium is $143.14, which is one of the cheapest premiums out of the companies we reviewed. You can also get annual plans and plans with multi-trip coverage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-59"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-4"> <p>Keep in mind that Trawick’s free look period is only 10 days, which is shorter than the typical 15-day period other insurers offer.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plan Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> <li><strong>Lowest CFAR premium:</strong> $143.14</li><li><strong>Highest CFAR premium:</strong> $302.94</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line  </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Cancel for any reason travel insurance can be worth the added cost, especially if you travel often or take expensive trips. However, the best CFAR travel insurance company is different for everyone. For instance, if you want the cheapest plan, USI Affinity is a great choice. But if you’re looking for a plan with a high CFAR reimbursement rate, Allianz is the top choice.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-2"> <span class="heading-toc" id="toc-frequently-asked-questions-05acab7c-b79e-4b96-a01a-b71a12e1b152"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What’s the Difference Between Trip Cancellation and Cancel for Any Reason?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Trip cancellation is a standard part of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-travel-insurance-4842641">travel insurance</a> that covers the cost of non-refundable travel if you have to cancel a trip for a specific reason, including illness, injury, or death. Cancel for any reason insurance is something you add to a policy to cover cancellations that don’t qualify for trip cancellation. For example, if you have to cancel a trip at the last second because your fear of flying overwhelms you a couple of days before your flight,  CFAR allows you to cancel, no questions asked. Another key difference is that trip cancellation insurance typically offers a maximum dollar amount your policy pays out, whereas CFAR reimbursements you a percentage of your non-refundable trip costs.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Is Cancel for Any Reason Coverage?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Cancel for any reason coverage is a type of insurance coverage you can add to a travel insurance policy that will cover you for cancellation reasons that aren’t covered by your travel insurance. CFAR insurance reimburses you a percentage of your non-refundable travel costs, often 50% to 75%.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">How Much Does Cancellation Insurance Cost?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Cancel for any reason insurance can cost you anywhere from 10% to 40% of your travel insurance premium. For example, during our research, we found adding CFAR to a Travel Guard policy that cost $169.29 would add an extra $38.08.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">Can You Buy Cancel for Any Reason Insurance After 21 Days?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>In most cases, travel insurance companies will require you to buy your CFAR insurance within 14 to 21 days of your first payment for the trip.<span class="ql-inline-citation" data-cite="3"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> Narrowing down the best cancel for any reason travel insurance companies means analyzing aspects of travel insurance that are most important to travelers.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> With that in mind, we examined 18 top travel insurance companies across the following 16 categories: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> <li><strong>CFAR reimbursement rate (20% of score)</strong>: Companies with higher reimbursement rates for CFAR coverage received the highest scores.</li><li><strong>Premiums (17%)</strong>; We analyzed the highest and lowest premiums offered by a company, weighting the two premiums equally. </li><li><strong>Policy types available (7.5%)</strong>: Having a choice of plans to pick from can ensure you aren’t paying for coverage you don’t need. Companies with more options scored higher.</li><li><strong>Free look period length (5%)</strong>: A free-look period is an invaluable part of buying insurance. Companies with longer free-look periods received higher scores. </li><li><strong>Pre-existing condition coverage (5%)</strong>: Companies that offered medical coverage for pre-existing conditions scored higher than those that didn’t. </li><li><strong>Maximum coverage for emergency transportation (5%)</strong>: Evacuation out of a country for medical reasons can be costly, so we scored companies higher if they had higher emergency transportation limits. </li><li><strong>Maximum baggage coverage (5%)</strong>: Companies that offer higher coverage limits for lost and damaged baggage score higher. </li><li><strong>Maximum medical coverage (5%)</strong>: Medical coverage for injuries you sustain while traveling can offset potentially expensive hospital bills. </li><li><strong>Adventure sports coverage (5%)</strong>: Provides coverage if you participate in adventure sports during your trip. </li><li><strong>Sports and activity coverage (5%)</strong>: Because vacations typically include new activities or participation in sports, it can be helpful to have travel insurance that covers injuries you sustain during those activities. </li><li><strong>Maximum travel delay coverage (5%)</strong>: Travel delay coverage can help you cover the cost of lodging and food if you’re stranded due to, for example, a canceled flight or train ride. </li><li><strong>Maximum trip cancellation coverage (5%)</strong>: If you have to cancel a trip for covered reasons (CFAR insurance covers cancellations not otherwise covered by your insurance), a high coverage limit can help offset some or all of your non-refundable trip costs. </li><li><strong>AM Best rating (2.5%)</strong>: A high AM Best rating means a company is very likely to pay out a claim in the near future, so companies with higher ratings scored higher. </li><li><strong>Maximum trip interruption reimbursement rate (2.5%)</strong>: Companies that offered higher reimbursement amounts in the event of a trip interruption earned higher scores in this category. </li><li><strong>Multi-trip coverage (2.5%)</strong>: Avid travelers can benefit from multi-trip coverage, and may be able to save money by booking one insurance package as opposed to a separate policy for each trip. </li><li><strong>No extra charge for a child: (2.5%)</strong>: Companies that offered to include at least one child in their CFAR insurance policies received higher scores than those that didn’t. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Woman using smartphone to book flight tickets and plan holiday " class="primary-image__image mntl-primary-image--blurry" height="2667" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/V_5PeFsXJWCph5M5Tu_hZ6whONk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg" srcset="https://www.investopedia.com/thmb/afpY9T8dzerWrQH_2b7uWgjia5M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="4000"/> <noscript> <img alt="Woman using smartphone to book flight tickets and plan holiday " class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="2667" sizes="750px" src="https://www.investopedia.com/thmb/V_5PeFsXJWCph5M5Tu_hZ6whONk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg" srcset="https://www.investopedia.com/thmb/afpY9T8dzerWrQH_2b7uWgjia5M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Oscar Wong / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp 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These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>Allianz. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.allianztravelinsurance.com/travel/insurance-101/cancel-anytime-explained.htm" rel="nofollow sponsored">How the Cancel Anytime Upgrade Works</a>.”</p></li> <li class="mntl-sources__source" id="citation-2"><p>HTH Worldwide Travel Insurance. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.hthtravelinsurance.com/1_benefits_protector.cfm" rel="nofollow sponsored">TripProtector Classic Benefits</a>.”</p></li> <li class="mntl-sources__source" id="citation-3"><p>SquareMouth. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.squaremouth.com/travel-insurance-benefits/cancel-for-any-reason" rel="nofollow sponsored">Your Guide to Cancel For Any Reason Travel Insurance</a>.”</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 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The best cancel for any reason (CFAR) travel insurance provider is [USI Affinity](https://www.usiaffinity.com/attorneyspreferred/lpl/), which offers seven cancel for any reason plans and the cheapest premiums of all the companies we researched. To help you choose the best cancel for any reason travel insurance, we evaluated 18 companies based on 28 criteria. Some of the factors we looked at include the maximum CFAR reimbursement rates (20% of the score), premiums (17.5%), number of policy types available (7.5%), and trip cancellation coverage amounts (5%). If you’re a frequent traveler, having [travel insurance](https://www.investopedia.com/best-travel-insurance-4842641) can be valuable. But if you need to cancel a trip, your policy will only refund your prepaid expenses due to certain circumstances. Adding cancel for any reason travel insurance to your policy covers many reasons for canceling that normally are not covered, like last-minute work obligations or safety concerns. ## Best Cancel for Any Reason Travel Insurance of 2024 * **Best Overall:** [USI Affinity](https://www.usiaffinity.com/attorneyspreferred/lpl/) * **Best Reimbursement Rate:** [Allianz Travel Insurance](https://www.allianztravelinsurance.com/) * **Most Affordable Premiums for Upgraded Plans:** [Tin Leg](https://www.tinleg.com/) * **Best for Trip Interruption Reimbursement:** [HTH](https://www.squaremouth.com/travel-insurance-providers/hth-worldwide?aid=22543-4415) * **Best for Travel Delay Coverage:** [Trawick International](https://www.squaremouth.com/travel-insurance-providers/trawick-international?aid=22543-4415) All premiums mentioned are based on a $3,500, 10-day trip from Florida to Costa Rica for two same-aged travelers. We gathered quotes for four different ages: 28, 40, 55, and 70. Best Cancel for Any Reason Travel Insurance of 2024 Expand Best Cancel for Any Reason Travel Insurance of 2024 * [Our Top Picks](#summary-list) * [USI Affinity](#toc-best-overall-usi-affinity) * [Allianz Travel Insurance](#toc-best-reimbursement-rate-allianz-travel-insurance) * [Tin Leg](#toc-most-affordable-premiums-for-upgraded-plans-tin-leg) * [HTH](#toc-best-for-trip-interruption-reimbursement-hth) * [Trawick International](#toc-best-for-travel-delay-coverage-trawick-international) * See More (2) * [The Bottom Line](#toc-the-bottom-line) * [Frequently Asked Questions](#toc-frequently-asked-questions-05acab7c-b79e-4b96-a01a-b71a12e1b152) * [Methodology](#toc-methodology) ### Best Overall : USI Affinity --- ![USI Affinity]() :fill(white):max_bytes(150000):strip_icc()/USIAffinity-c6b7ad1feb014ad28f1790f5d9f11e20.jpeg) USI Affinity. [Get a Quote](https://www.usiaffinity.com/attorneyspreferred/lpl/) Why We Chose It With seven cancel for any reason plans available and the cheapest CFAR plan premiums, USI Affinity is our top choice for travelers. Pros & Cons Pros * Lowest premiums for CFAR policies * Offers seven CFAR policy options Cons * No pet medical coverage * Kids aren’t covered for free Overview USI Affinity offered the most CFAR policy options—seven—out of the 18 cancel for any reason travel insurance companies we reviewed. Additionally, USI Affinity offered the lowest CFAR premium of any company we researched: $121. The company’s highest plan premium was $200, which is also among the lowest rates we found during our research. CFAR plans from USI Affinity include 75% reimbursement, with a maximum trip cancellation reimbursement of $150,000 for covered events and up to $250,000 in medical coverage per person, per trip.  Plan Pricing * **Lowest CFAR premium:** $121 * **Highest CFAR premium:** $200 ### Best Reimbursement Rate : Allianz Travel Insurance --- ![Allianz Travel Insurance]() :fill(white):max_bytes(150000):strip_icc()/allianz-travel-3dd61447249141dab5329f8f4e6ba160.jpg) Allianz Travel Insurance [Get a Quote](https://www.allianztravelinsurance.com/) Why We Chose It Cancel for any reason travel insurance from Allianz will provide up to 80% reimbursement for non-refundable travel costs.  Pros & Cons Pros * Maximum reimbursement of 80% * Kids under 17 are covered for free * $200,000 limit for covered cancellations Cons * Low coverage limit for travel delays * No pet medical coverage * Limited coverage for medical expenses * No missed connections coverage Overview If you spend a lot of money on trips, a CFAR plan from Allianz can be a good choice. Allianz offers up to 80% reimbursement for eligible travel expenses if you need to cancel for uncovered reasons, which was the highest rate of any of the insurers we analyzed. Additionally, Allianz’s  $200,000 trip cancellation coverage (for covered cancellations) was among the highest we found during research. Although Allianz offers the most coverage for trip reimbursement, its CFAR plans have some limitations worth noting. For example, there’s no coverage for missed connections or pet medical expenses. Allianz will only provide CFAR insurance if you insure the full cost of your trip within 14 days of making your first trip payment. Plan Pricing * **Lowest CFAR premium**:$261 * **Highest CFAR premium**:$315 ### Most Affordable Premiums for Upgraded Plans : Tin Leg --- ![TinLeg logo]() :fill(white):max_bytes(150000):strip_icc()/Tin-Leg-logo-ca16207f5c824c8b84313e64ee02aa3d.jpg) TinLeg [Get a Quote](https://www.tinleg.com/) Why We Chose It If you want a cancel for any reason travel insurance policy with the best features and the most coverage, Tin Leg is a great choice because it offers the lowest premiums for its upgraded plans. Pros & Cons Pros * Lowest premium for upgraded plans * Up to $500,000 in medical coverage Cons * No pet medical coverage * Doesn’t offer multi-trip coverage * No annual plans * Kids aren’t covered for free Overview Out of the best CFAR companies on our list, Tin Leg has the lowest premiums for its upgraded CFAR plans. The highest plan premium from Tin Leg is just under $200.  Another thing we like about Tin Leg is that it has the highest amount of coverage for medical expenses. The maximum amount of medical coverage is $500,000 per person, per trip. There were only six insurers we reviewed that offered that much coverage. Despite the benefits of Tin Leg, this CFAR insurance provider also has some downsides. The plans don’t include pet medical coverage, and kids aren’t covered for free.  Berkshire Hathaway offered a slightly lower premium than Tin Leg for its top-tier plan. However, the company’s overall score was below average and higher than just five of the other 17 companies. Therefore, we kept the insurer out of our rankings.  Plan Pricing * **Lowest CFAR premium:** $145.55 * **Highest CFAR premium:** $199.50 ### Best for Trip Interruption Reimbursement : HTH --- ![HTH Worldwide]() :fill(white):max_bytes(150000):strip_icc()/hth-176f22433f0a405e833100456b2204e4.jpg) HTH Worldwide. [Get a Quote](https://www.squaremouth.com/travel-insurance-providers/hth-worldwide?aid=22543-4415) Why We Chose It HTH’s cancel for any reason travel insurance plan reimburses up to 200% of your trip interruption costs, which is the highest reimbursement limit out of the “best” companies we reviewed. Pros & Cons Pros * Highest trip interruption reimbursement limit * Plan includes pet medical coverage * Provides up to $500,000 in medical coverage Cons * Only one CFAR plan available * Only reimburses $50,000 for covered cancellations * No multi-trip coverage * No annual plans Overview HTH only offers one CFAR plan, but it provides excellent coverage, including 200% reimbursement for your trip interruption costs (covered interruptions include 14 scenarios, including sickness and natural disasters). Additionally, the plan includes $500,000 in medical coverage per person, per trip, as well as pet medical expenses coverage. HTH’s CFAR plan provides a maximum reimbursement of 75% for prepaid travel expenses, which is the typical rate. Thirteen of the 18 companies we analyzed offered a 75% CFAR reimbursement rate. HTH will only reimburse a maximum of $50,000 in trip cancellation costs for covered events, which is the lowest coverage limit out of the best companies on our list. In addition, it doesn’t offer annual plans, and the one CFAR travel insurance plan available doesn’t cover multiple trips. Additionally, the premium for HTH’s CFAR plan was  $301.82, which was around $31 more than the average for top-tier plans and nearly $80 more than the average for low-tier plans. Plan Pricing * **Lowest CFAR premium**:$301.82 * **Highest CFAR premium**:$301.82 ### Best for Travel Delay Coverage : Trawick International --- ![Trawick International]() :fill(white):max_bytes(150000):strip_icc()/TrawickInternational-5270914e2661488db946dce067612973.jpg) Trawick International. [Get a Quote](https://www.squaremouth.com/travel-insurance-providers/trawick-international?aid=22543-4415) Why We Chose It Trawick International’s cancel for any reason travel insurance plans provide $3,000 in travel delay coverage, which is the highest amount of delay coverage out of the companies on this list. Pros & Cons Pros * Highest amount of travel delay coverage * Five CFAR plan options * Affordable premiums Cons * Plans don’t include pet medical coverage * No free coverage for kids * Free-look period is only 10 days Overview Trawick International offers the most travel delay coverage out of the 18 CFAR travel insurance companies we evaluated. Plans include a maximum of $3,000 in travel delay coverage in case you need to get a hotel or rent a car due to unexpected travel delays. Trawick International has five CFAR plans, and the premiums are pretty affordable. The lowest plan premium is $143.14, which is one of the cheapest premiums out of the companies we reviewed. You can also get annual plans and plans with multi-trip coverage. Keep in mind that Trawick’s free look period is only 10 days, which is shorter than the typical 15-day period other insurers offer. Plan Pricing * **Lowest CFAR premium:** $143.14 * **Highest CFAR premium:** $302.94 ## The Bottom Line Cancel for any reason travel insurance can be worth the added cost, especially if you travel often or take expensive trips. However, the best CFAR travel insurance company is different for everyone. For instance, if you want the cheapest plan, USI Affinity is a great choice. But if you’re looking for a plan with a high CFAR reimbursement rate, Allianz is the top choice.  ## Frequently Asked Questions * ### What’s the Difference Between Trip Cancellation and Cancel for Any Reason? Trip cancellation is a standard part of [travel insurance](https://www.investopedia.com/best-travel-insurance-4842641) that covers the cost of non-refundable travel if you have to cancel a trip for a specific reason, including illness, injury, or death. Cancel for any reason insurance is something you add to a policy to cover cancellations that don’t qualify for trip cancellation. For example, if you have to cancel a trip at the last second because your fear of flying overwhelms you a couple of days before your flight,  CFAR allows you to cancel, no questions asked. Another key difference is that trip cancellation insurance typically offers a maximum dollar amount your policy pays out, whereas CFAR reimbursements you a percentage of your non-refundable trip costs. * ### What Is Cancel for Any Reason Coverage? Cancel for any reason coverage is a type of insurance coverage you can add to a travel insurance policy that will cover you for cancellation reasons that aren’t covered by your travel insurance. CFAR insurance reimburses you a percentage of your non-refundable travel costs, often 50% to 75%. * ### How Much Does Cancellation Insurance Cost? Cancel for any reason insurance can cost you anywhere from 10% to 40% of your travel insurance premium. For example, during our research, we found adding CFAR to a Travel Guard policy that cost $169.29 would add an extra $38.08. * ### Can You Buy Cancel for Any Reason Insurance After 21 Days? In most cases, travel insurance companies will require you to buy your CFAR insurance within 14 to 21 days of your first payment for the trip. ## Methodology Narrowing down the best cancel for any reason travel insurance companies means analyzing aspects of travel insurance that are most important to travelers.  With that in mind, we examined 18 top travel insurance companies across the following 16 categories: * **CFAR reimbursement rate (20% of score)**: Companies with higher reimbursement rates for CFAR coverage received the highest scores. * **Premiums (17%)**; We analyzed the highest and lowest premiums offered by a company, weighting the two premiums equally. * **Policy types available (7.5%)**: Having a choice of plans to pick from can ensure you aren’t paying for coverage you don’t need. Companies with more options scored higher. * **Free look period length (5%)**: A free-look period is an invaluable part of buying insurance. Companies with longer free-look periods received higher scores. * **Pre-existing condition coverage (5%)**: Companies that offered medical coverage for pre-existing conditions scored higher than those that didn’t. * **Maximum coverage for emergency transportation (5%)**: Evacuation out of a country for medical reasons can be costly, so we scored companies higher if they had higher emergency transportation limits. * **Maximum baggage coverage (5%)**: Companies that offer higher coverage limits for lost and damaged baggage score higher. * **Maximum medical coverage (5%)**: Medical coverage for injuries you sustain while traveling can offset potentially expensive hospital bills. * **Adventure sports coverage (5%)**: Provides coverage if you participate in adventure sports during your trip. * **Sports and activity coverage (5%)**: Because vacations typically include new activities or participation in sports, it can be helpful to have travel insurance that covers injuries you sustain during those activities. * **Maximum travel delay coverage (5%)**: Travel delay coverage can help you cover the cost of lodging and food if you’re stranded due to, for example, a canceled flight or train ride. * **Maximum trip cancellation coverage (5%)**: If you have to cancel a trip for covered reasons (CFAR insurance covers cancellations not otherwise covered by your insurance), a high coverage limit can help offset some or all of your non-refundable trip costs. * **AM Best rating (2.5%)**: A high AM Best rating means a company is very likely to pay out a claim in the near future, so companies with higher ratings scored higher. * **Maximum trip interruption reimbursement rate (2.5%)**: Companies that offered higher reimbursement amounts in the event of a trip interruption earned higher scores in this category. * **Multi-trip coverage (2.5%)**: Avid travelers can benefit from multi-trip coverage, and may be able to save money by booking one insurance package as opposed to a separate policy for each trip. * **No extra charge for a child: (2.5%)**: Companies that offered to include at least one child in their CFAR insurance policies received higher scores than those that didn’t. :max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-cancel-for-any-reason-travel-insurance-of-july-2023-7561959-c1a7120519104284a9679db9ff250f09.jpg) Oscar Wong / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Allianz. “[How the Cancel Anytime Upgrade Works](https://www.allianztravelinsurance.com/travel/insurance-101/cancel-anytime-explained.htm).” 2. HTH Worldwide Travel Insurance. “[TripProtector Classic Benefits](https://www.hthtravelinsurance.com/1_benefits_protector.cfm).” 3. SquareMouth. “[Your Guide to Cancel For Any Reason Travel Insurance](https://www.squaremouth.com/travel-insurance-benefits/cancel-for-any-reason).” Related Articles [![A family with a pile of luggage has a discussion.]() :max_bytes(150000):strip_icc()/trip-74f2345da73d46dd942e9383b6f1791a.jpg) What Is Cancel for Any Reason (CFAR) Insurance?](https://www.investopedia.com/what-is-cancel-for-any-reason-cfar-insurance-8599192) [![Travel Insurance Companies]() :max_bytes(150000):strip_icc()/GettyImages-1365609230-4636d33ba0ec41799d44f64e1d85ddac.jpg) Best Travel Insurance Companies for May 2024](https://www.investopedia.com/best-travel-insurance-4842641) [![A woman traveler in an airport]() :max_bytes(150000):strip_icc()/traveler-06ad08a1b3e545fab9565dc80958afe1.jpg) Do I Need Travel Insurance?](https://www.investopedia.com/do-i-need-travel-insurance-7553834) [![Woman smiling into phone in front of temple in Bangkok]() :max_bytes(150000):strip_icc()/travelinsurance-cb50a4e892344d29a58578e9d2178685.jpg) What Is Travel Insurance, and What Does It Cover?](https://www.investopedia.com/terms/t/travel-insurance.asp) [![woman carrying suitcase and holding smartphone on hand, walking in airport terminal]() :max_bytes(150000):strip_icc()/Primary-Image-how-much-does-travel-insurance-cost-7377124-c44e95776d284d3e84b756908efb5add.jpg) How Much Does Travel Insurance Cost?](https://www.investopedia.com/how-much-does-travel-insurance-cost-7377124) [![woman carrying suitcase walking in airport terminal]() :max_bytes(150000):strip_icc()/Primary-Image-how-to-get-the-cheapest-travel-insurance-7370036-778ece1077ff421197034d11fc16ce0c.jpg) How to Get the Cheapest Travel Insurance](https://www.investopedia.com/how-to-get-the-cheapest-travel-insurance-7370036) Related Terms [What Is Travel Insurance, and What Does It Cover?](https://www.investopedia.com/terms/t/travel-insurance.asp) Travel insurance helps cover financial losses associated with illness, injury, accidents, flight or other transportation delays, and other issues that happen during a trip. [more](https://www.investopedia.com/terms/t/travel-insurance.asp) [Insurance: Definition, How It Works, and Main Types of Policies](https://www.investopedia.com/terms/i/insurance.asp) Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies and/or perils. [more](https://www.investopedia.com/terms/i/insurance.asp) [What Is a Car Insurance Premium?](https://www.investopedia.com/what-is-a-car-insurance-premium-8606529) A car insurance premium is the money you pay your insurer in exchange for the protections outlined in your policy. Learn how to get the best rates. [more](https://www.investopedia.com/what-is-a-car-insurance-premium-8606529) [What Is Short-Term Health Insurance?](https://www.investopedia.com/what-is-short-term-health-insurance-8624265) Short-term health insurance offers healthcare coverage for a limited period of time. [more](https://www.investopedia.com/what-is-short-term-health-insurance-8624265) [What Is Dental Insurance?](https://www.investopedia.com/what-is-dental-insurance-8580593) Dental insurance helps people pay for dental treatments and procedures. Discover how it works and learn about the various coverage options. [more](https://www.investopedia.com/what-is-dental-insurance-8580593) [What Is Medicare Supplement Plan G?](https://www.investopedia.com/what-is-medicare-supplement-plan-g-8606488) Plan G is a popular Medicare supplement plan that helps cover out-of-pocket costs for people with Original Medicare. Learn more about Plan G, including the pros and cons. [more](https://www.investopedia.com/what-is-medicare-supplement-plan-g-8606488)

The best cancel for any reason (CFAR) travel insurance provider is USI Affinity, which offers seven cancel for any reason plans and the cheapest premiums of all the companies we researched. To help you choose the best cancel for any reason travel insurance, we evaluated 18 companies based on 28 criteria. Some of the factors we looked at include the maximum CFAR reimbursement rates (20% of the score), premiums (17.5%), number of policy types available (7.5%), and trip cancellation coverage amounts (5%). If you’re a frequent traveler, having travel insurance can be valuable. But if you need to cancel a trip, your policy will only refund your prepaid expenses due to certain circumstances. Adding cancel for any reason travel insurance to your policy covers many reasons for canceling that normally are not covered, like last-minute work obligations or safety concerns. Best Cancel for Any Reason Travel Insurance of 2024 Best Overall: USI Affinity Best Reimbursement Rate: Allianz Travel Insurance Most Affordable Premiums for Upgraded Plans: Tin Leg Best for Trip Interruption Reimbursement: HTH Best for Travel Delay Coverage: Trawick International All premiums mentioned are based on a $3,500, 10-day trip from Florida to Costa Rica for two same-aged travelers. We gathered quotes for four different ages: 28, 40, 55, and 70. Best Cancel for Any Reason Travel Insurance of 2024 Expand Best Cancel for Any Reason Travel Insurance of 2024 Our Top Picks USI Affinity Allianz Travel Insurance Tin Leg HTH Trawick International See More (2) The Bottom Line Frequently Asked Questions Methodology Best Overall : USI Affinity USI Affinity. Get a Quote Why We Chose It With seven cancel for any reason plans available and the cheapest CFAR plan premiums, USI Affinity is our top choice for travelers. Pros & Cons Pros Lowest premiums for CFAR policies Offers seven CFAR policy options Cons No pet medical coverage Kids aren’t covered for free Overview USI Affinity offered the most CFAR policy options—seven—out of the 18 cancel for any reason travel insurance companies we reviewed. Additionally, USI Affinity offered the lowest CFAR premium of any company we researched: $121. The company’s highest plan premium was $200, which is also among the lowest rates we found during our research. CFAR plans from USI Affinity include 75% reimbursement, with a maximum trip cancellation reimbursement of $150,000 for covered events and up to $250,000 in medical coverage per person, per trip.  Plan Pricing Lowest CFAR premium: $121Highest CFAR premium: $200 Best Reimbursement Rate : Allianz Travel Insurance Allianz Travel Insurance Get a Quote Why We Chose It Cancel for any reason travel insurance from Allianz will provide up to 80% reimbursement for non-refundable travel costs.  Pros & Cons Pros Maximum reimbursement of 80% Kids under 17 are covered for free $200,000 limit for covered cancellations Cons Low coverage limit for travel delays No pet medical coverage Limited coverage for medical expenses No missed connections coverage Overview If you spend a lot of money on trips, a CFAR plan from Allianz can be a good choice. Allianz offers up to 80% reimbursement for eligible travel expenses if you need to cancel for uncovered reasons, which was the highest rate of any of the insurers we analyzed. Additionally, Allianz’s  $200,000 trip cancellation coverage (for covered cancellations) was among the highest we found during research. Although Allianz offers the most coverage for trip reimbursement, its CFAR plans have some limitations worth noting. For example, there’s no coverage for missed connections or pet medical expenses. Allianz will only provide CFAR insurance if you insure the full cost of your trip within 14 days of making your first trip payment. Plan Pricing Lowest CFAR premium: $261Highest CFAR premium: $315 Most Affordable Premiums for Upgraded Plans : Tin Leg TinLeg Get a Quote Why We Chose It If you want a cancel for any reason travel insurance policy with the best features and the most coverage, Tin Leg is a great choice because it offers the lowest premiums for its upgraded plans. Pros & Cons Pros Lowest premium for upgraded plans Up to $500,000 in medical coverage Cons No pet medical coverage Doesn’t offer multi-trip coverage No annual plans Kids aren’t covered for free Overview Out of the best CFAR companies on our list, Tin Leg has the lowest premiums for its upgraded CFAR plans. The highest plan premium from Tin Leg is just under $200.  Another thing we like about Tin Leg is that it has the highest amount of coverage for medical expenses. The maximum amount of medical coverage is $500,000 per person, per trip. There were only six insurers we reviewed that offered that much coverage. Despite the benefits of Tin Leg, this CFAR insurance provider also has some downsides. The plans don’t include pet medical coverage, and kids aren’t covered for free.  Berkshire Hathaway offered a slightly lower premium than Tin Leg for its top-tier plan. However, the company’s overall score was below average and higher than just five of the other 17 companies. Therefore, we kept the insurer out of our rankings.  Plan Pricing Lowest CFAR premium: $145.55Highest CFAR premium: $199.50 Best for Trip Interruption Reimbursement : HTH HTH Worldwide. Get a Quote Why We Chose It HTH’s cancel for any reason travel insurance plan reimburses up to 200% of your trip interruption costs, which is the highest reimbursement limit out of the “best” companies we reviewed. Pros & Cons Pros Highest trip interruption reimbursement limit Plan includes pet medical coverage Provides up to $500,000 in medical coverage Cons Only one CFAR plan available Only reimburses $50,000 for covered cancellations No multi-trip coverage No annual plans Overview HTH only offers one CFAR plan, but it provides excellent coverage, including 200% reimbursement for your trip interruption costs (covered interruptions include 14 scenarios, including sickness and natural disasters). Additionally, the plan includes $500,000 in medical coverage per person, per trip, as well as pet medical expenses coverage. HTH’s CFAR plan provides a maximum reimbursement of 75% for prepaid travel expenses, which is the typical rate. Thirteen of the 18 companies we analyzed offered a 75% CFAR reimbursement rate. HTH will only reimburse a maximum of $50,000 in trip cancellation costs for covered events, which is the lowest coverage limit out of the best companies on our list. In addition, it doesn’t offer annual plans, and the one CFAR travel insurance plan available doesn’t cover multiple trips. Additionally, the premium for HTH’s CFAR plan was  $301.82, which was around $31 more than the average for top-tier plans and nearly $80 more than the average for low-tier plans. Plan Pricing Lowest CFAR premium: $301.82Highest CFAR premium: $301.82 Best for Travel Delay Coverage : Trawick International Trawick International. Get a Quote Why We Chose It Trawick International’s cancel for any reason travel insurance plans provide $3,000 in travel delay coverage, which is the highest amount of delay coverage out of the companies on this list. Pros & Cons Pros Highest amount of travel delay coverage Five CFAR plan options Affordable premiums Cons Plans don’t include pet medical coverage No free coverage for kids Free-look period is only 10 days Overview Trawick International offers the most travel delay coverage out of the 18 CFAR travel insurance companies we evaluated. Plans include a maximum of $3,000 in travel delay coverage in case you need to get a hotel or rent a car due to unexpected travel delays. Trawick International has five CFAR plans, and the premiums are pretty affordable. The lowest plan premium is $143.14, which is one of the cheapest premiums out of the companies we reviewed. You can also get annual plans and plans with multi-trip coverage. Keep in mind that Trawick’s free look period is only 10 days, which is shorter than the typical 15-day period other insurers offer. Plan Pricing Lowest CFAR premium: $143.14Highest CFAR premium: $302.94 The Bottom Line  Cancel for any reason travel insurance can be worth the added cost, especially if you travel often or take expensive trips. However, the best CFAR travel insurance company is different for everyone. For instance, if you want the cheapest plan, USI Affinity is a great choice. But if you’re looking for a plan with a high CFAR reimbursement rate, Allianz is the top choice.  Frequently Asked Questions What’s the Difference Between Trip Cancellation and Cancel for Any Reason? Trip cancellation is a standard part of travel insurance that covers the cost of non-refundable travel if you have to cancel a trip for a specific reason, including illness, injury, or death. Cancel for any reason insurance is something you add to a policy to cover cancellations that don’t qualify for trip cancellation. For example, if you have to cancel a trip at the last second because your fear of flying overwhelms you a couple of days before your flight,  CFAR allows you to cancel, no questions asked. Another key difference is that trip cancellation insurance typically offers a maximum dollar amount your policy pays out, whereas CFAR reimbursements you a percentage of your non-refundable trip costs. What Is Cancel for Any Reason Coverage? Cancel for any reason coverage is a type of insurance coverage you can add to a travel insurance policy that will cover you for cancellation reasons that aren’t covered by your travel insurance. CFAR insurance reimburses you a percentage of your non-refundable travel costs, often 50% to 75%. How Much Does Cancellation Insurance Cost? Cancel for any reason insurance can cost you anywhere from 10% to 40% of your travel insurance premium. For example, during our research, we found adding CFAR to a Travel Guard policy that cost $169.29 would add an extra $38.08. Can You Buy Cancel for Any Reason Insurance After 21 Days? In most cases, travel insurance companies will require you to buy your CFAR insurance within 14 to 21 days of your first payment for the trip. Methodology Narrowing down the best cancel for any reason travel insurance companies means analyzing aspects of travel insurance that are most important to travelers.  With that in mind, we examined 18 top travel insurance companies across the following 16 categories: CFAR reimbursement rate (20% of score): Companies with higher reimbursement rates for CFAR coverage received the highest scores.Premiums (17%); We analyzed the highest and lowest premiums offered by a company, weighting the two premiums equally. Policy types available (7.5%): Having a choice of plans to pick from can ensure you aren’t paying for coverage you don’t need. Companies with more options scored higher.Free look period length (5%): A free-look period is an invaluable part of buying insurance. Companies with longer free-look periods received higher scores. Pre-existing condition coverage (5%): Companies that offered medical coverage for pre-existing conditions scored higher than those that didn’t. Maximum coverage for emergency transportation (5%): Evacuation out of a country for medical reasons can be costly, so we scored companies higher if they had higher emergency transportation limits. Maximum baggage coverage (5%): Companies that offer higher coverage limits for lost and damaged baggage score higher. Maximum medical coverage (5%): Medical coverage for injuries you sustain while traveling can offset potentially expensive hospital bills. Adventure sports coverage (5%): Provides coverage if you participate in adventure sports during your trip. Sports and activity coverage (5%): Because vacations typically include new activities or participation in sports, it can be helpful to have travel insurance that covers injuries you sustain during those activities. Maximum travel delay coverage (5%): Travel delay coverage can help you cover the cost of lodging and food if you’re stranded due to, for example, a canceled flight or train ride. Maximum trip cancellation coverage (5%): If you have to cancel a trip for covered reasons (CFAR insurance covers cancellations not otherwise covered by your insurance), a high coverage limit can help offset some or all of your non-refundable trip costs. AM Best rating (2.5%): A high AM Best rating means a company is very likely to pay out a claim in the near future, so companies with higher ratings scored higher. Maximum trip interruption reimbursement rate (2.5%): Companies that offered higher reimbursement amounts in the event of a trip interruption earned higher scores in this category. Multi-trip coverage (2.5%): Avid travelers can benefit from multi-trip coverage, and may be able to save money by booking one insurance package as opposed to a separate policy for each trip. No extra charge for a child: (2.5%): Companies that offered to include at least one child in their CFAR insurance policies received higher scores than those that didn’t.  Oscar Wong / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Allianz. “How the Cancel Anytime Upgrade Works.” HTH Worldwide Travel Insurance. “TripProtector Classic Benefits.” SquareMouth. “Your Guide to Cancel For Any Reason Travel Insurance.” Related Articles What Is Cancel for Any Reason (CFAR) Insurance? Best Travel Insurance Companies for May 2024 Do I Need Travel Insurance? What Is Travel Insurance, and What Does It Cover? How Much Does Travel Insurance Cost? How to Get the Cheapest Travel Insurance Related Terms What Is Travel Insurance, and What Does It Cover? Travel insurance helps cover financial losses associated with illness, injury, accidents, flight or other transportation delays, and other issues that happen during a trip. more Insurance: Definition, How It Works, and Main Types of Policies Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies and/or perils. more What Is a Car Insurance Premium? A car insurance premium is the money you pay your insurer in exchange for the protections outlined in your policy. Learn how to get the best rates. more What Is Short-Term Health Insurance? Short-term health insurance offers healthcare coverage for a limited period of time. more What Is Dental Insurance? Dental insurance helps people pay for dental treatments and procedures. Discover how it works and learn about the various coverage options. more What Is Medicare Supplement Plan G? Plan G is a popular Medicare supplement plan that helps cover out-of-pocket costs for people with Original Medicare. Learn more about Plan G, including the pros and cons. more

https://www.investopedia.com/ask/answers/are-my-investments-insured/

Who Insures Your Investment in the Stock Market

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Savings deposits are protected by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corporation</a> (FDIC) for up to $250,000 per account, but money in the securities markets had virtually no protection of any kind for much of Wall Street's history.<span class="ql-inline-citation" data-cite="9"></span> This changed in 1970 when Congress created the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sipc.asp">Securities Investor Protection Corporation</a> (SIPC).<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Congress created the Securities Investor Protection Corporation (SIPC) in 1970 to protect investors against losses incurred due to broker bankruptcies.<span class="ql-inline-citation" data-cite="12"></span></li><li>The SIPC doesn't insure you against losses resulting from market activity or fraud.<span class="ql-inline-citation" data-cite="11"></span></li><li>The SIPC will reimburse investors for up to $500,000, including $250,000 in cash, in the event of a firm's insolvency.<span class="ql-inline-citation" data-cite="11"></span></li><li>The SIPC only covers member firms.<span class="ql-inline-citation" data-cite="11"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-are-investment-losses-insured"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Are Investment Losses Insured? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> There's no insurance against the possible loss of your initial investment when you invest in a stock, bond, or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp">mutual fund</a>.<span class="ql-inline-citation" data-cite="11"></span> Insurance that you can purchase protects only against unexpected occurrences such as fire or theft, not depreciation in value. This is the case even if you're investing in collectibles. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">element of risk</a> is inherent to investing, which is why investments cannot be insured. The return is a reflection of the type of risk you're taking on, whether it's in the form of interest, dividends, or capital gains. The higher the risk, the higher the potential return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Conversely, a reduction in risk means a reduction in potential return. Consider the investment products that guarantee your principal. Your money is guaranteed because you'll receive a relatively low rate of return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-insurance-against-broker-and-dealer-bankruptcy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Insurance Against Broker and Dealer Bankruptcy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Congress created an agency known as the Securities Investor Protection Corporation (SIPC) in 1970. The agency's only function is to cover the losses of investors' accounts that are incurred by the bankruptcy of their broker or dealer. The SIPC doesn't cover any kind of loss incurred as a result of market activity, fraud, or any other cause of loss.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Regulatory agencies such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">Securities And Exchange Commission</a> (SEC) and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority</a> (FINRA) deal with issues related to fraud and other losses.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The SIPC either acts as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trustee.asp">trustee</a> or works with the client to recover assets in the event a broker or dealer becomes insolvent. The SIPC will also oversee the recovery process and ensure that all customer claims are paid in a timely and orderly manner and that all recovered securities are distributed on an equitable, pro rata basis.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The SIPC will reimburse investors for up to $500,000, of which $250,000 can be cash.<span class="ql-inline-citation" data-cite="11"></span> Any securities that are already registered in the certificate form in the investor's name will be returned as well.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> An example of SIPC protection </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> An investor has $300,000 in cash and $150,000 in securities that are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/185.asp">held in street name</a> with a broker or dealer that becomes insolvent. They also deposit $450,000 worth of securities registered in their own name with the broker or dealer just before it declares bankruptcy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The SIPC guidelines dictate that this investor will receive $250,000 of their cash and all their securities that are held in street name for a total of $400,000. The SIPC will reimburse up to $500,000, but the remaining $50,000 in cash won't be covered because it's over the $250,000 cash limit. They'll get all their stock certificates back, provided they're still registered in their name. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-when-sipc-protection-may-not-apply"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> When SIPC Protection May Not Apply </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Not all types of securities are eligible for SIPC reimbursement. Securities that the SIPC won't reimburse for include commodities, futures, currency, fixed and indexed annuity contracts, and limited partnerships (LPs). These are covered separately by insurance carriers. Any security that isn't registered with the SEC won't be eligible for reimbursement, either.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Like the FDIC, the SIPC only covers member firms, so you should make sure your brokerage is a member firm. You're probably okay if you're a customer at a large brokerage house, but check to make sure. If your account is at a smaller firm, make sure that it's a member and determine whether another company handles transactions on behalf of your brokerage as well. Make sure that this other company is also a member of the SIPC. This is necessary for your account to be insured.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The SEC has noted that a frequent problem for the SIPC is deciding how much of a person's account has suffered losses because of normal market risks and how much is lost due to unauthorized trading, which is a frequent cause of brokerage insolvency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You may have to prove to the SIPC that unauthorized trading took place on your account if you want to claim losses that are a result of this activity.<span class="ql-inline-citation" data-cite="5"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Make sure to send a letter to the firm for documentation purposes if you suspect that an unauthorized transaction on your account has taken place. Creating a record can help the SIPC decide which portions of your accounts are covered and which are not if your firm ever <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/08/sipc-fdic-bank-failure.asp">becomes insolvent</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Few investors nationwide have lost any actual assets from insolvency when the SIPC was involved. Between the pro rata recovery distribution, the return of all registered securities certificates, and the insurance coverage limits, there's little chance that an investor will suffer a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netloss.asp">net loss</a> as a result of broker or dealer insolvency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Many brokers and dealers also provide their customers with additional coverage through a private carrier in addition to protection by the SIPC. This type of coverage is known as "excess SIPC" insurance, and coverage limits for this protection are often high, as much as $100 million per account.<span class="ql-inline-citation" data-cite="14"></span> As with the SIPC, this coverage will only reimburse investors for losses due to broker or dealer insolvency. Coverage limits will vary from firm to firm. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-frequently-asked-questions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions </span> </h2> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-how-can-i-file-a-claim-with-the-sipc"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can I File a Claim with the SIPC?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SIPC "strongly recommends" that you file a claim electronically. You'll receive an email confirming receipt of your Customer Claim Form by the Trustee. Send your form by certified mail if you must use U.S. Postal Service delivery instead.<span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-can-the-sipc-help-me-if-i-can-prove-unautorized-trading-that-doesnt-result-in-the-firms-insolvency"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can the SIPC Help me if I Can Prove Unautorized Trading that Doesn't Result in the Firm's Insolvency?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can contact your state's securities regulator in this case, but you might be better off going to FINRA because its Enforcement Teams are authorized to take action for restitution in some cases.<span class="ql-inline-citation" data-cite="8"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-what-if-my-brokerage-firm-used-to-be-an-sipc-member-but-isnt-any-longer"></span> <h2 class="mntl-sc-block-questionandanswer__question">What If my Brokerage Firm Used to be an SIPC Member but Isn't Any Longer?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You're covered for an additional 180 days or six months after your firm is no longer an SIPC member. You can check on its status by calling the SIPC at 202-371-8300.<span class="ql-inline-citation" data-cite="7"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The SIPC can help you recover assets in the event that your broker or dealer goes bankrupt, but it doesn't protect you against losses that result from market activity. Nor will it protect you if you're dealing with a firm that isn't a member. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> You can take steps to protect your investment by documenting interactions with your broker or dealer if you have reason to believe that unauthorized trading caused its insolvency. You may have to prove that this event led to your loss. Many brokers and dealers provide their customers with additional "extra SIPC" coverage, and you'll want to check into this as well. </p></div>

Savings deposits are protected by the [Federal Deposit Insurance Corporation](https://www.investopedia.com/terms/f/fdic.asp) (FDIC) for up to $250,000 per account, but money in the securities markets had virtually no protection of any kind for much of Wall Street's history. This changed in 1970 when Congress created the [Securities Investor Protection Corporation](https://www.investopedia.com/terms/s/sipc.asp) (SIPC). ### Key Takeaways * Congress created the Securities Investor Protection Corporation (SIPC) in 1970 to protect investors against losses incurred due to broker bankruptcies. * The SIPC doesn't insure you against losses resulting from market activity or fraud. * The SIPC will reimburse investors for up to $500,000, including $250,000 in cash, in the event of a firm's insolvency. * The SIPC only covers member firms. ## Are Investment Losses Insured? There's no insurance against the possible loss of your initial investment when you invest in a stock, bond, or [mutual fund](https://www.investopedia.com/terms/m/mutualfund.asp). Insurance that you can purchase protects only against unexpected occurrences such as fire or theft, not depreciation in value. This is the case even if you're investing in collectibles. The [element of risk](https://www.investopedia.com/terms/r/risk.asp) is inherent to investing, which is why investments cannot be insured. The return is a reflection of the type of risk you're taking on, whether it's in the form of interest, dividends, or capital gains. The higher the risk, the higher the potential return. Conversely, a reduction in risk means a reduction in potential return. Consider the investment products that guarantee your principal. Your money is guaranteed because you'll receive a relatively low rate of return. ## Insurance Against Broker and Dealer Bankruptcy Congress created an agency known as the Securities Investor Protection Corporation (SIPC) in 1970. The agency's only function is to cover the losses of investors' accounts that are incurred by the bankruptcy of their broker or dealer. The SIPC doesn't cover any kind of loss incurred as a result of market activity, fraud, or any other cause of loss. ### Regulatory agencies such as the [Securities And Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) and the [Financial Industry Regulatory Authority](https://www.investopedia.com/terms/f/finra.asp) (FINRA) deal with issues related to fraud and other losses. The SIPC either acts as a [trustee](https://www.investopedia.com/terms/t/trustee.asp) or works with the client to recover assets in the event a broker or dealer becomes insolvent. The SIPC will also oversee the recovery process and ensure that all customer claims are paid in a timely and orderly manner and that all recovered securities are distributed on an equitable, pro rata basis. The SIPC will reimburse investors for up to $500,000, of which $250,000 can be cash. Any securities that are already registered in the certificate form in the investor's name will be returned as well. ### An example of SIPC protection An investor has $300,000 in cash and $150,000 in securities that are [held in street name](https://www.investopedia.com/ask/answers/185.asp) with a broker or dealer that becomes insolvent. They also deposit $450,000 worth of securities registered in their own name with the broker or dealer just before it declares bankruptcy. The SIPC guidelines dictate that this investor will receive $250,000 of their cash and all their securities that are held in street name for a total of $400,000. The SIPC will reimburse up to $500,000, but the remaining $50,000 in cash won't be covered because it's over the $250,000 cash limit. They'll get all their stock certificates back, provided they're still registered in their name. ## When SIPC Protection May Not Apply Not all types of securities are eligible for SIPC reimbursement. Securities that the SIPC won't reimburse for include commodities, futures, currency, fixed and indexed annuity contracts, and limited partnerships (LPs). These are covered separately by insurance carriers. Any security that isn't registered with the SEC won't be eligible for reimbursement, either. Like the FDIC, the SIPC only covers member firms, so you should make sure your brokerage is a member firm. You're probably okay if you're a customer at a large brokerage house, but check to make sure. If your account is at a smaller firm, make sure that it's a member and determine whether another company handles transactions on behalf of your brokerage as well. Make sure that this other company is also a member of the SIPC. This is necessary for your account to be insured. The SEC has noted that a frequent problem for the SIPC is deciding how much of a person's account has suffered losses because of normal market risks and how much is lost due to unauthorized trading, which is a frequent cause of brokerage insolvency. ### You may have to prove to the SIPC that unauthorized trading took place on your account if you want to claim losses that are a result of this activity. Make sure to send a letter to the firm for documentation purposes if you suspect that an unauthorized transaction on your account has taken place. Creating a record can help the SIPC decide which portions of your accounts are covered and which are not if your firm ever [becomes insolvent](https://www.investopedia.com/articles/stocks/08/sipc-fdic-bank-failure.asp). ## Special Considerations Few investors nationwide have lost any actual assets from insolvency when the SIPC was involved. Between the pro rata recovery distribution, the return of all registered securities certificates, and the insurance coverage limits, there's little chance that an investor will suffer a [net loss](https://www.investopedia.com/terms/n/netloss.asp) as a result of broker or dealer insolvency. Many brokers and dealers also provide their customers with additional coverage through a private carrier in addition to protection by the SIPC. This type of coverage is known as "excess SIPC" insurance, and coverage limits for this protection are often high, as much as $100 million per account. As with the SIPC, this coverage will only reimburse investors for losses due to broker or dealer insolvency. Coverage limits will vary from firm to firm. ## Frequently Asked Questions ## How Can I File a Claim with the SIPC? The SIPC "strongly recommends" that you file a claim electronically. You'll receive an email confirming receipt of your Customer Claim Form by the Trustee. Send your form by certified mail if you must use U.S. Postal Service delivery instead. ## Can the SIPC Help me if I Can Prove Unautorized Trading that Doesn't Result in the Firm's Insolvency? You can contact your state's securities regulator in this case, but you might be better off going to FINRA because its Enforcement Teams are authorized to take action for restitution in some cases. ## What If my Brokerage Firm Used to be an SIPC Member but Isn't Any Longer? You're covered for an additional 180 days or six months after your firm is no longer an SIPC member. You can check on its status by calling the SIPC at 202-371-8300. ## The Bottom Line The SIPC can help you recover assets in the event that your broker or dealer goes bankrupt, but it doesn't protect you against losses that result from market activity. Nor will it protect you if you're dealing with a firm that isn't a member. You can take steps to protect your investment by documenting interactions with your broker or dealer if you have reason to believe that unauthorized trading caused its insolvency. You may have to prove that this event led to your loss. Many brokers and dealers provide their customers with additional "extra SIPC" coverage, and you'll want to check into this as well.

Savings deposits are protected by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account, but money in the securities markets had virtually no protection of any kind for much of Wall Street's history. This changed in 1970 when Congress created the Securities Investor Protection Corporation (SIPC). Key Takeaways Congress created the Securities Investor Protection Corporation (SIPC) in 1970 to protect investors against losses incurred due to broker bankruptcies.The SIPC doesn't insure you against losses resulting from market activity or fraud.The SIPC will reimburse investors for up to $500,000, including $250,000 in cash, in the event of a firm's insolvency.The SIPC only covers member firms. Are Investment Losses Insured? There's no insurance against the possible loss of your initial investment when you invest in a stock, bond, or mutual fund. Insurance that you can purchase protects only against unexpected occurrences such as fire or theft, not depreciation in value. This is the case even if you're investing in collectibles. The element of risk is inherent to investing, which is why investments cannot be insured. The return is a reflection of the type of risk you're taking on, whether it's in the form of interest, dividends, or capital gains. The higher the risk, the higher the potential return. Conversely, a reduction in risk means a reduction in potential return. Consider the investment products that guarantee your principal. Your money is guaranteed because you'll receive a relatively low rate of return. Insurance Against Broker and Dealer Bankruptcy Congress created an agency known as the Securities Investor Protection Corporation (SIPC) in 1970. The agency's only function is to cover the losses of investors' accounts that are incurred by the bankruptcy of their broker or dealer. The SIPC doesn't cover any kind of loss incurred as a result of market activity, fraud, or any other cause of loss. Regulatory agencies such as the Securities And Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) deal with issues related to fraud and other losses. The SIPC either acts as a trustee or works with the client to recover assets in the event a broker or dealer becomes insolvent. The SIPC will also oversee the recovery process and ensure that all customer claims are paid in a timely and orderly manner and that all recovered securities are distributed on an equitable, pro rata basis. The SIPC will reimburse investors for up to $500,000, of which $250,000 can be cash. Any securities that are already registered in the certificate form in the investor's name will be returned as well. An example of SIPC protection An investor has $300,000 in cash and $150,000 in securities that are held in street name with a broker or dealer that becomes insolvent. They also deposit $450,000 worth of securities registered in their own name with the broker or dealer just before it declares bankruptcy. The SIPC guidelines dictate that this investor will receive $250,000 of their cash and all their securities that are held in street name for a total of $400,000. The SIPC will reimburse up to $500,000, but the remaining $50,000 in cash won't be covered because it's over the $250,000 cash limit. They'll get all their stock certificates back, provided they're still registered in their name. When SIPC Protection May Not Apply Not all types of securities are eligible for SIPC reimbursement. Securities that the SIPC won't reimburse for include commodities, futures, currency, fixed and indexed annuity contracts, and limited partnerships (LPs). These are covered separately by insurance carriers. Any security that isn't registered with the SEC won't be eligible for reimbursement, either. Like the FDIC, the SIPC only covers member firms, so you should make sure your brokerage is a member firm. You're probably okay if you're a customer at a large brokerage house, but check to make sure. If your account is at a smaller firm, make sure that it's a member and determine whether another company handles transactions on behalf of your brokerage as well. Make sure that this other company is also a member of the SIPC. This is necessary for your account to be insured. The SEC has noted that a frequent problem for the SIPC is deciding how much of a person's account has suffered losses because of normal market risks and how much is lost due to unauthorized trading, which is a frequent cause of brokerage insolvency. You may have to prove to the SIPC that unauthorized trading took place on your account if you want to claim losses that are a result of this activity. Make sure to send a letter to the firm for documentation purposes if you suspect that an unauthorized transaction on your account has taken place. Creating a record can help the SIPC decide which portions of your accounts are covered and which are not if your firm ever becomes insolvent. Special Considerations Few investors nationwide have lost any actual assets from insolvency when the SIPC was involved. Between the pro rata recovery distribution, the return of all registered securities certificates, and the insurance coverage limits, there's little chance that an investor will suffer a net loss as a result of broker or dealer insolvency. Many brokers and dealers also provide their customers with additional coverage through a private carrier in addition to protection by the SIPC. This type of coverage is known as "excess SIPC" insurance, and coverage limits for this protection are often high, as much as $100 million per account. As with the SIPC, this coverage will only reimburse investors for losses due to broker or dealer insolvency. Coverage limits will vary from firm to firm. Frequently Asked Questions How Can I File a Claim with the SIPC? The SIPC "strongly recommends" that you file a claim electronically. You'll receive an email confirming receipt of your Customer Claim Form by the Trustee. Send your form by certified mail if you must use U.S. Postal Service delivery instead. Can the SIPC Help me if I Can Prove Unautorized Trading that Doesn't Result in the Firm's Insolvency? You can contact your state's securities regulator in this case, but you might be better off going to FINRA because its Enforcement Teams are authorized to take action for restitution in some cases. What If my Brokerage Firm Used to be an SIPC Member but Isn't Any Longer? You're covered for an additional 180 days or six months after your firm is no longer an SIPC member. You can check on its status by calling the SIPC at 202-371-8300. The Bottom Line The SIPC can help you recover assets in the event that your broker or dealer goes bankrupt, but it doesn't protect you against losses that result from market activity. Nor will it protect you if you're dealing with a firm that isn't a member. You can take steps to protect your investment by documenting interactions with your broker or dealer if you have reason to believe that unauthorized trading caused its insolvency. You may have to prove that this event led to your loss. Many brokers and dealers provide their customers with additional "extra SIPC" coverage, and you'll want to check into this as well.

https://www.investopedia.com/terms/c/crm2.asp

CRM2: What it Means, How it Works, Impact

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-crm2"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is CRM2? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> CRM2, short for Client Relationship Model 2, refers to rules for Canadian investment dealers and advisors that require greater transparency about the cost and performance of client accounts. The regulations, which were fully implemented in mid-2017, were the second stage of a reform of the client relationship model by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/csa.asp">Canadian Securities Administrators</a> (CSA).<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="1"></span> The CSA is the umbrella organization that harmonizes regulations across Canada’s provinces and territories. CRM2 is helpful since it improves how financial information is disclosed to investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>CRM2, or Client Relationship Model 2, is a set of rules for Canadian investment advisors that require improved disclosure to investors.</li><li>CRM2 requires an investment report to help investors see their portfolio's performance, and how it relates to their financial goals.</li><li>CRM2 also requires a summary cost report with the last 12 months of fees, including an itemized list of any charges to the account.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-crm2-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How CRM2 Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> CRM2 is meant to create greater transparency for Canadian investors by providing them with a clear look at their account performance and the costs involved to achieve that performance. The two reports that must be included in an investor's portfolio are as follows: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-subheading__text"> Investment Performance Report </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The new disclosures under CRM2 include a clearer account performance report using standard measurement periods. The report is designed to help investors see how their portfolio is performing and how that performance relates to their long-term financial goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The return on the account will be reported using a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/money-weighted-return.asp" rel="noopener noreferrer">money-weighted rate of return</a> to provide a more personal view of an investor's progress towards their financial goals. MWR is an inclusive method of calculating a portfolio's rate of return since all cash flow debits and credits are factored into the calculation. Those cash flow changes might include <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp" rel="noopener noreferrer">dividends</a>, withdrawals, deposits, and the sale price of the security. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-subheading__text"> Cost Report </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The summary cost report shows the last 12 months of fees, including an itemized list of any charges to the account. One of the most interesting changes due to CRM2 is the presentation of fees in terms of dollars paid rather than as percentages. Although there is no mathematical difference between the two styles, seeing fees in dollars for the first time—particularly if the accounts have not performed well—may cause sticker shock for some Canadian investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> For example, a fund that charges a 1% fee might not appear to be a lot of money. However, if an investor's return is 5% and they're being charged 1% per year, after several years it can add up to a considerable cost that reduces the long-term rate of return on the fund. Disclosing the costs in dollars provides greater clarity for investors so they can see the actual cost year-to-year. Some investment funds and advisors can easily charge 2% to 3% in fees each year, regardless of the fund's performance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-how-crm2-affects-investment-advisors"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> How CRM2 Affects Investment Advisors </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> With fees being made explicit in dollar terms, Canadian investment advisors need to show that they are providing value for the fees that they charge. There could potentially be quite a few Canadian investors who start looking at lower-cost options such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp">robo-advisors</a>, which have no human involvement in investment selection. Investors might also opt for low-cost <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passivemanagement.asp">passively managed</a> portfolios. A passive fund is a basket of securities in which a portfolio manager is not actively buying and selling securities. Oftentimes, a passive fund might track a stock index such as the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">S&amp;P 500</a>. Many <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded-funds</a> (ETFs) are passively managed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> There is, of course, also an opportunity for high performing advisors to use CRM2 as a way to pull in clients from poor performing competitors. However, if an advisor isn’t providing value for the fees they're charging, then CRM2 could be bad news for them. Regulators argue that while the act of having to explain and justify their fees to clients may be burdensome, advisors should already be able to explain and justify their value. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-how-crm2-affects-investors"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> How CRM2 Affects Investors </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Canadian investors already could figure outperformance and costs on their own, but it was a longer and more complex process than it should have been. CRM2 does the work of calculating direct and indirect costs, as well as standardizing performance reporting. For investors, CRM2 makes it easier to evaluate the value that they're getting from their advisors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The ease of evaluation also opens the door for comparison shopping when looking for investment advice. In other words, CRM2 helps to provide investors with making more-informed choices about their investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-crm2-vs-mfda"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> CRM2 vs. MFDA </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> In mid-2018, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutual-fund-dealers-association.asp">Mutual Fund Dealers Association of Canada</a> (MFDA) published a discussion paper that advocated for the disclosure of total fund costs to clients on top of the CRM2 disclosures. Certain investments that are not securities are not required to be included in the CRM2 reporting such as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gic.asp">GIC or guaranteed investment certificate</a>, which is similar to a U.S. certificate of deposit. Such disclosure would enable clients to make better investing decisions. This disclosure, outlined in an MFDA bulletin entitled "<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="http://mfda.ca/bulletin/bulletin0748/">Discussion Paper on Expanding Cost Reporting</a>," would raise the bar compared to CRM2.  </p></div>

## What Is CRM2? CRM2, short for Client Relationship Model 2, refers to rules for Canadian investment dealers and advisors that require greater transparency about the cost and performance of client accounts. The regulations, which were fully implemented in mid-2017, were the second stage of a reform of the client relationship model by the [Canadian Securities Administrators](https://www.investopedia.com/terms/c/csa.asp) (CSA). The CSA is the umbrella organization that harmonizes regulations across Canada’s provinces and territories. CRM2 is helpful since it improves how financial information is disclosed to investors. ### Key Takeaways * CRM2, or Client Relationship Model 2, is a set of rules for Canadian investment advisors that require improved disclosure to investors. * CRM2 requires an investment report to help investors see their portfolio's performance, and how it relates to their financial goals. * CRM2 also requires a summary cost report with the last 12 months of fees, including an itemized list of any charges to the account. ## How CRM2 Works CRM2 is meant to create greater transparency for Canadian investors by providing them with a clear look at their account performance and the costs involved to achieve that performance. The two reports that must be included in an investor's portfolio are as follows: ### Investment Performance Report The new disclosures under CRM2 include a clearer account performance report using standard measurement periods. The report is designed to help investors see how their portfolio is performing and how that performance relates to their long-term financial goals. The return on the account will be reported using a [money-weighted rate of return](https://www.investopedia.com/terms/m/money-weighted-return.asp) to provide a more personal view of an investor's progress towards their financial goals. MWR is an inclusive method of calculating a portfolio's rate of return since all cash flow debits and credits are factored into the calculation. Those cash flow changes might include [dividends](https://www.investopedia.com/terms/d/dividend.asp), withdrawals, deposits, and the sale price of the security. ### Cost Report The summary cost report shows the last 12 months of fees, including an itemized list of any charges to the account. One of the most interesting changes due to CRM2 is the presentation of fees in terms of dollars paid rather than as percentages. Although there is no mathematical difference between the two styles, seeing fees in dollars for the first time—particularly if the accounts have not performed well—may cause sticker shock for some Canadian investors. For example, a fund that charges a 1% fee might not appear to be a lot of money. However, if an investor's return is 5% and they're being charged 1% per year, after several years it can add up to a considerable cost that reduces the long-term rate of return on the fund. Disclosing the costs in dollars provides greater clarity for investors so they can see the actual cost year-to-year. Some investment funds and advisors can easily charge 2% to 3% in fees each year, regardless of the fund's performance. ## How CRM2 Affects Investment Advisors With fees being made explicit in dollar terms, Canadian investment advisors need to show that they are providing value for the fees that they charge. There could potentially be quite a few Canadian investors who start looking at lower-cost options such as [robo-advisors](https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp), which have no human involvement in investment selection. Investors might also opt for low-cost [passively managed](https://www.investopedia.com/terms/p/passivemanagement.asp) portfolios. A passive fund is a basket of securities in which a portfolio manager is not actively buying and selling securities. Oftentimes, a passive fund might track a stock index such as the [S&P 500](https://www.investopedia.com/terms/s/sp500.asp). Many [exchange-traded-funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs) are passively managed. There is, of course, also an opportunity for high performing advisors to use CRM2 as a way to pull in clients from poor performing competitors. However, if an advisor isn’t providing value for the fees they're charging, then CRM2 could be bad news for them. Regulators argue that while the act of having to explain and justify their fees to clients may be burdensome, advisors should already be able to explain and justify their value. ## How CRM2 Affects Investors Canadian investors already could figure outperformance and costs on their own, but it was a longer and more complex process than it should have been. CRM2 does the work of calculating direct and indirect costs, as well as standardizing performance reporting. For investors, CRM2 makes it easier to evaluate the value that they're getting from their advisors. The ease of evaluation also opens the door for comparison shopping when looking for investment advice. In other words, CRM2 helps to provide investors with making more-informed choices about their investments. ## CRM2 vs. MFDA In mid-2018, the [Mutual Fund Dealers Association of Canada](https://www.investopedia.com/terms/m/mutual-fund-dealers-association.asp) (MFDA) published a discussion paper that advocated for the disclosure of total fund costs to clients on top of the CRM2 disclosures. Certain investments that are not securities are not required to be included in the CRM2 reporting such as a [GIC or guaranteed investment certificate](https://www.investopedia.com/terms/g/gic.asp), which is similar to a U.S. certificate of deposit. Such disclosure would enable clients to make better investing decisions. This disclosure, outlined in an MFDA bulletin entitled "[Discussion Paper on Expanding Cost Reporting](http://mfda.ca/bulletin/bulletin0748/)," would raise the bar compared to CRM2. 

What Is CRM2? CRM2, short for Client Relationship Model 2, refers to rules for Canadian investment dealers and advisors that require greater transparency about the cost and performance of client accounts. The regulations, which were fully implemented in mid-2017, were the second stage of a reform of the client relationship model by the Canadian Securities Administrators (CSA). The CSA is the umbrella organization that harmonizes regulations across Canada’s provinces and territories. CRM2 is helpful since it improves how financial information is disclosed to investors. Key Takeaways CRM2, or Client Relationship Model 2, is a set of rules for Canadian investment advisors that require improved disclosure to investors.CRM2 requires an investment report to help investors see their portfolio's performance, and how it relates to their financial goals.CRM2 also requires a summary cost report with the last 12 months of fees, including an itemized list of any charges to the account. How CRM2 Works CRM2 is meant to create greater transparency for Canadian investors by providing them with a clear look at their account performance and the costs involved to achieve that performance. The two reports that must be included in an investor's portfolio are as follows: Investment Performance Report The new disclosures under CRM2 include a clearer account performance report using standard measurement periods. The report is designed to help investors see how their portfolio is performing and how that performance relates to their long-term financial goals. The return on the account will be reported using a money-weighted rate of return to provide a more personal view of an investor's progress towards their financial goals. MWR is an inclusive method of calculating a portfolio's rate of return since all cash flow debits and credits are factored into the calculation. Those cash flow changes might include dividends, withdrawals, deposits, and the sale price of the security. Cost Report The summary cost report shows the last 12 months of fees, including an itemized list of any charges to the account. One of the most interesting changes due to CRM2 is the presentation of fees in terms of dollars paid rather than as percentages. Although there is no mathematical difference between the two styles, seeing fees in dollars for the first time—particularly if the accounts have not performed well—may cause sticker shock for some Canadian investors. For example, a fund that charges a 1% fee might not appear to be a lot of money. However, if an investor's return is 5% and they're being charged 1% per year, after several years it can add up to a considerable cost that reduces the long-term rate of return on the fund. Disclosing the costs in dollars provides greater clarity for investors so they can see the actual cost year-to-year. Some investment funds and advisors can easily charge 2% to 3% in fees each year, regardless of the fund's performance. How CRM2 Affects Investment Advisors With fees being made explicit in dollar terms, Canadian investment advisors need to show that they are providing value for the fees that they charge. There could potentially be quite a few Canadian investors who start looking at lower-cost options such as robo-advisors, which have no human involvement in investment selection. Investors might also opt for low-cost passively managed portfolios. A passive fund is a basket of securities in which a portfolio manager is not actively buying and selling securities. Oftentimes, a passive fund might track a stock index such as the S&P 500. Many exchange-traded-funds (ETFs) are passively managed. There is, of course, also an opportunity for high performing advisors to use CRM2 as a way to pull in clients from poor performing competitors. However, if an advisor isn’t providing value for the fees they're charging, then CRM2 could be bad news for them. Regulators argue that while the act of having to explain and justify their fees to clients may be burdensome, advisors should already be able to explain and justify their value. How CRM2 Affects Investors Canadian investors already could figure outperformance and costs on their own, but it was a longer and more complex process than it should have been. CRM2 does the work of calculating direct and indirect costs, as well as standardizing performance reporting. For investors, CRM2 makes it easier to evaluate the value that they're getting from their advisors. The ease of evaluation also opens the door for comparison shopping when looking for investment advice. In other words, CRM2 helps to provide investors with making more-informed choices about their investments. CRM2 vs. MFDA In mid-2018, the Mutual Fund Dealers Association of Canada (MFDA) published a discussion paper that advocated for the disclosure of total fund costs to clients on top of the CRM2 disclosures. Certain investments that are not securities are not required to be included in the CRM2 reporting such as a GIC or guaranteed investment certificate, which is similar to a U.S. certificate of deposit. Such disclosure would enable clients to make better investing decisions. This disclosure, outlined in an MFDA bulletin entitled "Discussion Paper on Expanding Cost Reporting," would raise the bar compared to CRM2. 

https://www.investopedia.com/what-is-a-business-grant-7644272

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> A business grant is a sum of money given to a business by a donor. In the United States, the largest donors are the federal government, state governments, foundations, charities, and corporations. Business grants are usually given to businesses to achieve specific goals or to businesses that are owned or run by members of an underrepresented community. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Business <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">grants</a> are different from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410">business loans</a> in one key way: You don’t have to pay them back. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>Business grants offer many advantages over other types of <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">business financing</a>. Unlike a business loan, for example, a grant does not have to be paid back.</li> <li>Business grants are provided by various levels of government—federal, state, and local—and a wide variety of private charities, foundations, and corporations.</li> <li>Business grants are typically designed to support specific activities or specific types of business.</li> <li>It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive.</li> </ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is a Business Grant? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596">Business grant programs</a> are run by donors—including federal and state governments—to support businesses. Businesses can apply for grants from governments, corporations, foundations, or trusts, and if they are successful, they will receive a sum of money.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The crucial difference between a business grant and many other types of business financing, including business loans, is that grants don’t have to be repaid. If a business receives a grant, it might have to report back to the donor on how it used the grant, or how it has supported the business, but the money itself can be kept.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Most business grants are designed to achieve a specific purpose. This can be to promote a particular type of business or a specific type of business activity, or to support people from communities that are underrepresented in the world of business. For example, a wide range of grants are available for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/randd.asp">research and development</a> companies—businesses that work in highly technical fields—or businesses owned and run by women or minorities.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> This means that the “average” company can find it difficult to qualify for a business grant. Even if your business does qualify, business grants are often highly competitive, so it can be quite difficult to actually get funding. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If your business doesn’t qualify for a business grant, plenty of other financing opportunities are available, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-business-loans-with-no-credit-check-7374777">business loans with no credit check</a>.</p></div></div></div> <span class="heading-toc" id="toc-how-business-grants-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> How Business Grants Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> In general, the following steps are involved in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-do-business-grants-work-7642849">securing a business grant</a>: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <li>A business owner or employee identifies a grant that their business is eligible for, and submits an application for it.</li><li>The donor organization will assess the application and decide whether the applicant qualifies for the grant.</li><li>If an application is successful, grant money is then paid to the business by the donor.</li><li>The business is often required to use this grant money for a specific purpose, but is not required to repay the donor.</li><li>Typically, the donor organization will ask the business to report on how it has used the grant.<span class="ql-inline-citation" data-cite="10"></span><br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-business-grant-types"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Business Grant Types </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> There are many different types of business grant. Some are administered by federal or state governments, some are focused on supporting certain types of business owner, and some are focused on businesses that operate in a particular field or geographical location.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Government Business Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Government business grants are offered by three levels of government: federal, state, and local. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li>Most federal business grant programs are administered by agencies of the federal government (such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/usda.asp">Department of Agriculture</a>) and are designed to achieve the agency’s specific objectives.<span class="ql-inline-citation" data-cite="11"></span> These are generally the largest grants that companies can qualify for, but they are also the most competitive. </li> <li>State and local business grants are usually smaller than <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant-in-aid.asp">federal grants</a>, but are typically easier to secure because they are less competitive. Sometimes, state governments administer federal business grants and tailor their grants process to fit local priorities or objectives. </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Grants for Minorities, Veterans, and Women </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> There are also lots of business grants available for certain types of business owner. These include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li><strong>Grants for veterans</strong>. The federal government has occasionally offered grants for business owners who are veterans. However, these programs aren’t available on an ongoing basis because they don’t run continuously. That said, veterans are able to access preferential business loan rates from the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/us-department-veterans-affairs.asp">Department of Veterans Affairs (VA)</a> to finance a business.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-grants-for-women-8417262"><strong>Grants for women</strong></a>. If your business is female-owned or -run, you may have access to a wide range of governmental and private grants. The federal government offers grants to support this kind of business, as do a large number of private foundations, charities, and corporations.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="5"></span></li> <li><strong>Grants for minorities</strong>. Similarly, a federal agency, the Minority Business Development Agency, supports businesses run or owned by Blacks and minorities to <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250">access grants</a> and investment opportunities.<span class="ql-inline-citation" data-cite="4"></span> Lots of local and city-level foundations also provide financial support.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> If your business qualifies for a business grant, it almost always makes sense to apply for one. However, business grants have advantages and disadvantages compared to other forms of business financing. Here’s a look at both. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-subheading__text"> Advantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <li>The primary advantage of a business grant (over, say, a business loan) is that you don’t have to pay it back. Applying for a business grant also won’t affect your ability to apply for other forms of funding or financing, so it’s possible to receive both a grant and take out a business loan at the same time.</li> <li>Business grants can be helpful for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-women-small-business-grant-7963621">businesses run by women</a> or minorities. Both groups face structural barriers when it comes to accessing other forms of business financing, including loans, so grants are often crucial to their ongoing success.</li> <li>Business grants are also useful for capital-intensive businesses that don’t expect to make profits in the short term. For example, businesses that are focused on developing new technologies might need to rely on business grants for the period it takes to bring a profitable product to market.<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li>Business grants can be fairly inflexible compared to business loans. Most donors require businesses to spend their grant in a specific way, and to confirm that they have done so. If your business priorities or market conditions change, this can mean that you are unable to use your grant.<span class="ql-inline-citation" data-cite="12"></span></li><li>The amount of money that a business grant provides is usually smaller than a typical business loan. This is especially true for business grants given out by local governments or private foundations.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-requirements-for-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> Requirements for Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> There are many different types of business grant, each focused on a different objective and each with its own specific requirements. This makes listing the “average” requirements for a business grant difficult and points to the need to read grant applications carefully. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> However, most applications for a business grant will require: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> <li><strong>A well-developed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-plan.asp">business plan</a></strong>. This should outline the current status of your business, prove that it is stable and well-run, and outline your objectives for the future.</li> <li><strong>An indicative budget</strong>. Most grant applications will require you to outline your current business <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/budget.asp">budget</a>, and to indicate how the business grant for which you are applying will fit in. </li> <li><strong>A justification for the grant</strong>. During the application process, most donors will ask you to explain why you need the grant that you are applying for, and how it will support or develop your business.<span class="ql-inline-citation" data-cite="13"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-how-to-apply"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> How to Apply </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> There are, broadly, five steps involved in applying for a business grant. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-subheading__text"> 1. Find a Grant </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> This is likely to be the most time-consuming part of the process. To find a grant that is both suitable for your business and that you are able to apply for, you might have to search quite widely: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> <li>For federal government business grants, there is a central database: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.grants.gov/web/grants/home.html">grants.gov</a>. This website will allow you to search for a federal grant against a number of criteria.<span class="ql-inline-citation" data-cite="14"></span></li> <li>For state and local government grants, there is no comparable system. To find these grants, you’ll have to search the websites of your state and local governments. Some states, however, offer consultation services for businesses, and these can point you in the right direction.</li> <li>Similarly, there is no central database for business grants offered by corporations, charities, or foundations. These grants are generally announced and advertised via the websites of the corporations, charities, or foundations that offer them, so you’ll have to do some research to find them. Since many of these grants are focused on a specific industry, a good place to start is to search online for grants offered in your sector. For example, you can search for “grants for manufacturing companies” or “grants for technology companies.”</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_60-0"> <span class="mntl-sc-block-subheading__text"> 2. Check Your Eligibility </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> Once you find a suitable grant, you should carefully check whether your business is eligible. Most grants have very specific eligibility requirements, and you don’t want to waste time applying for a grant for which your business won’t qualify. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Many grants, for example, are only available for businesses that have been operating for a specific number of years or that have an annual turnover below a certain dollar amount. Read the eligibility guidelines for any grant before starting your application, and, if possible, contact the donor organization to double-check that you are eligible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-subheading__text"> 3. Register </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> You will need to register an account on grants.gov to be able to apply for federal grants.<span class="ql-inline-citation" data-cite="15"></span> For other types of grant, you might be able to skip this step. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-subheading__text"> 4. Apply </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> You can apply for federal business grants directly through the grants.gov website. For other types of grant, the application process varies a lot. Typically, you will be able to apply for a business grant online, although some donors still require a paper form. In either case, however, the grant application documents will indicate how you should fill out the forms, and what additional documentation you need to supply. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-subheading__text"> 5. Track Your Application </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> If you are applying for a federal grant, the grants.gov website will allow you to track the progress of your application and check on the decision once the time comes.<span class="ql-inline-citation" data-cite="10"></span> For other types of grant, it’s often necessary to call or email the donor organization to get an update on your application. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_74-0"><span class="heading-toc" id="toc-what-is-the-difference-between-a-grant-and-a-business-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between a Grant and a Business Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You don’t have to pay back a business grant, but you do have to pay back a business loan. However, business grants are often less flexible than business loans, generally because you have to use them for a specific purpose.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-what-is-the-benefit-of-receiving-a-grant-to-fund-your-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Benefit of Receiving a Grant to Fund Your Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A business grant can support a business to carry out a specific activity or provide support to a business that might find it hard to access a business loan.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-what-is-the-most-popular-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Most Popular Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> offers a variety of grant programs to support small businesses. The most popular federal grant program is the Small Business Innovation Research (SBIR) program, which provides funding for research and development projects.<span class="ql-inline-citation" data-cite="16"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> The main advantages of a business grant over other types of business financing is that it doesn’t have to be paid back. Business grants are provided by various levels of government—federal, state, and local—and are typically designed for specific activities or types of business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive. However, for many businesses, a business grant represents a great opportunity for growth and development. </p></div>

A business grant is a sum of money given to a business by a donor. In the United States, the largest donors are the federal government, state governments, foundations, charities, and corporations. Business grants are usually given to businesses to achieve specific goals or to businesses that are owned or run by members of an underrepresented community. Business [grants](https://www.investopedia.com/terms/g/grant.asp) are different from [business loans](https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410) in one key way: You don’t have to pay them back. ### Key Takeaways * Business grants offer many advantages over other types of [business financing](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp). Unlike a business loan, for example, a grant does not have to be paid back. * Business grants are provided by various levels of government—federal, state, and local—and a wide variety of private charities, foundations, and corporations. * Business grants are typically designed to support specific activities or specific types of business. * It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive. ## What Is a Business Grant? [Business grant programs](https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596) are run by donors—including federal and state governments—to support businesses. Businesses can apply for grants from governments, corporations, foundations, or trusts, and if they are successful, they will receive a sum of money.  The crucial difference between a business grant and many other types of business financing, including business loans, is that grants don’t have to be repaid. If a business receives a grant, it might have to report back to the donor on how it used the grant, or how it has supported the business, but the money itself can be kept. Most business grants are designed to achieve a specific purpose. This can be to promote a particular type of business or a specific type of business activity, or to support people from communities that are underrepresented in the world of business. For example, a wide range of grants are available for [research and development](https://www.investopedia.com/terms/r/randd.asp) companies—businesses that work in highly technical fields—or businesses owned and run by women or minorities. This means that the “average” company can find it difficult to qualify for a business grant. Even if your business does qualify, business grants are often highly competitive, so it can be quite difficult to actually get funding. ### If your business doesn’t qualify for a business grant, plenty of other financing opportunities are available, including [business loans with no credit check](https://www.investopedia.com/best-business-loans-with-no-credit-check-7374777). ## How Business Grants Work In general, the following steps are involved in [securing a business grant](https://www.investopedia.com/how-do-business-grants-work-7642849): 1. A business owner or employee identifies a grant that their business is eligible for, and submits an application for it. 2. The donor organization will assess the application and decide whether the applicant qualifies for the grant. 3. If an application is successful, grant money is then paid to the business by the donor. 4. The business is often required to use this grant money for a specific purpose, but is not required to repay the donor. 5. Typically, the donor organization will ask the business to report on how it has used the grant. ## Business Grant Types There are many different types of business grant. Some are administered by federal or state governments, some are focused on supporting certain types of business owner, and some are focused on businesses that operate in a particular field or geographical location.  ### Government Business Grants Government business grants are offered by three levels of government: federal, state, and local. * Most federal business grant programs are administered by agencies of the federal government (such as the [Department of Agriculture](https://www.investopedia.com/terms/u/usda.asp)) and are designed to achieve the agency’s specific objectives. These are generally the largest grants that companies can qualify for, but they are also the most competitive. * State and local business grants are usually smaller than [federal grants](https://www.investopedia.com/terms/g/grant-in-aid.asp), but are typically easier to secure because they are less competitive. Sometimes, state governments administer federal business grants and tailor their grants process to fit local priorities or objectives. ### Grants for Minorities, Veterans, and Women There are also lots of business grants available for certain types of business owner. These include: * **Grants for veterans**. The federal government has occasionally offered grants for business owners who are veterans. However, these programs aren’t available on an ongoing basis because they don’t run continuously. That said, veterans are able to access preferential business loan rates from the U.S. [Department of Veterans Affairs (VA)](https://www.investopedia.com/terms/u/us-department-veterans-affairs.asp) to finance a business. * [**Grants for women**](https://www.investopedia.com/small-business-grants-for-women-8417262). If your business is female-owned or -run, you may have access to a wide range of governmental and private grants. The federal government offers grants to support this kind of business, as do a large number of private foundations, charities, and corporations. * **Grants for minorities**. Similarly, a federal agency, the Minority Business Development Agency, supports businesses run or owned by Blacks and minorities to [access grants](https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250) and investment opportunities. Lots of local and city-level foundations also provide financial support. ## Advantages and Disadvantages of Business Grants If your business qualifies for a business grant, it almost always makes sense to apply for one. However, business grants have advantages and disadvantages compared to other forms of business financing. Here’s a look at both. ### Advantages * The primary advantage of a business grant (over, say, a business loan) is that you don’t have to pay it back. Applying for a business grant also won’t affect your ability to apply for other forms of funding or financing, so it’s possible to receive both a grant and take out a business loan at the same time. * Business grants can be helpful for [businesses run by women](https://www.investopedia.com/how-to-get-women-small-business-grant-7963621) or minorities. Both groups face structural barriers when it comes to accessing other forms of business financing, including loans, so grants are often crucial to their ongoing success. * Business grants are also useful for capital-intensive businesses that don’t expect to make profits in the short term. For example, businesses that are focused on developing new technologies might need to rely on business grants for the period it takes to bring a profitable product to market. ### Disadvantages * Business grants can be fairly inflexible compared to business loans. Most donors require businesses to spend their grant in a specific way, and to confirm that they have done so. If your business priorities or market conditions change, this can mean that you are unable to use your grant. * The amount of money that a business grant provides is usually smaller than a typical business loan. This is especially true for business grants given out by local governments or private foundations. ## Requirements for Business Grants There are many different types of business grant, each focused on a different objective and each with its own specific requirements. This makes listing the “average” requirements for a business grant difficult and points to the need to read grant applications carefully. However, most applications for a business grant will require: * **A well-developed [business plan](https://www.investopedia.com/terms/b/business-plan.asp)**. This should outline the current status of your business, prove that it is stable and well-run, and outline your objectives for the future. * **An indicative budget**. Most grant applications will require you to outline your current business [budget](https://www.investopedia.com/terms/b/budget.asp), and to indicate how the business grant for which you are applying will fit in. * **A justification for the grant**. During the application process, most donors will ask you to explain why you need the grant that you are applying for, and how it will support or develop your business. ## How to Apply There are, broadly, five steps involved in applying for a business grant. ### 1. Find a Grant This is likely to be the most time-consuming part of the process. To find a grant that is both suitable for your business and that you are able to apply for, you might have to search quite widely: * For federal government business grants, there is a central database: [grants.gov](https://www.grants.gov/web/grants/home.html). This website will allow you to search for a federal grant against a number of criteria. * For state and local government grants, there is no comparable system. To find these grants, you’ll have to search the websites of your state and local governments. Some states, however, offer consultation services for businesses, and these can point you in the right direction. * Similarly, there is no central database for business grants offered by corporations, charities, or foundations. These grants are generally announced and advertised via the websites of the corporations, charities, or foundations that offer them, so you’ll have to do some research to find them. Since many of these grants are focused on a specific industry, a good place to start is to search online for grants offered in your sector. For example, you can search for “grants for manufacturing companies” or “grants for technology companies.” ### 2. Check Your Eligibility Once you find a suitable grant, you should carefully check whether your business is eligible. Most grants have very specific eligibility requirements, and you don’t want to waste time applying for a grant for which your business won’t qualify. Many grants, for example, are only available for businesses that have been operating for a specific number of years or that have an annual turnover below a certain dollar amount. Read the eligibility guidelines for any grant before starting your application, and, if possible, contact the donor organization to double-check that you are eligible. ### 3. Register You will need to register an account on grants.gov to be able to apply for federal grants. For other types of grant, you might be able to skip this step. ### 4. Apply You can apply for federal business grants directly through the grants.gov website. For other types of grant, the application process varies a lot. Typically, you will be able to apply for a business grant online, although some donors still require a paper form. In either case, however, the grant application documents will indicate how you should fill out the forms, and what additional documentation you need to supply. ### 5. Track Your Application If you are applying for a federal grant, the grants.gov website will allow you to track the progress of your application and check on the decision once the time comes. For other types of grant, it’s often necessary to call or email the donor organization to get an update on your application. ## What Is the Difference Between a Grant and a Business Loan? You don’t have to pay back a business grant, but you do have to pay back a business loan. However, business grants are often less flexible than business loans, generally because you have to use them for a specific purpose. ## What Is the Benefit of Receiving a Grant to Fund Your Business? A business grant can support a business to carry out a specific activity or provide support to a business that might find it hard to access a business loan. ## What Is the Most Popular Business Grant? The U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) offers a variety of grant programs to support small businesses. The most popular federal grant program is the Small Business Innovation Research (SBIR) program, which provides funding for research and development projects. ## The Bottom Line The main advantages of a business grant over other types of business financing is that it doesn’t have to be paid back. Business grants are provided by various levels of government—federal, state, and local—and are typically designed for specific activities or types of business. It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive. However, for many businesses, a business grant represents a great opportunity for growth and development.

A business grant is a sum of money given to a business by a donor. In the United States, the largest donors are the federal government, state governments, foundations, charities, and corporations. Business grants are usually given to businesses to achieve specific goals or to businesses that are owned or run by members of an underrepresented community. Business grants are different from business loans in one key way: You don’t have to pay them back. Key Takeaways Business grants offer many advantages over other types of business financing. Unlike a business loan, for example, a grant does not have to be paid back. Business grants are provided by various levels of government—federal, state, and local—and a wide variety of private charities, foundations, and corporations. Business grants are typically designed to support specific activities or specific types of business. It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive. What Is a Business Grant? Business grant programs are run by donors—including federal and state governments—to support businesses. Businesses can apply for grants from governments, corporations, foundations, or trusts, and if they are successful, they will receive a sum of money.  The crucial difference between a business grant and many other types of business financing, including business loans, is that grants don’t have to be repaid. If a business receives a grant, it might have to report back to the donor on how it used the grant, or how it has supported the business, but the money itself can be kept. Most business grants are designed to achieve a specific purpose. This can be to promote a particular type of business or a specific type of business activity, or to support people from communities that are underrepresented in the world of business. For example, a wide range of grants are available for research and development companies—businesses that work in highly technical fields—or businesses owned and run by women or minorities. This means that the “average” company can find it difficult to qualify for a business grant. Even if your business does qualify, business grants are often highly competitive, so it can be quite difficult to actually get funding. If your business doesn’t qualify for a business grant, plenty of other financing opportunities are available, including business loans with no credit check. How Business Grants Work In general, the following steps are involved in securing a business grant: A business owner or employee identifies a grant that their business is eligible for, and submits an application for it.The donor organization will assess the application and decide whether the applicant qualifies for the grant.If an application is successful, grant money is then paid to the business by the donor.The business is often required to use this grant money for a specific purpose, but is not required to repay the donor.Typically, the donor organization will ask the business to report on how it has used the grant. Business Grant Types There are many different types of business grant. Some are administered by federal or state governments, some are focused on supporting certain types of business owner, and some are focused on businesses that operate in a particular field or geographical location.  Government Business Grants Government business grants are offered by three levels of government: federal, state, and local. Most federal business grant programs are administered by agencies of the federal government (such as the Department of Agriculture) and are designed to achieve the agency’s specific objectives. These are generally the largest grants that companies can qualify for, but they are also the most competitive.  State and local business grants are usually smaller than federal grants, but are typically easier to secure because they are less competitive. Sometimes, state governments administer federal business grants and tailor their grants process to fit local priorities or objectives.  Grants for Minorities, Veterans, and Women There are also lots of business grants available for certain types of business owner. These include: Grants for veterans. The federal government has occasionally offered grants for business owners who are veterans. However, these programs aren’t available on an ongoing basis because they don’t run continuously. That said, veterans are able to access preferential business loan rates from the U.S. Department of Veterans Affairs (VA) to finance a business. Grants for women. If your business is female-owned or -run, you may have access to a wide range of governmental and private grants. The federal government offers grants to support this kind of business, as do a large number of private foundations, charities, and corporations. Grants for minorities. Similarly, a federal agency, the Minority Business Development Agency, supports businesses run or owned by Blacks and minorities to access grants and investment opportunities. Lots of local and city-level foundations also provide financial support. Advantages and Disadvantages of Business Grants If your business qualifies for a business grant, it almost always makes sense to apply for one. However, business grants have advantages and disadvantages compared to other forms of business financing. Here’s a look at both. Advantages The primary advantage of a business grant (over, say, a business loan) is that you don’t have to pay it back. Applying for a business grant also won’t affect your ability to apply for other forms of funding or financing, so it’s possible to receive both a grant and take out a business loan at the same time. Business grants can be helpful for businesses run by women or minorities. Both groups face structural barriers when it comes to accessing other forms of business financing, including loans, so grants are often crucial to their ongoing success. Business grants are also useful for capital-intensive businesses that don’t expect to make profits in the short term. For example, businesses that are focused on developing new technologies might need to rely on business grants for the period it takes to bring a profitable product to market. Disadvantages Business grants can be fairly inflexible compared to business loans. Most donors require businesses to spend their grant in a specific way, and to confirm that they have done so. If your business priorities or market conditions change, this can mean that you are unable to use your grant.The amount of money that a business grant provides is usually smaller than a typical business loan. This is especially true for business grants given out by local governments or private foundations. Requirements for Business Grants There are many different types of business grant, each focused on a different objective and each with its own specific requirements. This makes listing the “average” requirements for a business grant difficult and points to the need to read grant applications carefully. However, most applications for a business grant will require: A well-developed business plan. This should outline the current status of your business, prove that it is stable and well-run, and outline your objectives for the future. An indicative budget. Most grant applications will require you to outline your current business budget, and to indicate how the business grant for which you are applying will fit in.  A justification for the grant. During the application process, most donors will ask you to explain why you need the grant that you are applying for, and how it will support or develop your business. How to Apply There are, broadly, five steps involved in applying for a business grant. 1. Find a Grant This is likely to be the most time-consuming part of the process. To find a grant that is both suitable for your business and that you are able to apply for, you might have to search quite widely: For federal government business grants, there is a central database: grants.gov. This website will allow you to search for a federal grant against a number of criteria. For state and local government grants, there is no comparable system. To find these grants, you’ll have to search the websites of your state and local governments. Some states, however, offer consultation services for businesses, and these can point you in the right direction. Similarly, there is no central database for business grants offered by corporations, charities, or foundations. These grants are generally announced and advertised via the websites of the corporations, charities, or foundations that offer them, so you’ll have to do some research to find them. Since many of these grants are focused on a specific industry, a good place to start is to search online for grants offered in your sector. For example, you can search for “grants for manufacturing companies” or “grants for technology companies.” 2. Check Your Eligibility Once you find a suitable grant, you should carefully check whether your business is eligible. Most grants have very specific eligibility requirements, and you don’t want to waste time applying for a grant for which your business won’t qualify. Many grants, for example, are only available for businesses that have been operating for a specific number of years or that have an annual turnover below a certain dollar amount. Read the eligibility guidelines for any grant before starting your application, and, if possible, contact the donor organization to double-check that you are eligible. 3. Register You will need to register an account on grants.gov to be able to apply for federal grants. For other types of grant, you might be able to skip this step. 4. Apply You can apply for federal business grants directly through the grants.gov website. For other types of grant, the application process varies a lot. Typically, you will be able to apply for a business grant online, although some donors still require a paper form. In either case, however, the grant application documents will indicate how you should fill out the forms, and what additional documentation you need to supply. 5. Track Your Application If you are applying for a federal grant, the grants.gov website will allow you to track the progress of your application and check on the decision once the time comes. For other types of grant, it’s often necessary to call or email the donor organization to get an update on your application. What Is the Difference Between a Grant and a Business Loan? You don’t have to pay back a business grant, but you do have to pay back a business loan. However, business grants are often less flexible than business loans, generally because you have to use them for a specific purpose. What Is the Benefit of Receiving a Grant to Fund Your Business? A business grant can support a business to carry out a specific activity or provide support to a business that might find it hard to access a business loan. What Is the Most Popular Business Grant? The U.S. Small Business Administration (SBA) offers a variety of grant programs to support small businesses. The most popular federal grant program is the Small Business Innovation Research (SBIR) program, which provides funding for research and development projects. The Bottom Line The main advantages of a business grant over other types of business financing is that it doesn’t have to be paid back. Business grants are provided by various levels of government—federal, state, and local—and are typically designed for specific activities or types of business. It can be difficult to qualify for and secure a business grant, as the application process can be highly competitive. However, for many businesses, a business grant represents a great opportunity for growth and development.

https://www.investopedia.com/terms/b/business-process-outsourcing.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-business-process-outsourcing-bpo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Business Process Outsourcing (BPO)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Business process outsourcing (BPO) is a method of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subcontracting.asp">subcontracting</a> various business-related operations to third-party <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/vendor.asp">vendors</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of various products and services. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Business process outsourcing (BPO) utilizes third-party vendors or subcontractors to carry out certain parts of their business operations.</li><li>BPO began with large manufacturing companies to aid with supply chain management,</li><li>Today BPO has grown to include all sorts of sectors, including services companies.</li><li>BPO is considered "offshore outsourcing" if the vendor or subcontractor is located in a different country; for instance, in the case of customer support.</li><li>BPO today is an industry unto itself, with companies specializing in facilitating BPO to companies around the world.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-business-process-outsourcing-bpo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Business Process Outsourcing (BPO) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Many businesses, from small startups to large companies, opt to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/082815/unintended-consequences-outsourcing.asp">outsource</a> processes, as new and innovative services are increasingly available in today's ever-changing, highly competitive business climate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Broadly speaking, companies adopt BPO practices in the two main areas of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/backoffice.asp">back-office</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/frontoffice.asp">front-office</a> operations. Back office BPO refers to a company contracting its core business support operations such as accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to outside professionals who ensure the business runs smoothly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> By contrast, front office BPO tasks commonly include customer-related services such as tech support, sales, and marketing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The breadth of a business' BPO options depends on whether it contracts its operations within or outside the borders of its home country. BPO is deemed "offshore outsourcing" if the contract is sent to another country where there is political stability, lower labor costs, and/or tax savings. A U.S. company using an offshore BPO vendor in Singapore is one such example of offshore outsourcing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> BPO is referred to as "nearshore outsourcing" if the job is contracted to a neighboring country. Such would be the case if a U.S. company partnered with a BPO vendor located in Canada. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> A third option, known as "onshore outsourcing" or "domestic sourcing," occurs when BPO is contracted within the company’s own country, even if its vendor partners are located in different cities or states. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> BPO is often referred to as information technology-enabled services (ITES) because it relies on technology/infrastructure that enables external companies to efficiently perform their roles. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-the-attraction-of-bpo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> The Attraction of BPO </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Companies are often drawn to BPO because it affords them greater operational flexibility. By outsourcing non-core and administrative functions, companies can reallocate time and resources to core competencies like customer relations and product leadership, which ultimately results in advantages over competing businesses in their industry. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> BPO offers businesses access to innovative technological resources that they might not otherwise have exposure to. BPO partners and companies constantly strive to improve their processes by adopting the most recent technologies and practices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Since the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporatetax.asp">corporate income tax</a> is among the highest in the developed world, American companies benefit from outsourcing operations to countries with lower income taxes and cheaper labor forces as viable cost reduction measures. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> BPO also offers companies the benefits of quick and accurate reporting, improved productivity, and the ability to swiftly reassign its resources, when necessary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-some-disadvantages-of-bpo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Some Disadvantages of BPO </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> While there are many advantages of BPO, there are also disadvantages. A business that outsources its business processes may be prone to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/data-breach.asp">data breaches</a> or have communication issues that delay project completion, and such businesses may underestimate the running costs of BPO providers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Another disadvantage could be customer backlash against outsourcing if they perceive this to be of inferior quality or at the expense of domestic employment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">A Career in BPO</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Business process outsourcing is a fast-growing sector of the economy, which makes it attractive as a career path or startup opportunity. According to industry research, the BPO market was valued at nearly $250 billion in 2021, and is projected to grow at 9% per year over the next decade.<span class="ql-inline-citation" data-cite="2"></span></p><p>According to data from Zip Recruiter, BPO jobs in America pay an average of $91,100 as of 2022.<span class="ql-inline-citation" data-cite="3"></span></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-is-the-goal-of-bpo-and-what-are-its-types"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Goal of BPO and What Are Its Types?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>BPO is the abbreviation for business process outsourcing, which refers to when companies outsource business processes to a third-party (external) company. The primary goal is to cut costs, free up time, and focus on core aspects of the business. Two types of BPO are front-office and back-office. Back-office BPO entails the internal aspects of a business, such as payroll, inventory purchasing, and billing. Front-office BPO focuses on activities external to the company, such as marketing and customer service.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-are-the-advantages-of-bpo"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Advantages of BPO?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are numerous advantages to BPO. One of the primary advantages is that it lowers costs. Performing a certain job function internally costs a specific amount. BPO can reduce these costs by outsourcing this job to an external party, often in a less cost-intensive country, reducing the overall cost of performing that job function.</p><p>Other advantages include a company being allowed to focus on core business functions that are critical to its success, rather than administrative tasks or other aspects of running a company that are not critical. BPO also helps with growth, particularly in global expansion. If a company is interested in opening an overseas branch or operating overseas, utilizing a BPO company that has experience in the local industry and that speaks the language is extremely beneficial.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-what-are-the-types-of-bpo-companies"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Types of BPO Companies?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are three primary types of BPO companies. These are local outsourcing, offshore outsourcing, and nearshore outsourcing. Local outsourcing is a company that is in the same country as your business. Offshore outsourcing is a company that is in another country, and nearshore outsourcing is a company that is in a country that is not too far from your country.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-what-is-a-bpo-call-center"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a BPO Call Center?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A BPO call center handles outsourced incoming and outgoing customer calls on behalf of other businesses. Many BPO call centers will have agents that can individually handle customer complaints or inquiries standing in for a number of different companies, often within a particular specialty. For instance, one call center agent may be able to field tech support phone calls for a variety of vendors or manufacturers.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Business process outsourcing (BPO) utilizes third-party specialists to carry out some part of a business process or operation (as opposed to outsourcing the entire production). BPO can lower a company's costs, increase efficiency, and provide flexibility. At the same time, the BPO industry is rapidly-growing, which means that in our increasingly global economy, process outsourcing is not going anywhere. </p></div>

## What Is Business Process Outsourcing (BPO)? Business process outsourcing (BPO) is a method of [subcontracting](https://www.investopedia.com/terms/s/subcontracting.asp) various business-related operations to third-party [vendors](https://www.investopedia.com/terms/v/vendor.asp). Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of various products and services. ### Key Takeaways * Business process outsourcing (BPO) utilizes third-party vendors or subcontractors to carry out certain parts of their business operations. * BPO began with large manufacturing companies to aid with supply chain management, * Today BPO has grown to include all sorts of sectors, including services companies. * BPO is considered "offshore outsourcing" if the vendor or subcontractor is located in a different country; for instance, in the case of customer support. * BPO today is an industry unto itself, with companies specializing in facilitating BPO to companies around the world. ## Understanding Business Process Outsourcing (BPO) Many businesses, from small startups to large companies, opt to [outsource](https://www.investopedia.com/articles/personal-finance/082815/unintended-consequences-outsourcing.asp) processes, as new and innovative services are increasingly available in today's ever-changing, highly competitive business climate. Broadly speaking, companies adopt BPO practices in the two main areas of [back-office](https://www.investopedia.com/terms/b/backoffice.asp) and [front-office](https://www.investopedia.com/terms/f/frontoffice.asp) operations. Back office BPO refers to a company contracting its core business support operations such as accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to outside professionals who ensure the business runs smoothly. By contrast, front office BPO tasks commonly include customer-related services such as tech support, sales, and marketing. ## Special Considerations The breadth of a business' BPO options depends on whether it contracts its operations within or outside the borders of its home country. BPO is deemed "offshore outsourcing" if the contract is sent to another country where there is political stability, lower labor costs, and/or tax savings. A U.S. company using an offshore BPO vendor in Singapore is one such example of offshore outsourcing. BPO is referred to as "nearshore outsourcing" if the job is contracted to a neighboring country. Such would be the case if a U.S. company partnered with a BPO vendor located in Canada. A third option, known as "onshore outsourcing" or "domestic sourcing," occurs when BPO is contracted within the company’s own country, even if its vendor partners are located in different cities or states. BPO is often referred to as information technology-enabled services (ITES) because it relies on technology/infrastructure that enables external companies to efficiently perform their roles. ## The Attraction of BPO Companies are often drawn to BPO because it affords them greater operational flexibility. By outsourcing non-core and administrative functions, companies can reallocate time and resources to core competencies like customer relations and product leadership, which ultimately results in advantages over competing businesses in their industry. BPO offers businesses access to innovative technological resources that they might not otherwise have exposure to. BPO partners and companies constantly strive to improve their processes by adopting the most recent technologies and practices. Since the U.S. [corporate income tax](https://www.investopedia.com/terms/c/corporatetax.asp) is among the highest in the developed world, American companies benefit from outsourcing operations to countries with lower income taxes and cheaper labor forces as viable cost reduction measures. BPO also offers companies the benefits of quick and accurate reporting, improved productivity, and the ability to swiftly reassign its resources, when necessary. ## Some Disadvantages of BPO While there are many advantages of BPO, there are also disadvantages. A business that outsources its business processes may be prone to [data breaches](https://www.investopedia.com/terms/d/data-breach.asp) or have communication issues that delay project completion, and such businesses may underestimate the running costs of BPO providers. Another disadvantage could be customer backlash against outsourcing if they perceive this to be of inferior quality or at the expense of domestic employment. ### A Career in BPO Business process outsourcing is a fast-growing sector of the economy, which makes it attractive as a career path or startup opportunity. According to industry research, the BPO market was valued at nearly $250 billion in 2021, and is projected to grow at 9% per year over the next decade. According to data from Zip Recruiter, BPO jobs in America pay an average of $91,100 as of 2022. ## What Is the Goal of BPO and What Are Its Types? BPO is the abbreviation for business process outsourcing, which refers to when companies outsource business processes to a third-party (external) company. The primary goal is to cut costs, free up time, and focus on core aspects of the business. Two types of BPO are front-office and back-office. Back-office BPO entails the internal aspects of a business, such as payroll, inventory purchasing, and billing. Front-office BPO focuses on activities external to the company, such as marketing and customer service. ## What Are the Advantages of BPO? There are numerous advantages to BPO. One of the primary advantages is that it lowers costs. Performing a certain job function internally costs a specific amount. BPO can reduce these costs by outsourcing this job to an external party, often in a less cost-intensive country, reducing the overall cost of performing that job function. Other advantages include a company being allowed to focus on core business functions that are critical to its success, rather than administrative tasks or other aspects of running a company that are not critical. BPO also helps with growth, particularly in global expansion. If a company is interested in opening an overseas branch or operating overseas, utilizing a BPO company that has experience in the local industry and that speaks the language is extremely beneficial. ## What Are the Types of BPO Companies? There are three primary types of BPO companies. These are local outsourcing, offshore outsourcing, and nearshore outsourcing. Local outsourcing is a company that is in the same country as your business. Offshore outsourcing is a company that is in another country, and nearshore outsourcing is a company that is in a country that is not too far from your country. ## What Is a BPO Call Center? A BPO call center handles outsourced incoming and outgoing customer calls on behalf of other businesses. Many BPO call centers will have agents that can individually handle customer complaints or inquiries standing in for a number of different companies, often within a particular specialty. For instance, one call center agent may be able to field tech support phone calls for a variety of vendors or manufacturers. ## The Bottom Line Business process outsourcing (BPO) utilizes third-party specialists to carry out some part of a business process or operation (as opposed to outsourcing the entire production). BPO can lower a company's costs, increase efficiency, and provide flexibility. At the same time, the BPO industry is rapidly-growing, which means that in our increasingly global economy, process outsourcing is not going anywhere.

What Is Business Process Outsourcing (BPO)? Business process outsourcing (BPO) is a method of subcontracting various business-related operations to third-party vendors. Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of various products and services. Key Takeaways Business process outsourcing (BPO) utilizes third-party vendors or subcontractors to carry out certain parts of their business operations.BPO began with large manufacturing companies to aid with supply chain management,Today BPO has grown to include all sorts of sectors, including services companies.BPO is considered "offshore outsourcing" if the vendor or subcontractor is located in a different country; for instance, in the case of customer support.BPO today is an industry unto itself, with companies specializing in facilitating BPO to companies around the world. Understanding Business Process Outsourcing (BPO) Many businesses, from small startups to large companies, opt to outsource processes, as new and innovative services are increasingly available in today's ever-changing, highly competitive business climate. Broadly speaking, companies adopt BPO practices in the two main areas of back-office and front-office operations. Back office BPO refers to a company contracting its core business support operations such as accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to outside professionals who ensure the business runs smoothly. By contrast, front office BPO tasks commonly include customer-related services such as tech support, sales, and marketing. Special Considerations The breadth of a business' BPO options depends on whether it contracts its operations within or outside the borders of its home country. BPO is deemed "offshore outsourcing" if the contract is sent to another country where there is political stability, lower labor costs, and/or tax savings. A U.S. company using an offshore BPO vendor in Singapore is one such example of offshore outsourcing. BPO is referred to as "nearshore outsourcing" if the job is contracted to a neighboring country. Such would be the case if a U.S. company partnered with a BPO vendor located in Canada. A third option, known as "onshore outsourcing" or "domestic sourcing," occurs when BPO is contracted within the company’s own country, even if its vendor partners are located in different cities or states. BPO is often referred to as information technology-enabled services (ITES) because it relies on technology/infrastructure that enables external companies to efficiently perform their roles. The Attraction of BPO Companies are often drawn to BPO because it affords them greater operational flexibility. By outsourcing non-core and administrative functions, companies can reallocate time and resources to core competencies like customer relations and product leadership, which ultimately results in advantages over competing businesses in their industry. BPO offers businesses access to innovative technological resources that they might not otherwise have exposure to. BPO partners and companies constantly strive to improve their processes by adopting the most recent technologies and practices. Since the U.S. corporate income tax is among the highest in the developed world, American companies benefit from outsourcing operations to countries with lower income taxes and cheaper labor forces as viable cost reduction measures. BPO also offers companies the benefits of quick and accurate reporting, improved productivity, and the ability to swiftly reassign its resources, when necessary. Some Disadvantages of BPO While there are many advantages of BPO, there are also disadvantages. A business that outsources its business processes may be prone to data breaches or have communication issues that delay project completion, and such businesses may underestimate the running costs of BPO providers. Another disadvantage could be customer backlash against outsourcing if they perceive this to be of inferior quality or at the expense of domestic employment. A Career in BPO Business process outsourcing is a fast-growing sector of the economy, which makes it attractive as a career path or startup opportunity. According to industry research, the BPO market was valued at nearly $250 billion in 2021, and is projected to grow at 9% per year over the next decade.According to data from Zip Recruiter, BPO jobs in America pay an average of $91,100 as of 2022. What Is the Goal of BPO and What Are Its Types? BPO is the abbreviation for business process outsourcing, which refers to when companies outsource business processes to a third-party (external) company. The primary goal is to cut costs, free up time, and focus on core aspects of the business. Two types of BPO are front-office and back-office. Back-office BPO entails the internal aspects of a business, such as payroll, inventory purchasing, and billing. Front-office BPO focuses on activities external to the company, such as marketing and customer service. What Are the Advantages of BPO? There are numerous advantages to BPO. One of the primary advantages is that it lowers costs. Performing a certain job function internally costs a specific amount. BPO can reduce these costs by outsourcing this job to an external party, often in a less cost-intensive country, reducing the overall cost of performing that job function.Other advantages include a company being allowed to focus on core business functions that are critical to its success, rather than administrative tasks or other aspects of running a company that are not critical. BPO also helps with growth, particularly in global expansion. If a company is interested in opening an overseas branch or operating overseas, utilizing a BPO company that has experience in the local industry and that speaks the language is extremely beneficial. What Are the Types of BPO Companies? There are three primary types of BPO companies. These are local outsourcing, offshore outsourcing, and nearshore outsourcing. Local outsourcing is a company that is in the same country as your business. Offshore outsourcing is a company that is in another country, and nearshore outsourcing is a company that is in a country that is not too far from your country. What Is a BPO Call Center? A BPO call center handles outsourced incoming and outgoing customer calls on behalf of other businesses. Many BPO call centers will have agents that can individually handle customer complaints or inquiries standing in for a number of different companies, often within a particular specialty. For instance, one call center agent may be able to field tech support phone calls for a variety of vendors or manufacturers. The Bottom Line Business process outsourcing (BPO) utilizes third-party specialists to carry out some part of a business process or operation (as opposed to outsourcing the entire production). BPO can lower a company's costs, increase efficiency, and provide flexibility. At the same time, the BPO industry is rapidly-growing, which means that in our increasingly global economy, process outsourcing is not going anywhere.

https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> People who have been convicted of a felony in the United States can own and run a business, but there are challenges in doing so, including access to capital and overcoming prejudice against having been incarcerated. However, small business grants and loans, as well as other resources that may prove helpful in supporting an entrepreneurial vision, are available for formerly incarcerated people who are looking to start or run a business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>People who have been convicted of a felony can legally own a business, but they may face challenges in obtaining the capital required to start one.</li><li>Small business grants can be a potential financial resource in this scenario, and can be obtained from various sources.</li><li>Small business loans, including the U.S. Small Business Administration (SBA) microloan program, are available to people who have been convicted of a felony.</li><li>Additional resources like Inmates to Entrepreneurs or Help for Felons can provide support for formerly incarcerated people who want to start a business.</li><li>Crowdfunding is another alternative funding option for those convicted of a felony.</li></ul></div></div></div> <span class="heading-toc" id="toc-can-you-own-a-business-if-you-have-been-convicted-of-a-felony"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Can You Own a Business If You Have Been Convicted of a Felony? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> There are no laws against owning a business as someone with a felony conviction on their record.<span class="ql-inline-citation" data-cite="1"></span> In fact, a 2021 study found that more than 3.8% of U.S. small business owners have a criminal record, and 1.5% have a felony record.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> However, starting a business requires <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a> to purchase equipment and tools, and having certain crimes on your record can render you ineligible for or make it difficult to pursue certain funding categories and small business insurance. However, there are funding opportunities and resources dedicated to supporting formerly incarcerated entrepreneurs.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <span class="heading-toc" id="toc-small-business-grants-for-people-who-have-been-convicted-of-a-felony"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Small Business Grants for People Who Have Been Convicted of a Felony </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> A small <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">business grant</a> is a type of funding for entrepreneurs that can be offered by city, state, and federal governments as well as private businesses, nonprofits, and charities. Unlike a loan, it does not need to be paid back, making it a highly desirable and advantageous form of business capital. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-a-business-grant-7644272">Grants</a> are usually designed to help specific demographics or populations of people access funding, so they may be targeted at <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250">minorities</a>, veterans, or certain business industries.<span class="ql-inline-citation" data-cite="16"></span> Some examples of grants designated for formerly incarcerated people hoping to start a business include:<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> <li><strong>Nav’s Small Business Grant</strong>:<strong> </strong>Although currently paused and under redevelopment, this grant awarded entrepreneurs with up to $10,000 to help them overcome roadblocks and achieve their dreams.<span class="ql-inline-citation" data-cite="4"></span></li><li><strong>FedEx Small Business Grants Program</strong>:<strong> </strong>This annual grant contest awards one $50,000 grand prize and nine $20,000 second-place prizes to business owners with a FedEx shipping account.<span class="ql-inline-citation" data-cite="5"></span></li><li><strong>NASE Growth Grants</strong>: These business development grants, offered by the National Association for the Self-Employed, can be worth up to $4,000 and are meant to help entrepreneurs with marketing, advertising, hiring, expanding facilities, and other business needs.<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> How to Get a Business Grant If You’ve Been Convicted of a Felony </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Although every grant application is different and has its own application criteria, here is a general overview of what applying for a business grant might look like. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li><strong>Identify a grant</strong>. Search online to find a grant that is currently or will be accepting applications. Some helpful places to look include Inmates to Entrepreneurs, Help for Felons, and NASE.</li> <li><strong>Review the eligibility criteria</strong>. Ensure that you understand and meet the grant requirements, as some grants are designated for specific purposes or business types. Many grants are highly competitive and time-consuming to apply for, so investing time and effort into creating a strong application is a must.</li> <li><strong>Prepare any required documents or application materials</strong>. Some grants require you to prepare a detailed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-plan.asp">business plan</a> or submit a video or other media in order to participate. Most grants require you to submit personal or business information as well, so it can be useful to gather those resources and have them handy for the application process.</li> <li><strong>Submit your application</strong>.<strong> </strong>Many grants will inform you of their decision-making or announcement timeline, so after submitting your application, make note of when you should expect to hear back.<br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-small-business-loans-for-people-who-have-been-convicted-of-a-felony"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Small Business Loans for People Who Have Been Convicted of a Felony </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Another potential avenue for securing the necessary funding to start a business is a small <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-do-business-loans-work-7550170">business loan</a>, and having a criminal record does not necessarily disqualify someone from obtaining one. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> As is the case with grants, there are different categories of loans meant to address specific business needs, whether it’s starting a new business or developing an existing one. However, unlike a grant, a loan does need to be paid back, and your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit score</a> may be a factor in determining potential eligibility, repayment terms, and interest rates.<span class="ql-inline-citation" data-cite="16"></span> There are still options that <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-business-loans-with-no-credit-check-7374777">do not require a credit check</a> or for those with a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-small-business-loans-for-bad-credit-5114623">low credit score</a>, however.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Here are a few small business loans available to those who have a criminal record: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li><strong>U.S. Small Business Administration (SBA) microloans</strong>: For individuals who have a high credit score, this program is a great potential source of funding of up to $50,000, as the loans have some of the lowest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> available (generally 8% to 13%).<span class="ql-inline-citation" data-cite="7"></span></li> <li><strong>Kapitus loans</strong>:<strong> </strong>For business owners who have been operating for two or more years, bringing in a minimum of $250,000 in annual revenue, and who have a minimum <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ficoscore.asp">FICO Score</a> of 625, Kapitus can provide funding and financing from $10,000 to $500,000.<span class="ql-inline-citation" data-cite="8"></span></li> <li><strong>NewtekOne</strong> <strong>loans</strong>: NewtekOne’s loan programs are flexible when it comes to business type and funding amount. They offer the option to borrow anywhere from $1,000 to $15 million.<span class="ql-inline-citation" data-cite="19"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> How to Get a Business Loan If You’ve Been Convicted of a Felony </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Loan applications will vary depending on the lender and purpose of the loan, but here is a general overview of what applying for a business loan can look like. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li><strong>Identify a loan</strong>.<strong> </strong>Information on loans can be found online. Some helpful resources include Inmates to Entrepreneurs, Help for Felons, NASE, and the SBA.</li> <li><strong>Understand the eligibility criteria</strong>. Take the time to review the loan requirements and understand the interest rate, fees, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a> terms. Some loans are designated for specific purposes or business types, so it’s important to be clear about what you’ll be using the money for. </li> <li><strong>Prepare the required documents or application form</strong>. Application and documentation requirements will vary depending on the lender, but usually, the lender will require some form of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> for the loan as well as some business and personal information, including financial documentation. It can be helpful to get these ready in advance of submitting the application so that everything is handy when the time comes.</li> <li><strong>Submit your loan application</strong>. After that, you should hear back from the lender on whether your application is successful and, if so, when you’ll receive the funds. Make note of any repayment terms or schedules to ensure that you are able to make repayments and that you are aware of any penalties around missed or late payments.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-other-entrepreneurial-resources-for-those-with-a-felony-conviction"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Other Entrepreneurial Resources for Those with a Felony Conviction </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Additional resources for formerly incarcerated people looking to start a business include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li><strong>Inmates to Entrepreneurs</strong>:<strong> </strong>This national nonprofit offers entrepreneurship programs and resources for individuals with criminal records.<span class="ql-inline-citation" data-cite="9"></span></li> <li><strong>Small Business Administration (SBA)</strong>: This government agency is devoted to helping small businesses succeed, providing information, funding, and programming to entrepreneurs.<span class="ql-inline-citation" data-cite="10"></span></li> <li><strong>Grants.gov</strong>: This official government website lists federal grant opportunities.<span class="ql-inline-citation" data-cite="11"></span></li> <li><strong>Small Business Development Centers (SBDCs)</strong>: These publicly funded local centers provide free business consulting and low-cost training to business owners and are hosted by universities, colleges, state economic development agencies, and private partners in partnership with the SBA.<span class="ql-inline-citation" data-cite="12"></span></li> <li><strong>HelpForFelons.org</strong>: This organization assists formerly incarcerated people reenter the workforce and lists grant and loan opportunities.<span class="ql-inline-citation" data-cite="13"></span></li> <li><strong>SCORE</strong>:<strong> </strong>This nonprofit organization, another partner of the SBA, provides free resources, mentoring, and education for entrepreneurs looking to start, grow, or successfully exit a business.<span class="ql-inline-citation" data-cite="14"></span></li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crowdfunding.asp">Crowdfunding</a> platforms</strong>: A business funding option that’s an alternative to grants and loans can be to fundraise on a website like Kickstarter, GoFundMe, or Indiegogo.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-what-are-the-advantages-of-small-business-grants-over-loans"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Advantages of Small Business Grants Over Loans?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Unlike loans, grants do not need to be paid back. Because of this, they tend not to require a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-inquiry.asp">credit check</a> or the submission of any financial documentation. However, because grants essentially offer a prize of free money, they are usually highly competitive to apply for.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-why-do-formerly-incarcerated-people-struggle-to-find-business-funding"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Do Formerly Incarcerated People Struggle to Find Business Funding?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Formerly incarcerated people may struggle to secure funding for their business for many different reasons. Some traditional forms of funding—like loans, for example—may only be secured by passing a criminal background check. Being incarcerated can also interrupt a person’s career and make it difficult to get hired upon release, interfering with the potential option of self-funding a business. Formerly incarcerated individuals can also face discrimination, increasing barriers to accessing funding.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-can-people-who-have-been-convicted-of-a-felony-qualify-for-a-federal-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can People Who Have Been Convicted of a Felony Qualify for a Federal Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Some federal grants are even set aside specifically for people who have a criminal conviction on their record, sometimes as part of broader reentry programs.<span class="ql-inline-citation" data-cite="15"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Having a felony conviction on one’s record does not prohibit someone from owning a business and is not necessarily a barrier to pursuing an entrepreneurial dream. Although it can make it difficult to access traditional funding, there are options available, some specifically set aside to help people in their transition from prison. With research and determination, it is possible to start a business as a formerly incarcerated person. </p></div>

People who have been convicted of a felony in the United States can own and run a business, but there are challenges in doing so, including access to capital and overcoming prejudice against having been incarcerated. However, small business grants and loans, as well as other resources that may prove helpful in supporting an entrepreneurial vision, are available for formerly incarcerated people who are looking to start or run a business. ### Key Takeaways * People who have been convicted of a felony can legally own a business, but they may face challenges in obtaining the capital required to start one. * Small business grants can be a potential financial resource in this scenario, and can be obtained from various sources. * Small business loans, including the U.S. Small Business Administration (SBA) microloan program, are available to people who have been convicted of a felony. * Additional resources like Inmates to Entrepreneurs or Help for Felons can provide support for formerly incarcerated people who want to start a business. * Crowdfunding is another alternative funding option for those convicted of a felony. ## Can You Own a Business If You Have Been Convicted of a Felony? There are no laws against owning a business as someone with a felony conviction on their record. In fact, a 2021 study found that more than 3.8% of U.S. small business owners have a criminal record, and 1.5% have a felony record. However, starting a business requires [capital](https://www.investopedia.com/terms/c/capital.asp) to purchase equipment and tools, and having certain crimes on your record can render you ineligible for or make it difficult to pursue certain funding categories and small business insurance. However, there are funding opportunities and resources dedicated to supporting formerly incarcerated entrepreneurs. ## Small Business Grants for People Who Have Been Convicted of a Felony A small [business grant](https://www.investopedia.com/terms/g/grant.asp) is a type of funding for entrepreneurs that can be offered by city, state, and federal governments as well as private businesses, nonprofits, and charities. Unlike a loan, it does not need to be paid back, making it a highly desirable and advantageous form of business capital. [Grants](https://www.investopedia.com/what-is-a-business-grant-7644272) are usually designed to help specific demographics or populations of people access funding, so they may be targeted at [minorities](https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250), veterans, or certain business industries. Some examples of grants designated for formerly incarcerated people hoping to start a business include: * **Nav’s Small Business Grant**:Although currently paused and under redevelopment, this grant awarded entrepreneurs with up to $10,000 to help them overcome roadblocks and achieve their dreams. * **FedEx Small Business Grants Program**:This annual grant contest awards one $50,000 grand prize and nine $20,000 second-place prizes to business owners with a FedEx shipping account. * **NASE Growth Grants**: These business development grants, offered by the National Association for the Self-Employed, can be worth up to $4,000 and are meant to help entrepreneurs with marketing, advertising, hiring, expanding facilities, and other business needs. ### How to Get a Business Grant If You’ve Been Convicted of a Felony Although every grant application is different and has its own application criteria, here is a general overview of what applying for a business grant might look like. 1. **Identify a grant**. Search online to find a grant that is currently or will be accepting applications. Some helpful places to look include Inmates to Entrepreneurs, Help for Felons, and NASE. 2. **Review the eligibility criteria**. Ensure that you understand and meet the grant requirements, as some grants are designated for specific purposes or business types. Many grants are highly competitive and time-consuming to apply for, so investing time and effort into creating a strong application is a must. 3. **Prepare any required documents or application materials**. Some grants require you to prepare a detailed [business plan](https://www.investopedia.com/terms/b/business-plan.asp) or submit a video or other media in order to participate. Most grants require you to submit personal or business information as well, so it can be useful to gather those resources and have them handy for the application process. 4. **Submit your application**.Many grants will inform you of their decision-making or announcement timeline, so after submitting your application, make note of when you should expect to hear back. ## Small Business Loans for People Who Have Been Convicted of a Felony Another potential avenue for securing the necessary funding to start a business is a small [business loan](https://www.investopedia.com/how-do-business-loans-work-7550170), and having a criminal record does not necessarily disqualify someone from obtaining one. As is the case with grants, there are different categories of loans meant to address specific business needs, whether it’s starting a new business or developing an existing one. However, unlike a grant, a loan does need to be paid back, and your [credit score](https://www.investopedia.com/terms/c/credit_score.asp) may be a factor in determining potential eligibility, repayment terms, and interest rates. There are still options that [do not require a credit check](https://www.investopedia.com/best-business-loans-with-no-credit-check-7374777) or for those with a [low credit score](https://www.investopedia.com/best-small-business-loans-for-bad-credit-5114623), however. Here are a few small business loans available to those who have a criminal record: * **U.S. Small Business Administration (SBA) microloans**: For individuals who have a high credit score, this program is a great potential source of funding of up to $50,000, as the loans have some of the lowest [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) available (generally 8% to 13%). * **Kapitus loans**:For business owners who have been operating for two or more years, bringing in a minimum of $250,000 in annual revenue, and who have a minimum [FICO Score](https://www.investopedia.com/terms/f/ficoscore.asp) of 625, Kapitus can provide funding and financing from $10,000 to $500,000. * **NewtekOne** **loans**: NewtekOne’s loan programs are flexible when it comes to business type and funding amount. They offer the option to borrow anywhere from $1,000 to $15 million. ### How to Get a Business Loan If You’ve Been Convicted of a Felony Loan applications will vary depending on the lender and purpose of the loan, but here is a general overview of what applying for a business loan can look like. 1. **Identify a loan**.Information on loans can be found online. Some helpful resources include Inmates to Entrepreneurs, Help for Felons, NASE, and the SBA. 2. **Understand the eligibility criteria**. Take the time to review the loan requirements and understand the interest rate, fees, and [repayment](https://www.investopedia.com/terms/r/repayment.asp) terms. Some loans are designated for specific purposes or business types, so it’s important to be clear about what you’ll be using the money for. 3. **Prepare the required documents or application form**. Application and documentation requirements will vary depending on the lender, but usually, the lender will require some form of [collateral](https://www.investopedia.com/terms/c/collateral.asp) for the loan as well as some business and personal information, including financial documentation. It can be helpful to get these ready in advance of submitting the application so that everything is handy when the time comes. 4. **Submit your loan application**. After that, you should hear back from the lender on whether your application is successful and, if so, when you’ll receive the funds. Make note of any repayment terms or schedules to ensure that you are able to make repayments and that you are aware of any penalties around missed or late payments. ## Other Entrepreneurial Resources for Those with a Felony Conviction Additional resources for formerly incarcerated people looking to start a business include: * **Inmates to Entrepreneurs**:This national nonprofit offers entrepreneurship programs and resources for individuals with criminal records. * **Small Business Administration (SBA)**: This government agency is devoted to helping small businesses succeed, providing information, funding, and programming to entrepreneurs. * **Grants.gov**: This official government website lists federal grant opportunities. * **Small Business Development Centers (SBDCs)**: These publicly funded local centers provide free business consulting and low-cost training to business owners and are hosted by universities, colleges, state economic development agencies, and private partners in partnership with the SBA. * **HelpForFelons.org**: This organization assists formerly incarcerated people reenter the workforce and lists grant and loan opportunities. * **SCORE**:This nonprofit organization, another partner of the SBA, provides free resources, mentoring, and education for entrepreneurs looking to start, grow, or successfully exit a business. * **[Crowdfunding](https://www.investopedia.com/terms/c/crowdfunding.asp) platforms**: A business funding option that’s an alternative to grants and loans can be to fundraise on a website like Kickstarter, GoFundMe, or Indiegogo. ## What Are the Advantages of Small Business Grants Over Loans? Unlike loans, grants do not need to be paid back. Because of this, they tend not to require a [credit check](https://www.investopedia.com/terms/c/credit-inquiry.asp) or the submission of any financial documentation. However, because grants essentially offer a prize of free money, they are usually highly competitive to apply for. ## Why Do Formerly Incarcerated People Struggle to Find Business Funding? Formerly incarcerated people may struggle to secure funding for their business for many different reasons. Some traditional forms of funding—like loans, for example—may only be secured by passing a criminal background check. Being incarcerated can also interrupt a person’s career and make it difficult to get hired upon release, interfering with the potential option of self-funding a business. Formerly incarcerated individuals can also face discrimination, increasing barriers to accessing funding. ## Can People Who Have Been Convicted of a Felony Qualify for a Federal Grant? Yes. Some federal grants are even set aside specifically for people who have a criminal conviction on their record, sometimes as part of broader reentry programs. ## The Bottom Line Having a felony conviction on one’s record does not prohibit someone from owning a business and is not necessarily a barrier to pursuing an entrepreneurial dream. Although it can make it difficult to access traditional funding, there are options available, some specifically set aside to help people in their transition from prison. With research and determination, it is possible to start a business as a formerly incarcerated person.

People who have been convicted of a felony in the United States can own and run a business, but there are challenges in doing so, including access to capital and overcoming prejudice against having been incarcerated. However, small business grants and loans, as well as other resources that may prove helpful in supporting an entrepreneurial vision, are available for formerly incarcerated people who are looking to start or run a business. Key Takeaways People who have been convicted of a felony can legally own a business, but they may face challenges in obtaining the capital required to start one.Small business grants can be a potential financial resource in this scenario, and can be obtained from various sources.Small business loans, including the U.S. Small Business Administration (SBA) microloan program, are available to people who have been convicted of a felony.Additional resources like Inmates to Entrepreneurs or Help for Felons can provide support for formerly incarcerated people who want to start a business.Crowdfunding is another alternative funding option for those convicted of a felony. Can You Own a Business If You Have Been Convicted of a Felony? There are no laws against owning a business as someone with a felony conviction on their record. In fact, a 2021 study found that more than 3.8% of U.S. small business owners have a criminal record, and 1.5% have a felony record. However, starting a business requires capital to purchase equipment and tools, and having certain crimes on your record can render you ineligible for or make it difficult to pursue certain funding categories and small business insurance. However, there are funding opportunities and resources dedicated to supporting formerly incarcerated entrepreneurs. Small Business Grants for People Who Have Been Convicted of a Felony A small business grant is a type of funding for entrepreneurs that can be offered by city, state, and federal governments as well as private businesses, nonprofits, and charities. Unlike a loan, it does not need to be paid back, making it a highly desirable and advantageous form of business capital. Grants are usually designed to help specific demographics or populations of people access funding, so they may be targeted at minorities, veterans, or certain business industries. Some examples of grants designated for formerly incarcerated people hoping to start a business include: Nav’s Small Business Grant: Although currently paused and under redevelopment, this grant awarded entrepreneurs with up to $10,000 to help them overcome roadblocks and achieve their dreams.FedEx Small Business Grants Program: This annual grant contest awards one $50,000 grand prize and nine $20,000 second-place prizes to business owners with a FedEx shipping account.NASE Growth Grants: These business development grants, offered by the National Association for the Self-Employed, can be worth up to $4,000 and are meant to help entrepreneurs with marketing, advertising, hiring, expanding facilities, and other business needs. How to Get a Business Grant If You’ve Been Convicted of a Felony Although every grant application is different and has its own application criteria, here is a general overview of what applying for a business grant might look like. Identify a grant. Search online to find a grant that is currently or will be accepting applications. Some helpful places to look include Inmates to Entrepreneurs, Help for Felons, and NASE. Review the eligibility criteria. Ensure that you understand and meet the grant requirements, as some grants are designated for specific purposes or business types. Many grants are highly competitive and time-consuming to apply for, so investing time and effort into creating a strong application is a must. Prepare any required documents or application materials. Some grants require you to prepare a detailed business plan or submit a video or other media in order to participate. Most grants require you to submit personal or business information as well, so it can be useful to gather those resources and have them handy for the application process. Submit your application. Many grants will inform you of their decision-making or announcement timeline, so after submitting your application, make note of when you should expect to hear back. Small Business Loans for People Who Have Been Convicted of a Felony Another potential avenue for securing the necessary funding to start a business is a small business loan, and having a criminal record does not necessarily disqualify someone from obtaining one. As is the case with grants, there are different categories of loans meant to address specific business needs, whether it’s starting a new business or developing an existing one. However, unlike a grant, a loan does need to be paid back, and your credit score may be a factor in determining potential eligibility, repayment terms, and interest rates. There are still options that do not require a credit check or for those with a low credit score, however. Here are a few small business loans available to those who have a criminal record: U.S. Small Business Administration (SBA) microloans: For individuals who have a high credit score, this program is a great potential source of funding of up to $50,000, as the loans have some of the lowest interest rates available (generally 8% to 13%). Kapitus loans: For business owners who have been operating for two or more years, bringing in a minimum of $250,000 in annual revenue, and who have a minimum FICO Score of 625, Kapitus can provide funding and financing from $10,000 to $500,000. NewtekOne loans: NewtekOne’s loan programs are flexible when it comes to business type and funding amount. They offer the option to borrow anywhere from $1,000 to $15 million. How to Get a Business Loan If You’ve Been Convicted of a Felony Loan applications will vary depending on the lender and purpose of the loan, but here is a general overview of what applying for a business loan can look like. Identify a loan. Information on loans can be found online. Some helpful resources include Inmates to Entrepreneurs, Help for Felons, NASE, and the SBA. Understand the eligibility criteria. Take the time to review the loan requirements and understand the interest rate, fees, and repayment terms. Some loans are designated for specific purposes or business types, so it’s important to be clear about what you’ll be using the money for.  Prepare the required documents or application form. Application and documentation requirements will vary depending on the lender, but usually, the lender will require some form of collateral for the loan as well as some business and personal information, including financial documentation. It can be helpful to get these ready in advance of submitting the application so that everything is handy when the time comes. Submit your loan application. After that, you should hear back from the lender on whether your application is successful and, if so, when you’ll receive the funds. Make note of any repayment terms or schedules to ensure that you are able to make repayments and that you are aware of any penalties around missed or late payments. Other Entrepreneurial Resources for Those with a Felony Conviction Additional resources for formerly incarcerated people looking to start a business include: Inmates to Entrepreneurs: This national nonprofit offers entrepreneurship programs and resources for individuals with criminal records. Small Business Administration (SBA): This government agency is devoted to helping small businesses succeed, providing information, funding, and programming to entrepreneurs. Grants.gov: This official government website lists federal grant opportunities. Small Business Development Centers (SBDCs): These publicly funded local centers provide free business consulting and low-cost training to business owners and are hosted by universities, colleges, state economic development agencies, and private partners in partnership with the SBA. HelpForFelons.org: This organization assists formerly incarcerated people reenter the workforce and lists grant and loan opportunities. SCORE: This nonprofit organization, another partner of the SBA, provides free resources, mentoring, and education for entrepreneurs looking to start, grow, or successfully exit a business. Crowdfunding platforms: A business funding option that’s an alternative to grants and loans can be to fundraise on a website like Kickstarter, GoFundMe, or Indiegogo. What Are the Advantages of Small Business Grants Over Loans? Unlike loans, grants do not need to be paid back. Because of this, they tend not to require a credit check or the submission of any financial documentation. However, because grants essentially offer a prize of free money, they are usually highly competitive to apply for. Why Do Formerly Incarcerated People Struggle to Find Business Funding? Formerly incarcerated people may struggle to secure funding for their business for many different reasons. Some traditional forms of funding—like loans, for example—may only be secured by passing a criminal background check. Being incarcerated can also interrupt a person’s career and make it difficult to get hired upon release, interfering with the potential option of self-funding a business. Formerly incarcerated individuals can also face discrimination, increasing barriers to accessing funding. Can People Who Have Been Convicted of a Felony Qualify for a Federal Grant? Yes. Some federal grants are even set aside specifically for people who have a criminal conviction on their record, sometimes as part of broader reentry programs. The Bottom Line Having a felony conviction on one’s record does not prohibit someone from owning a business and is not necessarily a barrier to pursuing an entrepreneurial dream. Although it can make it difficult to access traditional funding, there are options available, some specifically set aside to help people in their transition from prison. With research and determination, it is possible to start a business as a formerly incarcerated person.

https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-paycheck-protection-program-flexibility-act-of-2020"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Paycheck Protection Program Flexibility Act of 2020? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Paycheck Protection Program Flexibility Act (PPPFA) of 2020, signed into law by former President Donald Trump on June 5, 2020, amends the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195">Paycheck Protection Program (PPP)</a> to give borrowers more freedom as to how and when loan funds are spent while retaining the possibility of full forgiveness.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The PPP Flexibility Act amends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness.</li><li>Borrowers now have 24 weeks to spend loan proceeds, up from eight weeks.<span class="ql-inline-citation" data-cite="19"></span></li><li>The act also reduces mandatory payroll spending from 75% to 60%.<span class="ql-inline-citation" data-cite="20"></span></li><li>Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.<span class="ql-inline-citation" data-cite="8"></span></li><li>Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA.<span class="ql-inline-citation" data-cite="15"></span></li><li>The time to pay off the loan has been extended to five years from the original two.<span class="ql-inline-citation" data-cite="14"></span></li><li>The act now lets businesses delay paying payroll taxes even if they took a PPP loan.<span class="ql-inline-citation" data-cite="8"></span></li><li>In January 2021, the program opened again for first-time loans and second-time loans.<span class="ql-inline-citation" data-cite="17"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-paycheck-protection-program-flexibility-act-of-2020"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the Paycheck Protection Program Flexibility Act of 2020 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Under previous PPP loan guidance, borrowers had eight weeks from the time they received the first loan installment to spend the funds.<span class="ql-inline-citation" data-cite="9"></span> The PPP Flexibility Act of 2020 extends that period to 24 weeks. They also have the option to keep the original eight-week spending period if they already had their loan before the enactment of the act. Under the new timeline, full forgiveness is still possible.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The original PPP loan guidelines mandated that 75% of any forgiven amount had to be spent on payroll costs.<span class="ql-inline-citation" data-cite="10"></span> The Flexibility Act reduces required payroll expenditures to 60% of the loan amount with up to 40% of the loan amount used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount.<strong> </strong>Or, part of the loan can be forgiven provided the borrower maintains the same 60/40 ratio for the amount forgiven.<span class="ql-inline-citation" data-cite="8"></span> This change reflects complaints from many businesses that their payroll costs went down as employees were laid off but fixed costs such as rent did not. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Borrowers were able to use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The deadline under the Flexibility Act to achieve this was Dec. 31, 2020, as opposed to the previous deadline of June 30, 2020.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> In January 2021, the PPPFA opened again, allowing businesses to take loans for the first time as well as a second draw for businesses that had previously taken a loan.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-new-legislation-extends-previous-application-deadline"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> New Legislation Extends Previous Application Deadline </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> On March 30, 2021, President Biden extended the deadline to apply for a Paycheck Protection Program Loan by signing the aptly named Paycheck Protection Program Extension Act of 2021. This legislation extends the deadline to May 31, 2021, and gives the Small Business Administration an additional 30 days to process applications.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In January 2021, when Congress revived PPP funds as part of a $2.3 trillion coronavirus relief package signed in December 2020, an additional $285 billion became available for PPP loans, of which approximately $25 billion was allocated to second-draw loans. When the first program expired in August 2020, Congress had approximately $130 billion left in unused funds.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-exceptions-to-full-forgiveness-guidelines-contained-in-the-ppp-flexibility-act"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Exceptions to Full Forgiveness Guidelines Contained in the PPP Flexibility Act </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Two new exceptions let borrowers achieve full forgiveness even if they don't fully restore their workforce. These are in addition to previous guidance that lets companies exclude workers who turned down good-faith offers of reemployment. Borrowers can now also reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Changes made by the PPPFA have been fully incorporated into new loan forgiveness <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form">applications posted on the SBA website</a>.</p></div></div></div> <span class="heading-toc" id="toc-additional-provisions-of-the-ppp-flexibility-act"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Additional Provisions of the PPP Flexibility Act </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> The PPP loan repayment period has been extended to five years from the original two while retaining the original 1% interest rate.<span class="ql-inline-citation" data-cite="14"></span> This gives borrowers more time to pay off the unforgiven portion of their loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The payment deferment period (principal, interest, fees) is now extended from six months after the end of the covered period to the date the SBA sends the borrower's loan forgiveness amount to the lender. If the borrower does not apply for forgiveness, the deferral period lasts until 10 months after the end of the covered period, according to guidance issued by the SBA on June 8, 2020.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Finally, the PPP Flexibility Act of 2020 lets businesses that took a PPP loan also delay paying their payroll taxes.<span class="ql-inline-citation" data-cite="8"></span> This was not allowed under the original <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">Coronavirus Aid, Relief, and Economic Security (CARES) Act</a>.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-second-draw-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Second-Draw Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The second-draw loans for companies that have already taken the first-time loan must meet certain criteria. They must show that they employ less than 300 individuals, if they have used or will use the total amount of their first loan, and have lost 25% or more of their revenue for any quarter in 2020. Second-draw loans are also capped at $2 million, which is lower than the $10 million cap for first-time loans.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-further-ppp-flexibility-act-guidance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Further PPP Flexibility Act Guidance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The SBA, in consultation with the Treasury Department, issued additional PPPFA guidance on Aug. 4, 2020, which sets the maximum amount of compensation that can count toward forgiveness for anyone with an ownership interest in an S corporation, C corporation, partnership, or sole proprietorship (Schedule C business) at the lesser of $20,833 or 2.5 months' worth of their 2019 compensation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> This cap applies cumulatively to all companies that pay the owner/employee. The $20,833 cap applies to a "covered period" of 10.6 weeks or more. If the company elects an eight-week covered period, the cap will be the lesser of $15,385 or eight weeks' worth of 2019 compensation.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Additional highlights from the Aug. 4 guidance include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> <li>Health insurance and retirement plan costs are not included in the compensation calculation above.</li><li>In regard to the loss of forgiveness for reducing an employee's wages by more than 25%, a reduction in benefits would not be considered a reduction in wages. (This has now been altered with the new rounds in January 2021, which allow benefits to be included.)<span class="ql-inline-citation" data-cite="17"></span></li><li>The cap on the forgivable owner/employee compensation does not include compensation paid to other family members, such as a spouse.<span class="ql-inline-citation" data-cite="7"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-reaction-to-the-ppp-flexibility-act-of-2020"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> Reaction to the PPP Flexibility Act of 2020 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> The new PPP Flexibility Act has received a largely positive response from experts, mostly for the extended spending deadline and retooled payroll costs guidance, although the shift from "75% of the forgiven amount" to "60% of the total loan amount" has some worried that the new requirement will cause many businesses to obtain no forgiveness now where they would have obtained at least some in the past. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Amanda Ballantyne, executive director of the Main Street Alliance, called for additional support above and beyond what she refers to as a "first step in addressing the design flaws of the PPP." Noting that "Most small businesses have already spent their eight weeks of PPP funding," Ballantyne and the Alliance urge a "comprehensive longer-term solution that recognizes the financial crisis COVID-19 has created for small business and our entire economy."<span class="ql-inline-citation" data-cite="22"></span> </p></div>

## What Is the Paycheck Protection Program Flexibility Act of 2020? The Paycheck Protection Program Flexibility Act (PPPFA) of 2020, signed into law by former President Donald Trump on June 5, 2020, amends the [Paycheck Protection Program (PPP)](https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195) to give borrowers more freedom as to how and when loan funds are spent while retaining the possibility of full forgiveness. ### Key Takeaways * The PPP Flexibility Act amends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness. * Borrowers now have 24 weeks to spend loan proceeds, up from eight weeks. * The act also reduces mandatory payroll spending from 75% to 60%. * Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce. * Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA. * The time to pay off the loan has been extended to five years from the original two. * The act now lets businesses delay paying payroll taxes even if they took a PPP loan. * In January 2021, the program opened again for first-time loans and second-time loans. ## Understanding the Paycheck Protection Program Flexibility Act of 2020 Under previous PPP loan guidance, borrowers had eight weeks from the time they received the first loan installment to spend the funds. The PPP Flexibility Act of 2020 extends that period to 24 weeks. They also have the option to keep the original eight-week spending period if they already had their loan before the enactment of the act. Under the new timeline, full forgiveness is still possible. The original PPP loan guidelines mandated that 75% of any forgiven amount had to be spent on payroll costs. The Flexibility Act reduces required payroll expenditures to 60% of the loan amount with up to 40% of the loan amount used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount.Or, part of the loan can be forgiven provided the borrower maintains the same 60/40 ratio for the amount forgiven. This change reflects complaints from many businesses that their payroll costs went down as employees were laid off but fixed costs such as rent did not. Borrowers were able to use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The deadline under the Flexibility Act to achieve this was Dec. 31, 2020, as opposed to the previous deadline of June 30, 2020. In January 2021, the PPPFA opened again, allowing businesses to take loans for the first time as well as a second draw for businesses that had previously taken a loan. ## New Legislation Extends Previous Application Deadline On March 30, 2021, President Biden extended the deadline to apply for a Paycheck Protection Program Loan by signing the aptly named Paycheck Protection Program Extension Act of 2021. This legislation extends the deadline to May 31, 2021, and gives the Small Business Administration an additional 30 days to process applications. In January 2021, when Congress revived PPP funds as part of a $2.3 trillion coronavirus relief package signed in December 2020, an additional $285 billion became available for PPP loans, of which approximately $25 billion was allocated to second-draw loans. When the first program expired in August 2020, Congress had approximately $130 billion left in unused funds. ## Exceptions to Full Forgiveness Guidelines Contained in the PPP Flexibility Act Two new exceptions let borrowers achieve full forgiveness even if they don't fully restore their workforce. These are in addition to previous guidance that lets companies exclude workers who turned down good-faith offers of reemployment. Borrowers can now also reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions. ### Changes made by the PPPFA have been fully incorporated into new loan forgiveness [applications posted on the SBA website](https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form). ## Additional Provisions of the PPP Flexibility Act The PPP loan repayment period has been extended to five years from the original two while retaining the original 1% interest rate. This gives borrowers more time to pay off the unforgiven portion of their loan. The payment deferment period (principal, interest, fees) is now extended from six months after the end of the covered period to the date the SBA sends the borrower's loan forgiveness amount to the lender. If the borrower does not apply for forgiveness, the deferral period lasts until 10 months after the end of the covered period, according to guidance issued by the SBA on June 8, 2020. Finally, the PPP Flexibility Act of 2020 lets businesses that took a PPP loan also delay paying their payroll taxes. This was not allowed under the original [Coronavirus Aid, Relief, and Economic Security (CARES) Act](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707). ## Second-Draw Loans The second-draw loans for companies that have already taken the first-time loan must meet certain criteria. They must show that they employ less than 300 individuals, if they have used or will use the total amount of their first loan, and have lost 25% or more of their revenue for any quarter in 2020. Second-draw loans are also capped at $2 million, which is lower than the $10 million cap for first-time loans. ## Further PPP Flexibility Act Guidance The SBA, in consultation with the Treasury Department, issued additional PPPFA guidance on Aug. 4, 2020, which sets the maximum amount of compensation that can count toward forgiveness for anyone with an ownership interest in an S corporation, C corporation, partnership, or sole proprietorship (Schedule C business) at the lesser of $20,833 or 2.5 months' worth of their 2019 compensation. This cap applies cumulatively to all companies that pay the owner/employee. The $20,833 cap applies to a "covered period" of 10.6 weeks or more. If the company elects an eight-week covered period, the cap will be the lesser of $15,385 or eight weeks' worth of 2019 compensation. Additional highlights from the Aug. 4 guidance include the following: * Health insurance and retirement plan costs are not included in the compensation calculation above. * In regard to the loss of forgiveness for reducing an employee's wages by more than 25%, a reduction in benefits would not be considered a reduction in wages. (This has now been altered with the new rounds in January 2021, which allow benefits to be included.) * The cap on the forgivable owner/employee compensation does not include compensation paid to other family members, such as a spouse. ## Reaction to the PPP Flexibility Act of 2020 The new PPP Flexibility Act has received a largely positive response from experts, mostly for the extended spending deadline and retooled payroll costs guidance, although the shift from "75% of the forgiven amount" to "60% of the total loan amount" has some worried that the new requirement will cause many businesses to obtain no forgiveness now where they would have obtained at least some in the past. Amanda Ballantyne, executive director of the Main Street Alliance, called for additional support above and beyond what she refers to as a "first step in addressing the design flaws of the PPP." Noting that "Most small businesses have already spent their eight weeks of PPP funding," Ballantyne and the Alliance urge a "comprehensive longer-term solution that recognizes the financial crisis COVID-19 has created for small business and our entire economy."

What Is the Paycheck Protection Program Flexibility Act of 2020? The Paycheck Protection Program Flexibility Act (PPPFA) of 2020, signed into law by former President Donald Trump on June 5, 2020, amends the Paycheck Protection Program (PPP) to give borrowers more freedom as to how and when loan funds are spent while retaining the possibility of full forgiveness. Key Takeaways The PPP Flexibility Act amends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness.Borrowers now have 24 weeks to spend loan proceeds, up from eight weeks.The act also reduces mandatory payroll spending from 75% to 60%.Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA.The time to pay off the loan has been extended to five years from the original two.The act now lets businesses delay paying payroll taxes even if they took a PPP loan.In January 2021, the program opened again for first-time loans and second-time loans. Understanding the Paycheck Protection Program Flexibility Act of 2020 Under previous PPP loan guidance, borrowers had eight weeks from the time they received the first loan installment to spend the funds. The PPP Flexibility Act of 2020 extends that period to 24 weeks. They also have the option to keep the original eight-week spending period if they already had their loan before the enactment of the act. Under the new timeline, full forgiveness is still possible. The original PPP loan guidelines mandated that 75% of any forgiven amount had to be spent on payroll costs. The Flexibility Act reduces required payroll expenditures to 60% of the loan amount with up to 40% of the loan amount used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount. Or, part of the loan can be forgiven provided the borrower maintains the same 60/40 ratio for the amount forgiven. This change reflects complaints from many businesses that their payroll costs went down as employees were laid off but fixed costs such as rent did not. Borrowers were able to use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The deadline under the Flexibility Act to achieve this was Dec. 31, 2020, as opposed to the previous deadline of June 30, 2020. In January 2021, the PPPFA opened again, allowing businesses to take loans for the first time as well as a second draw for businesses that had previously taken a loan. New Legislation Extends Previous Application Deadline On March 30, 2021, President Biden extended the deadline to apply for a Paycheck Protection Program Loan by signing the aptly named Paycheck Protection Program Extension Act of 2021. This legislation extends the deadline to May 31, 2021, and gives the Small Business Administration an additional 30 days to process applications. In January 2021, when Congress revived PPP funds as part of a $2.3 trillion coronavirus relief package signed in December 2020, an additional $285 billion became available for PPP loans, of which approximately $25 billion was allocated to second-draw loans. When the first program expired in August 2020, Congress had approximately $130 billion left in unused funds. Exceptions to Full Forgiveness Guidelines Contained in the PPP Flexibility Act Two new exceptions let borrowers achieve full forgiveness even if they don't fully restore their workforce. These are in addition to previous guidance that lets companies exclude workers who turned down good-faith offers of reemployment. Borrowers can now also reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions. Changes made by the PPPFA have been fully incorporated into new loan forgiveness applications posted on the SBA website. Additional Provisions of the PPP Flexibility Act The PPP loan repayment period has been extended to five years from the original two while retaining the original 1% interest rate. This gives borrowers more time to pay off the unforgiven portion of their loan. The payment deferment period (principal, interest, fees) is now extended from six months after the end of the covered period to the date the SBA sends the borrower's loan forgiveness amount to the lender. If the borrower does not apply for forgiveness, the deferral period lasts until 10 months after the end of the covered period, according to guidance issued by the SBA on June 8, 2020. Finally, the PPP Flexibility Act of 2020 lets businesses that took a PPP loan also delay paying their payroll taxes. This was not allowed under the original Coronavirus Aid, Relief, and Economic Security (CARES) Act. Second-Draw Loans The second-draw loans for companies that have already taken the first-time loan must meet certain criteria. They must show that they employ less than 300 individuals, if they have used or will use the total amount of their first loan, and have lost 25% or more of their revenue for any quarter in 2020. Second-draw loans are also capped at $2 million, which is lower than the $10 million cap for first-time loans. Further PPP Flexibility Act Guidance The SBA, in consultation with the Treasury Department, issued additional PPPFA guidance on Aug. 4, 2020, which sets the maximum amount of compensation that can count toward forgiveness for anyone with an ownership interest in an S corporation, C corporation, partnership, or sole proprietorship (Schedule C business) at the lesser of $20,833 or 2.5 months' worth of their 2019 compensation. This cap applies cumulatively to all companies that pay the owner/employee. The $20,833 cap applies to a "covered period" of 10.6 weeks or more. If the company elects an eight-week covered period, the cap will be the lesser of $15,385 or eight weeks' worth of 2019 compensation. Additional highlights from the Aug. 4 guidance include the following: Health insurance and retirement plan costs are not included in the compensation calculation above.In regard to the loss of forgiveness for reducing an employee's wages by more than 25%, a reduction in benefits would not be considered a reduction in wages. (This has now been altered with the new rounds in January 2021, which allow benefits to be included.)The cap on the forgivable owner/employee compensation does not include compensation paid to other family members, such as a spouse. Reaction to the PPP Flexibility Act of 2020 The new PPP Flexibility Act has received a largely positive response from experts, mostly for the extended spending deadline and retooled payroll costs guidance, although the shift from "75% of the forgiven amount" to "60% of the total loan amount" has some worried that the new requirement will cause many businesses to obtain no forgiveness now where they would have obtained at least some in the past. Amanda Ballantyne, executive director of the Main Street Alliance, called for additional support above and beyond what she refers to as a "first step in addressing the design flaws of the PPP." Noting that "Most small businesses have already spent their eight weeks of PPP funding," Ballantyne and the Alliance urge a "comprehensive longer-term solution that recognizes the financial crisis COVID-19 has created for small business and our entire economy."

https://www.investopedia.com/discrimination-in-small-business-contracts-5113819

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Small business contract discrimination refers to the notable disparity in the number of government contracts that go to minority- and women-owned businesses when compared to other small businesses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Government contracts represent a significant source of income for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-8611031">small businesses</a>. The U.S. government has made it a priority to send federal contracts to small businesses since the second half of the 20th century. And the amount of money spent on government contracts is increasing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Reports have suggested that differences in contracts received at all levels of contracting can be attributed to outright discrimination or structural access to capital that aids some firms over others in competing for these contracts. The government has attempted to decrease these disparities through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/021215/guide-affirmative-action-and-business.asp">affirmative action programs</a>, but it is unclear how successful the programs have been, and court rulings have narrowed their scope.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>In the U.S., federal, state, and local governments represent significant sources of procurement contracts for small businesses, especially since the second half of the 20th century.</li><li>Some studies have suggested that minority-owned businesses have received a smaller proportion of those contracts than one would expect, which can be attributed to direct discrimination or structural disparities.</li><li>Barriers that affect small business discrimination involve the actual procurement of contracts, but also access to financing, as well as court decisions that have narrowed the scope of minority contracting.</li></ul></div></div></div> <span class="heading-toc" id="toc-federal-contracts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Federal Contracts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> When the government purchases goods and services from private businesses, it is called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/procurement.asp">procurement</a>. In the United States, this type of contract spending is increasing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> In fiscal year 2019, the federal government spent $586 billion on contracts, a 40% increase over fiscal year 2018 that was fueled mostly by national defense services, according to figures from the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-accountability-office-gao.asp">Government Accountability Office (GAO)</a>. Of that sum, $225.8 billion went to small businesses.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> It is an explicit goal of the government to move a portion of its expenditures into small businesses. The federal government, for example, automatically sets aside most contracts under $150,000 for small businesses. Moreover, since the end of the 20th century, much of government expenditure has been spent on contractors rather than on employees. In 1995, federal spending on contractors was higher than it was on employees. Consequently, a significant chunk of governmental budgetary expenses goes to small businesses.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> However, a disproportionately smaller percentage of this federal money finds its way to minority-owned businesses. U.S. General Services Administration (GSA) expenditure reports for 2019, for instance, showed that the Department of Defense—one of the largest areas of expenditure in the U.S. budget—spent almost $27 billion, or about 8.6%, on businesses from disadvantaged communities, compared to about $75 billion, or 24%, on small businesses in general.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Minority-owned businesses have received a smaller share of government contracts than the proportion of the population that they represent, and these firms tend to have fewer employees. This trend has been observed for all minority populations except Asian Americans.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-state-and-local-contracts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> State and Local Contracts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> State and local governments also represent a significant source of contracting money for small businesses. In 1990, for instance, procurement at all government levels was at $450 billion, or 10% of the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gnp.asp">gross national product (GNP)</a>. State and local government made up about $250 billion of that total. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Localities are also subject to allegations of discrimination. In December 2020, for instance, the Civil Rights Division of the U.S. Department of Justice opened an investigation to determine whether procurement practices in Kansas City, Missouri, were discriminatory and violated the Civil Rights Act.<span class="ql-inline-citation" data-cite="2"></span> A 2021 study commissioned by Boston Mayor Martin J. Walsh's office showed that only 1.2% of the city's $2.2 billion in procurements between 2014 and 2019 went to Black- or Latinx-owned businesses, triggering federal civil rights complaints.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Research shows that state and local discrimination in procurement is longstanding. A 1997 Urban Institute study found that members of minority groups received a disproportionately small share of government contracts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The study, which looked at rates among local and state contracts, concluded that disparities existed for Black-, Latinx-, Asian-, Native American–, and women-owned firms across all industries that the study examined—construction, goods, professional services, and other services, with the exception of construction subcontracting, which showed a relatively small disparity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> The study revealed that minority-owned firms received just 57 cents out of every dollar in government contracts they would have expected to see.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_32-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">1.2%</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The percentage of Boston's $2.2 billion in procurements between 2014 and 2019 that went to Black- or Latinx-owned businesses, according to a 2021 study.<span class="ql-inline-citation" data-cite="3"></span></p></div></div></div> <span class="heading-toc" id="toc-federal-regulations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Federal Regulations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Government contracting is subject to the anti-discriminatory laws that apply to private contracts, and federal contracting is also regulated heavily by Congress. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The U.S. Congress has made investing in small businesses a priority since the 20th century. Shortages during the Second World War and the Korean War led to the creation of the current regulatory framework. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> In 1953, during the Dwight D. Eisenhower administration, Congress passed the Small Business Act, which led to the creation of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a>. To promote free trade, Congress set out to give a "fair proportion" of federal contracts and subcontracts to small businesses in the United States. There is generally bipartisan support for this sort of program.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Congress also created the Small Disadvantaged Business and the Women-Owned Small Business programs to encourage fair contracting across race and gender. A 2013 study found that these programs led to an increase in contracting money flowing to minority-owned businesses, but not to women-owned businesses, which the authors partly attributed to possible gender bias.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> The Small Business Reauthorization Act of 2000 created an Office of Advocacy in the SBA, which looks at strengthening minority- and women-owned businesses, and it guaranteed limited small business loans.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> In June 2020, SBA restrictions placed on applicants with a criminal record to receive COVID-19 relief, including the Paycheck Protection Program, were removed following a court ruling.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-affirmative-action"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Affirmative Action </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Local, state, and federal governments have attempted to correct disparities through affirmative action programs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Affirmative action dates back to the John F. Kennedy administration's Executive Order 10925, which tried to free projects connected to federal funds from racial discrimination. That executive order established the President's Committee on Equal Employment Opportunity. Since the 1964 Civil Rights Act, discrimination based on race and sex has been illegal.<span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> A 1965 order from the Lyndon B. Johnson administration, Executive Order 11246, required federal contractors to document steps to encourage hiring equality. It was expanded in 1967 to include gender-based equality. Johnson's order took the question out of committees and handed it to the secretary of labor, giving it to a Cabinet-level official with the authority to enforce equal opportunity, which led to the creation of the Office of Federal Contract Compliance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> President Barack Obama's 2014 amendments to the order sought to make gender pay disparities easier to spot by increasing wage transparency and to include lesbian, gay, bisexual, and transgender employees under the order's protections.<span class="ql-inline-citation" data-cite="26"></span><span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_55-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_56-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Affirmative action has become an area of heated controversy, involving multiple high-profile court cases and executive actions.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Since Johnson's time, the scope of affirmative action programs has been limited by court cases, including Regents of the University of California v. Bakke (1978) and the City of Richmond v. Croson (1989), which labeled affirmative action a "highly suspect tool" in combating disparity in state- and local-run programs.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> The 1997 Urban Institute study mentioned above suggested that, where present, affirmative action has reduced but not eliminated disparities in contract awards.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <span class="heading-toc" id="toc-continuing-sources-of-discrimination"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> Continuing Sources of Discrimination </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Discrimination has historically fallen into two broad categories: that which affects the growth or formation of a firm, and that which affects the ability of those firms to participate in the government contracting process.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Businesses owned by women and minorities have less access to capital that can be used to finance or grow a firm. Minority-owned businesses, for instance, have had less access to loans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> In a 2010 Congressional hearing, Chair for the Subcommittee on Government Management, Organization, and Procurement Diane E. Watson identified three main sources of discrimination in these processes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Minority-owned businesses face "ongoing and persistent" discrimination in contract awards, she said. They also face structural barriers, such as access to financing, bonding, and resistance from trade unions. Finally, court decisions that restrict the scope and purpose of minority contracting harm the ability of these firms to compete for contracts.<span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-the-economic-effect-of-the-covid-19-pandemic"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> The Economic Effect of the COVID-19 Pandemic </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Congressional interest in the SBA is increasing due to COVID's financial effect on the national economy.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> In the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/great-recession.asp">Great Recession</a> period, SBA loans to Black businesses dropped from 8% to about 3%, according to a study from the National Community Reinvestment Coalition. Moreover, loans tend to concentrate in middle- and upper-<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/legal-milestones-that-fight-inequality-5116659">income areas</a>. Black individuals, who constitute about 12.6% of the U.S. population, own about 2.1% of small businesses. Latinx individuals, who make up 16.9%, own about 5.6% of businesses.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> The most recent crisis may have made matters worse. USAspending estimates show that the U.S. committed $2.4 trillion in budgetary resources across 38 government agencies in response to the crisis as of the end of 2020. However, most studies have shown that the impact has been more negative on minority populations and other vulnerable populations than on White populations, which would restrict their access to capital.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Lawsuits have also alleged that the federal government's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944">Paycheck Protection Program</a>, which is meant to help small businesses survive the crisis, was initially denied to businesses without employees, a category that comprises a disproportionate number of minority- and women-owned firms.<span class="ql-inline-citation" data-cite="28"></span> That changed in later iterations of the PPP and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195">the latest included a 14-day window</a> reserved for businesses with fewer than 20 employees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> In 2021, the Joseph Biden administration announced a plan to reduce disparities in the country through structural investments in disadvantaged communities. It remains to be seen to what extent this plan will be enacted and how effective it will be.<span class="ql-inline-citation" data-cite="24"></span> </p></div>

Small business contract discrimination refers to the notable disparity in the number of government contracts that go to minority- and women-owned businesses when compared to other small businesses. Government contracts represent a significant source of income for [small businesses](https://www.investopedia.com/small-business-8611031). The U.S. government has made it a priority to send federal contracts to small businesses since the second half of the 20th century. And the amount of money spent on government contracts is increasing. Reports have suggested that differences in contracts received at all levels of contracting can be attributed to outright discrimination or structural access to capital that aids some firms over others in competing for these contracts. The government has attempted to decrease these disparities through [affirmative action programs](https://www.investopedia.com/articles/investing/021215/guide-affirmative-action-and-business.asp), but it is unclear how successful the programs have been, and court rulings have narrowed their scope. ### Key Takeaways * In the U.S., federal, state, and local governments represent significant sources of procurement contracts for small businesses, especially since the second half of the 20th century. * Some studies have suggested that minority-owned businesses have received a smaller proportion of those contracts than one would expect, which can be attributed to direct discrimination or structural disparities. * Barriers that affect small business discrimination involve the actual procurement of contracts, but also access to financing, as well as court decisions that have narrowed the scope of minority contracting. ## Federal Contracts When the government purchases goods and services from private businesses, it is called [procurement](https://www.investopedia.com/terms/p/procurement.asp). In the United States, this type of contract spending is increasing. In fiscal year 2019, the federal government spent $586 billion on contracts, a 40% increase over fiscal year 2018 that was fueled mostly by national defense services, according to figures from the U.S. [Government Accountability Office (GAO)](https://www.investopedia.com/terms/g/government-accountability-office-gao.asp). Of that sum, $225.8 billion went to small businesses. It is an explicit goal of the government to move a portion of its expenditures into small businesses. The federal government, for example, automatically sets aside most contracts under $150,000 for small businesses. Moreover, since the end of the 20th century, much of government expenditure has been spent on contractors rather than on employees. In 1995, federal spending on contractors was higher than it was on employees. Consequently, a significant chunk of governmental budgetary expenses goes to small businesses. However, a disproportionately smaller percentage of this federal money finds its way to minority-owned businesses. U.S. General Services Administration (GSA) expenditure reports for 2019, for instance, showed that the Department of Defense—one of the largest areas of expenditure in the U.S. budget—spent almost $27 billion, or about 8.6%, on businesses from disadvantaged communities, compared to about $75 billion, or 24%, on small businesses in general. Minority-owned businesses have received a smaller share of government contracts than the proportion of the population that they represent, and these firms tend to have fewer employees. This trend has been observed for all minority populations except Asian Americans. ## State and Local Contracts State and local governments also represent a significant source of contracting money for small businesses. In 1990, for instance, procurement at all government levels was at $450 billion, or 10% of the U.S. [gross national product (GNP)](https://www.investopedia.com/terms/g/gnp.asp). State and local government made up about $250 billion of that total. Localities are also subject to allegations of discrimination. In December 2020, for instance, the Civil Rights Division of the U.S. Department of Justice opened an investigation to determine whether procurement practices in Kansas City, Missouri, were discriminatory and violated the Civil Rights Act. A 2021 study commissioned by Boston Mayor Martin J. Walsh's office showed that only 1.2% of the city's $2.2 billion in procurements between 2014 and 2019 went to Black- or Latinx-owned businesses, triggering federal civil rights complaints. Research shows that state and local discrimination in procurement is longstanding. A 1997 Urban Institute study found that members of minority groups received a disproportionately small share of government contracts. The study, which looked at rates among local and state contracts, concluded that disparities existed for Black-, Latinx-, Asian-, Native American–, and women-owned firms across all industries that the study examined—construction, goods, professional services, and other services, with the exception of construction subcontracting, which showed a relatively small disparity. The study revealed that minority-owned firms received just 57 cents out of every dollar in government contracts they would have expected to see. ### 1.2% The percentage of Boston's $2.2 billion in procurements between 2014 and 2019 that went to Black- or Latinx-owned businesses, according to a 2021 study. ## Federal Regulations Government contracting is subject to the anti-discriminatory laws that apply to private contracts, and federal contracting is also regulated heavily by Congress. The U.S. Congress has made investing in small businesses a priority since the 20th century. Shortages during the Second World War and the Korean War led to the creation of the current regulatory framework. In 1953, during the Dwight D. Eisenhower administration, Congress passed the Small Business Act, which led to the creation of the [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp). To promote free trade, Congress set out to give a "fair proportion" of federal contracts and subcontracts to small businesses in the United States. There is generally bipartisan support for this sort of program. Congress also created the Small Disadvantaged Business and the Women-Owned Small Business programs to encourage fair contracting across race and gender. A 2013 study found that these programs led to an increase in contracting money flowing to minority-owned businesses, but not to women-owned businesses, which the authors partly attributed to possible gender bias. The Small Business Reauthorization Act of 2000 created an Office of Advocacy in the SBA, which looks at strengthening minority- and women-owned businesses, and it guaranteed limited small business loans. In June 2020, SBA restrictions placed on applicants with a criminal record to receive COVID-19 relief, including the Paycheck Protection Program, were removed following a court ruling. ## Affirmative Action Local, state, and federal governments have attempted to correct disparities through affirmative action programs. Affirmative action dates back to the John F. Kennedy administration's Executive Order 10925, which tried to free projects connected to federal funds from racial discrimination. That executive order established the President's Committee on Equal Employment Opportunity. Since the 1964 Civil Rights Act, discrimination based on race and sex has been illegal. A 1965 order from the Lyndon B. Johnson administration, Executive Order 11246, required federal contractors to document steps to encourage hiring equality. It was expanded in 1967 to include gender-based equality. Johnson's order took the question out of committees and handed it to the secretary of labor, giving it to a Cabinet-level official with the authority to enforce equal opportunity, which led to the creation of the Office of Federal Contract Compliance. President Barack Obama's 2014 amendments to the order sought to make gender pay disparities easier to spot by increasing wage transparency and to include lesbian, gay, bisexual, and transgender employees under the order's protections. ### Affirmative action has become an area of heated controversy, involving multiple high-profile court cases and executive actions. Since Johnson's time, the scope of affirmative action programs has been limited by court cases, including Regents of the University of California v. Bakke (1978) and the City of Richmond v. Croson (1989), which labeled affirmative action a "highly suspect tool" in combating disparity in state- and local-run programs. The 1997 Urban Institute study mentioned above suggested that, where present, affirmative action has reduced but not eliminated disparities in contract awards. ## Continuing Sources of Discrimination Discrimination has historically fallen into two broad categories: that which affects the growth or formation of a firm, and that which affects the ability of those firms to participate in the government contracting process. Businesses owned by women and minorities have less access to capital that can be used to finance or grow a firm. Minority-owned businesses, for instance, have had less access to loans. In a 2010 Congressional hearing, Chair for the Subcommittee on Government Management, Organization, and Procurement Diane E. Watson identified three main sources of discrimination in these processes. Minority-owned businesses face "ongoing and persistent" discrimination in contract awards, she said. They also face structural barriers, such as access to financing, bonding, and resistance from trade unions. Finally, court decisions that restrict the scope and purpose of minority contracting harm the ability of these firms to compete for contracts. ## The Economic Effect of the COVID-19 Pandemic Congressional interest in the SBA is increasing due to COVID's financial effect on the national economy. In the [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp) period, SBA loans to Black businesses dropped from 8% to about 3%, according to a study from the National Community Reinvestment Coalition. Moreover, loans tend to concentrate in middle- and upper-[income areas](https://www.investopedia.com/legal-milestones-that-fight-inequality-5116659). Black individuals, who constitute about 12.6% of the U.S. population, own about 2.1% of small businesses. Latinx individuals, who make up 16.9%, own about 5.6% of businesses. The most recent crisis may have made matters worse. USAspending estimates show that the U.S. committed $2.4 trillion in budgetary resources across 38 government agencies in response to the crisis as of the end of 2020. However, most studies have shown that the impact has been more negative on minority populations and other vulnerable populations than on White populations, which would restrict their access to capital. Lawsuits have also alleged that the federal government's [Paycheck Protection Program](https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944), which is meant to help small businesses survive the crisis, was initially denied to businesses without employees, a category that comprises a disproportionate number of minority- and women-owned firms. That changed in later iterations of the PPP and [the latest included a 14-day window](https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195) reserved for businesses with fewer than 20 employees. In 2021, the Joseph Biden administration announced a plan to reduce disparities in the country through structural investments in disadvantaged communities. It remains to be seen to what extent this plan will be enacted and how effective it will be.

Small business contract discrimination refers to the notable disparity in the number of government contracts that go to minority- and women-owned businesses when compared to other small businesses. Government contracts represent a significant source of income for small businesses. The U.S. government has made it a priority to send federal contracts to small businesses since the second half of the 20th century. And the amount of money spent on government contracts is increasing. Reports have suggested that differences in contracts received at all levels of contracting can be attributed to outright discrimination or structural access to capital that aids some firms over others in competing for these contracts. The government has attempted to decrease these disparities through affirmative action programs, but it is unclear how successful the programs have been, and court rulings have narrowed their scope. Key Takeaways In the U.S., federal, state, and local governments represent significant sources of procurement contracts for small businesses, especially since the second half of the 20th century.Some studies have suggested that minority-owned businesses have received a smaller proportion of those contracts than one would expect, which can be attributed to direct discrimination or structural disparities.Barriers that affect small business discrimination involve the actual procurement of contracts, but also access to financing, as well as court decisions that have narrowed the scope of minority contracting. Federal Contracts When the government purchases goods and services from private businesses, it is called procurement. In the United States, this type of contract spending is increasing. In fiscal year 2019, the federal government spent $586 billion on contracts, a 40% increase over fiscal year 2018 that was fueled mostly by national defense services, according to figures from the U.S. Government Accountability Office (GAO). Of that sum, $225.8 billion went to small businesses. It is an explicit goal of the government to move a portion of its expenditures into small businesses. The federal government, for example, automatically sets aside most contracts under $150,000 for small businesses. Moreover, since the end of the 20th century, much of government expenditure has been spent on contractors rather than on employees. In 1995, federal spending on contractors was higher than it was on employees. Consequently, a significant chunk of governmental budgetary expenses goes to small businesses. However, a disproportionately smaller percentage of this federal money finds its way to minority-owned businesses. U.S. General Services Administration (GSA) expenditure reports for 2019, for instance, showed that the Department of Defense—one of the largest areas of expenditure in the U.S. budget—spent almost $27 billion, or about 8.6%, on businesses from disadvantaged communities, compared to about $75 billion, or 24%, on small businesses in general. Minority-owned businesses have received a smaller share of government contracts than the proportion of the population that they represent, and these firms tend to have fewer employees. This trend has been observed for all minority populations except Asian Americans. State and Local Contracts State and local governments also represent a significant source of contracting money for small businesses. In 1990, for instance, procurement at all government levels was at $450 billion, or 10% of the U.S. gross national product (GNP). State and local government made up about $250 billion of that total. Localities are also subject to allegations of discrimination. In December 2020, for instance, the Civil Rights Division of the U.S. Department of Justice opened an investigation to determine whether procurement practices in Kansas City, Missouri, were discriminatory and violated the Civil Rights Act. A 2021 study commissioned by Boston Mayor Martin J. Walsh's office showed that only 1.2% of the city's $2.2 billion in procurements between 2014 and 2019 went to Black- or Latinx-owned businesses, triggering federal civil rights complaints. Research shows that state and local discrimination in procurement is longstanding. A 1997 Urban Institute study found that members of minority groups received a disproportionately small share of government contracts. The study, which looked at rates among local and state contracts, concluded that disparities existed for Black-, Latinx-, Asian-, Native American–, and women-owned firms across all industries that the study examined—construction, goods, professional services, and other services, with the exception of construction subcontracting, which showed a relatively small disparity. The study revealed that minority-owned firms received just 57 cents out of every dollar in government contracts they would have expected to see. 1.2% The percentage of Boston's $2.2 billion in procurements between 2014 and 2019 that went to Black- or Latinx-owned businesses, according to a 2021 study. Federal Regulations Government contracting is subject to the anti-discriminatory laws that apply to private contracts, and federal contracting is also regulated heavily by Congress. The U.S. Congress has made investing in small businesses a priority since the 20th century. Shortages during the Second World War and the Korean War led to the creation of the current regulatory framework. In 1953, during the Dwight D. Eisenhower administration, Congress passed the Small Business Act, which led to the creation of the Small Business Administration (SBA). To promote free trade, Congress set out to give a "fair proportion" of federal contracts and subcontracts to small businesses in the United States. There is generally bipartisan support for this sort of program. Congress also created the Small Disadvantaged Business and the Women-Owned Small Business programs to encourage fair contracting across race and gender. A 2013 study found that these programs led to an increase in contracting money flowing to minority-owned businesses, but not to women-owned businesses, which the authors partly attributed to possible gender bias. The Small Business Reauthorization Act of 2000 created an Office of Advocacy in the SBA, which looks at strengthening minority- and women-owned businesses, and it guaranteed limited small business loans. In June 2020, SBA restrictions placed on applicants with a criminal record to receive COVID-19 relief, including the Paycheck Protection Program, were removed following a court ruling. Affirmative Action Local, state, and federal governments have attempted to correct disparities through affirmative action programs. Affirmative action dates back to the John F. Kennedy administration's Executive Order 10925, which tried to free projects connected to federal funds from racial discrimination. That executive order established the President's Committee on Equal Employment Opportunity. Since the 1964 Civil Rights Act, discrimination based on race and sex has been illegal. A 1965 order from the Lyndon B. Johnson administration, Executive Order 11246, required federal contractors to document steps to encourage hiring equality. It was expanded in 1967 to include gender-based equality. Johnson's order took the question out of committees and handed it to the secretary of labor, giving it to a Cabinet-level official with the authority to enforce equal opportunity, which led to the creation of the Office of Federal Contract Compliance. President Barack Obama's 2014 amendments to the order sought to make gender pay disparities easier to spot by increasing wage transparency and to include lesbian, gay, bisexual, and transgender employees under the order's protections. Affirmative action has become an area of heated controversy, involving multiple high-profile court cases and executive actions. Since Johnson's time, the scope of affirmative action programs has been limited by court cases, including Regents of the University of California v. Bakke (1978) and the City of Richmond v. Croson (1989), which labeled affirmative action a "highly suspect tool" in combating disparity in state- and local-run programs. The 1997 Urban Institute study mentioned above suggested that, where present, affirmative action has reduced but not eliminated disparities in contract awards. Continuing Sources of Discrimination Discrimination has historically fallen into two broad categories: that which affects the growth or formation of a firm, and that which affects the ability of those firms to participate in the government contracting process. Businesses owned by women and minorities have less access to capital that can be used to finance or grow a firm. Minority-owned businesses, for instance, have had less access to loans. In a 2010 Congressional hearing, Chair for the Subcommittee on Government Management, Organization, and Procurement Diane E. Watson identified three main sources of discrimination in these processes. Minority-owned businesses face "ongoing and persistent" discrimination in contract awards, she said. They also face structural barriers, such as access to financing, bonding, and resistance from trade unions. Finally, court decisions that restrict the scope and purpose of minority contracting harm the ability of these firms to compete for contracts. The Economic Effect of the COVID-19 Pandemic Congressional interest in the SBA is increasing due to COVID's financial effect on the national economy. In the Great Recession period, SBA loans to Black businesses dropped from 8% to about 3%, according to a study from the National Community Reinvestment Coalition. Moreover, loans tend to concentrate in middle- and upper-income areas. Black individuals, who constitute about 12.6% of the U.S. population, own about 2.1% of small businesses. Latinx individuals, who make up 16.9%, own about 5.6% of businesses. The most recent crisis may have made matters worse. USAspending estimates show that the U.S. committed $2.4 trillion in budgetary resources across 38 government agencies in response to the crisis as of the end of 2020. However, most studies have shown that the impact has been more negative on minority populations and other vulnerable populations than on White populations, which would restrict their access to capital. Lawsuits have also alleged that the federal government's Paycheck Protection Program, which is meant to help small businesses survive the crisis, was initially denied to businesses without employees, a category that comprises a disproportionate number of minority- and women-owned firms. That changed in later iterations of the PPP and the latest included a 14-day window reserved for businesses with fewer than 20 employees. In 2021, the Joseph Biden administration announced a plan to reduce disparities in the country through structural investments in disadvantaged communities. It remains to be seen to what extent this plan will be enacted and how effective it will be.

https://www.investopedia.com/what-is-a-sba-504-loan-7551278

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> SBA 504 loans are fixed-rated, long-term loans for small businesses offered through the U.S. Small Business Administration (SBA). The SBA 504 program supports small business growth and job generation. These loans are funded by Certified Development Companies (CDCs) and third-party lenders and guaranteed by the SBA. They typically require the borrower to have at least 10% equity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> SBA 504 loans have a number of eligibility requirements and rules on how borrowers can use the funds. Like all financing, SBA 504 loans come with fees, interest, and specific repayment terms.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The U.S. Small Business Administration (SBA) 504 loan program offers a program for small businesses that need fixed-rate financing.</li><li>Borrowers can use SBA 504 loans to purchase and build assets to grow their businesses, such as equipment and real estate.</li><li>There are restrictions on how the funds can be used. For example, it cannot be used for working capital.<br/></li><li>The maximum you can borrow with an SBA 504 loan is $5.5 million.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-how-sba-504-loans-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How SBA 504 Loans Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> SBA 504 loans are a financing solution for small business owners who want to purchase real estate or equipment. It can be a good option for small business owners who do not qualify for conventional financing.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_10-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_11-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>In most cases, the maximum amount you can borrow for an SBA 504 loan is $5 million. But some manufacturing and energy-efficient projects can qualify for up to $5.5 million.<span class="ql-inline-citation" data-cite="9"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> backs the loans, but it does not provide the funds. CDCs, which are economic development nonprofits, work with banks and credit unions approved by the SBA to provide the funding. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> A CDC will provide 40% of the funding, while an SBA-approved bank or credit union will provide 50%. Borrowers are responsible for making a 10% contribution.<span class="ql-inline-citation" data-cite="9"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-main-features-of-an-sba-504-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Main Features of an SBA 504 Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> SBA 504 loans have specific features that dictate how much you can borrow, how much the loan will cost, and how you can use the funds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Maximum Amount </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Certain eligible energy-efficient or manufacturing projects can qualify for up to $5.5 million in funding. In most cases, the maximum SBA 504 loan amount is $5 million.<span class="ql-inline-citation" data-cite="20"></span><span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Minimum Credit Score </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The SBA does not list a minimum credit score requirement for borrowers. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-lenders-5091699">SBA lenders</a> may have their own credit score requirements.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Down Payment </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Borrowers typically make a 10% down payment on SBA 504 loans.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Fees </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Fees are typically 3% of the 504 part of the loan.<span class="ql-inline-citation" data-cite="9"></span> Borrowers may have to pay a processing fee, guaranty fee, funding corporation fee, and bond broker fee. Fees can be rolled into the loan amount and therefore financed.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Interest </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> SBA 504 loan rates are fixed-rate loans. The loan <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> are set to an increment above the market rate for five- and 10-year U.S. Treasury issues.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> Terms </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> SBA 504 loans are offered for terms of 10, 20, or 25 years.<span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> Uses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Small business owners can use SBA 504 loans for different purposes. You can: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <li>Buy existing buildings or land</li><li>Buy long-term machinery and equipment</li><li>Construct new facilities</li><li>Make improvements to land, streets, utilities, parking lots, landscaping, and existing facilities<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_42-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_43-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You cannot use an SBA 504 loan for working capital or to consolidate, refinance, or repay debt.<span class="ql-inline-citation" data-cite="5"></span></p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-subheading__text"> Time for Funding </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> It can potentially take you months to go through the application period and processing to receive the funds. SBA loans typically take longer to process than private loans because they have requirements from both lenders and the SBA. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <span class="heading-toc" id="toc-eligibility-requirements-to-get-an-sba-504-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> Eligibility Requirements to Get an SBA 504 Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410">To qualify for an SBA 504 loan</a>, you must meet several eligibility criteria. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-subheading__text"> SBA Requirements </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> <li>You must operate a for-profit company.</li><li>You have to do business in the United States.</li><li>You need a feasible business plan and relevant management experience.</li><li>You cannot have other available sources of funding.</li><li>Your net worth must be less than $15 million.</li><li>Your average net income must be less than $5 million after taxes for the two years prior.</li><li>You cannot be engaged in activities like speculation in rental real estate, loan packaging, gambling, multi-sales distribution, or illegal activities.</li><li>You must be able to demonstrate the ability to repay the loan with projected operating cash flow from your business.</li><li>You must demonstrate good character, which is defined by a history of paying debts and obeying the law.<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-subheading__text"> Lender Requirements </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">Lenders</a> require borrowers to meet all SBA eligibility criteria. SBA lenders may also have their own criteria, such as minimum <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit scores</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/income.asp">income</a> requirements, which they use to evaluate potential borrowers.<span class="ql-inline-citation" data-cite="17"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Project Requirements </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Borrowers can use SBA 504 loans to buy or build buildings, land, new facilities, and machinery or equipment. They can also use the loan to improve existing facilities. They cannot use the funds for working capital, debt consolidation, or rental real estate investment.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <span class="heading-toc" id="toc-how-sba-504-loans-compare-to-other-sba-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-heading__text"> How SBA 504 Loans Compare to Other SBA Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> The SBA also offers 7(a) loans and microloans. Let’s look in more detail at how both of these loan types compare to 504 loans.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> SBA 504 Loan vs. SBA 7(a) Loan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> The 7(a) loan program, the SBA’s most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">common loan program</a>, offers several different types of loans. Small businesses can receive a maximum of $5 million through this program. SBA 7(a) loans can be used for working capital, refinancing business debt, machinery, equipment, furniture, fixtures, and supplies. Borrowers must provide <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> for loans of $25,000 or more.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_65-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_66-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA 504 Loan</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Amount</strong>: Maximum of $5.5 million<br/></p></li> <li><p><strong>Eligibility</strong>: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements.</p></li> <li><p><strong>Terms</strong>: 10-, 20-, and 25-year terms</p></li> <li><p><strong>Interest rates</strong>: Tied to five- and 10-year U.S. Treasury issues</p></li> <li><p><strong>Fees</strong>: Various</p></li> <li><p><strong>Collateral</strong>: Project assets being financed by the loan serve as collateral.</p></li> <li><p><strong>Uses</strong>: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA 7(a) Loan</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Amount</strong>: Maximum of $5 million<br/></p></li> <li><p><strong>Eligibility</strong>: Businesses must operate for profit, operate in the U.S., have owner equity to invest, and exhaust other financial resources before applying.</p></li> <li><p><strong>Terms</strong>: 10 years for a working capital or inventory loan, 10 years for an equipment loan, and 25 years for a real estate loan</p></li> <li><p><strong>Interest rates</strong>: Negotiated by borrowers and lenders, not to exceed the SBA’s maximums</p></li> <li><p><strong>Fees</strong>: Vary depending on the size of the loan</p></li> <li><p><strong>Collateral</strong>: Required for loans of $25,000 and up</p></li> <li><p><strong>Uses</strong>: Working capital, real estate, equipment, construction, establishing a new business, inventory, and refinancing business debt</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <span class="heading-toc" id="toc-sba-504-loan-vs-sba-microloan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-heading__text"> SBA 504 Loan vs. SBA Microloan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> SBA microloans offers small businesses $50,000 or less in funding. Small businesses can use these loans for working capital, equipment, fixtures, furniture supplies, and inventory.<span class="ql-inline-citation" data-cite="23"></span><span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_71-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_72-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA 504 Loan</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Amount</strong>: Maximum of $5.5 million</p></li> <li><p><strong>Eligibility</strong>: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements.</p></li> <li><p><strong>Terms</strong>: 10-, 20-, and 25-year terms</p></li> <li><p><strong>Interest rates</strong>: Tied to 10-year U.S. Treasury issues</p></li> <li><p><strong>Fees</strong>: Various</p></li> <li><p><strong>Collateral</strong>: Project assets being financed by the loan serve as collateral.</p></li> <li><p><strong>Uses</strong>: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">SBA Microloan</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Amount</strong>: Maximum of $50,000</p></li> <li><p><strong>Eligibility</strong>: Criteria specific to the intermediary lender</p></li> <li><p><strong>Terms</strong>: Maximum of six years</p></li> <li><p><strong>Interest rates</strong>: Varies depending on the intermediary lender</p></li> <li><p><strong>Fees</strong>: Calculated based on intermediary’s cost of funds and loan amount</p></li> <li><p><strong>Collateral</strong>: Typically required</p></li> <li><p><strong>Uses</strong>: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <span class="heading-toc" id="toc-how-to-apply-for-an-sba-504-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-heading__text"> How to Apply for an SBA 504 Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> You will need to find a CDC to apply for an SBA 504 loan. The SBA <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/local-assistance/find?type=Certified%20development%20company&amp;pageNumber=1">offers a resource</a> that allows you to search for local CDCs. The CDC and the borrower will complete an application, which the SBA will use to determine the applicant’s eligibility for the loan. You will need to provide personal information and information about your business.<span class="ql-inline-citation" data-cite="11"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-repaying-an-sba-504-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> Repaying an SBA 504 Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> You will repay your SBA loan in monthly installments determined by your loan total, interest rate, and terms. Payments can be made by Automated Clearing House (ACH), wire, or check.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> You can ask your CDC about any payment questions you have.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_82-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-get-an-sba-504-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Get an SBA 504 Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Once you apply for an SBA 504 loan, processing can take a month or more. SBA loans typically take longer than applying for personal loans or private business loans because you must meet both the lender’s criteria and the SBA’s criteria.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-are-the-fees-associated-with-an-sba-504-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Fees Associated with an SBA 504 Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Borrowers must pay several fees, such as a processing fee, <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/guarantee_fees.asp">guaranty/guarantee fee</a>, and bond broker fee. At the end of 2020, the SBA eliminated certain SBA 504 loan fees, including the third-party lender participation fee and the CDC processing fee.<span class="ql-inline-citation" data-cite="19"></span> In fiscal year 2023, the upfront guaranty fee is 0%, and the annual service fee is 0.4405% of the outstanding loan balance.<span class="ql-inline-citation" data-cite="4"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_86-0"><span class="heading-toc" id="toc-can-you-pay-off-an-sba-504-loan-early"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Pay Off an SBA 504 Loan Early?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SBA 504 loans have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prepaymentpenalty.asp">prepayment penalties</a> if you prepay within the first 10 years of your loan. The prepayment penalty varies, but it declines each year through the first 10 years of your loan. After 10 years, there are no prepayment penalties.<span class="ql-inline-citation" data-cite="22"></span><span class="ql-inline-citation" data-cite="21"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-are-sba-504-loans-fixed"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are SBA 504 Loans Fixed?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SBA 504 loans are a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedinterestrate.asp">fixed-rate financing</a>, so the amount of your payments will not change over time as they would with variable-rate financing.<span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-what-is-the-90-rule-for-sba-504-loans"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the 90% Rule for SBA 504 Loans?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/appraisal.asp">appraisal</a> of commercial real estate is determined to be less than 90% of the estimated value, then the SBA loan amount must be reduced or the CDC must obtain additional collateral from the borrower.<span class="ql-inline-citation" data-cite="16"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_92-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_93-0"> SBA 504 loans can be an affordable financing option for small business owners who qualify. Borrowers can compare SBA 504 loan features, fees, interest, and terms with other financing options to decide what works best for their small business.<br/> </p></div>

SBA 504 loans are fixed-rated, long-term loans for small businesses offered through the U.S. Small Business Administration (SBA). The SBA 504 program supports small business growth and job generation. These loans are funded by Certified Development Companies (CDCs) and third-party lenders and guaranteed by the SBA. They typically require the borrower to have at least 10% equity. SBA 504 loans have a number of eligibility requirements and rules on how borrowers can use the funds. Like all financing, SBA 504 loans come with fees, interest, and specific repayment terms. ### Key Takeaways * The U.S. Small Business Administration (SBA) 504 loan program offers a program for small businesses that need fixed-rate financing. * Borrowers can use SBA 504 loans to purchase and build assets to grow their businesses, such as equipment and real estate. * There are restrictions on how the funds can be used. For example, it cannot be used for working capital. * The maximum you can borrow with an SBA 504 loan is $5.5 million. ## How SBA 504 Loans Work SBA 504 loans are a financing solution for small business owners who want to purchase real estate or equipment. It can be a good option for small business owners who do not qualify for conventional financing. ### In most cases, the maximum amount you can borrow for an SBA 504 loan is $5 million. But some manufacturing and energy-efficient projects can qualify for up to $5.5 million. The U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) backs the loans, but it does not provide the funds. CDCs, which are economic development nonprofits, work with banks and credit unions approved by the SBA to provide the funding. A CDC will provide 40% of the funding, while an SBA-approved bank or credit union will provide 50%. Borrowers are responsible for making a 10% contribution. ## Main Features of an SBA 504 Loan SBA 504 loans have specific features that dictate how much you can borrow, how much the loan will cost, and how you can use the funds. ### Maximum Amount Certain eligible energy-efficient or manufacturing projects can qualify for up to $5.5 million in funding. In most cases, the maximum SBA 504 loan amount is $5 million. ### Minimum Credit Score The SBA does not list a minimum credit score requirement for borrowers. [SBA lenders](https://www.investopedia.com/best-sba-lenders-5091699) may have their own credit score requirements. ### Down Payment Borrowers typically make a 10% down payment on SBA 504 loans. ### Fees Fees are typically 3% of the 504 part of the loan. Borrowers may have to pay a processing fee, guaranty fee, funding corporation fee, and bond broker fee. Fees can be rolled into the loan amount and therefore financed. ### Interest SBA 504 loan rates are fixed-rate loans. The loan [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) are set to an increment above the market rate for five- and 10-year U.S. Treasury issues. ### Terms SBA 504 loans are offered for terms of 10, 20, or 25 years. ### Uses Small business owners can use SBA 504 loans for different purposes. You can: * Buy existing buildings or land * Buy long-term machinery and equipment * Construct new facilities * Make improvements to land, streets, utilities, parking lots, landscaping, and existing facilities ### You cannot use an SBA 504 loan for working capital or to consolidate, refinance, or repay debt. ### Time for Funding It can potentially take you months to go through the application period and processing to receive the funds. SBA loans typically take longer to process than private loans because they have requirements from both lenders and the SBA. ## Eligibility Requirements to Get an SBA 504 Loan [To qualify for an SBA 504 loan](https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410), you must meet several eligibility criteria. ### SBA Requirements * You must operate a for-profit company. * You have to do business in the United States. * You need a feasible business plan and relevant management experience. * You cannot have other available sources of funding. * Your net worth must be less than $15 million. * Your average net income must be less than $5 million after taxes for the two years prior. * You cannot be engaged in activities like speculation in rental real estate, loan packaging, gambling, multi-sales distribution, or illegal activities. * You must be able to demonstrate the ability to repay the loan with projected operating cash flow from your business. * You must demonstrate good character, which is defined by a history of paying debts and obeying the law. ### Lender Requirements [Lenders](https://www.investopedia.com/terms/l/lender.asp) require borrowers to meet all SBA eligibility criteria. SBA lenders may also have their own criteria, such as minimum [credit scores](https://www.investopedia.com/terms/c/credit_score.asp) or [income](https://www.investopedia.com/terms/i/income.asp) requirements, which they use to evaluate potential borrowers. ### Project Requirements Borrowers can use SBA 504 loans to buy or build buildings, land, new facilities, and machinery or equipment. They can also use the loan to improve existing facilities. They cannot use the funds for working capital, debt consolidation, or rental real estate investment. ## How SBA 504 Loans Compare to Other SBA Loans The SBA also offers 7(a) loans and microloans. Let’s look in more detail at how both of these loan types compare to 504 loans. ### SBA 504 Loan vs. SBA 7(a) Loan The 7(a) loan program, the SBA’s most [common loan program](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp), offers several different types of loans. Small businesses can receive a maximum of $5 million through this program. SBA 7(a) loans can be used for working capital, refinancing business debt, machinery, equipment, furniture, fixtures, and supplies. Borrowers must provide [collateral](https://www.investopedia.com/terms/c/collateral.asp) for loans of $25,000 or more. SBA 504 Loan * **Amount**: Maximum of $5.5 million * **Eligibility**: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements. * **Terms**: 10-, 20-, and 25-year terms * **Interest rates**: Tied to five- and 10-year U.S. Treasury issues * **Fees**: Various * **Collateral**: Project assets being financed by the loan serve as collateral. * **Uses**: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment SBA 7(a) Loan * **Amount**: Maximum of $5 million * **Eligibility**: Businesses must operate for profit, operate in the U.S., have owner equity to invest, and exhaust other financial resources before applying. * **Terms**: 10 years for a working capital or inventory loan, 10 years for an equipment loan, and 25 years for a real estate loan * **Interest rates**: Negotiated by borrowers and lenders, not to exceed the SBA’s maximums * **Fees**: Vary depending on the size of the loan * **Collateral**: Required for loans of $25,000 and up * **Uses**: Working capital, real estate, equipment, construction, establishing a new business, inventory, and refinancing business debt ## SBA 504 Loan vs. SBA Microloan SBA microloans offers small businesses $50,000 or less in funding. Small businesses can use these loans for working capital, equipment, fixtures, furniture supplies, and inventory. SBA 504 Loan * **Amount**: Maximum of $5.5 million * **Eligibility**: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements. * **Terms**: 10-, 20-, and 25-year terms * **Interest rates**: Tied to 10-year U.S. Treasury issues * **Fees**: Various * **Collateral**: Project assets being financed by the loan serve as collateral. * **Uses**: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment SBA Microloan * **Amount**: Maximum of $50,000 * **Eligibility**: Criteria specific to the intermediary lender * **Terms**: Maximum of six years * **Interest rates**: Varies depending on the intermediary lender * **Fees**: Calculated based on intermediary’s cost of funds and loan amount * **Collateral**: Typically required * **Uses**: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment ## How to Apply for an SBA 504 Loan You will need to find a CDC to apply for an SBA 504 loan. The SBA [offers a resource](https://www.sba.gov/local-assistance/find?type=Certified%20development%20company&pageNumber=1) that allows you to search for local CDCs. The CDC and the borrower will complete an application, which the SBA will use to determine the applicant’s eligibility for the loan. You will need to provide personal information and information about your business. ## Repaying an SBA 504 Loan You will repay your SBA loan in monthly installments determined by your loan total, interest rate, and terms. Payments can be made by Automated Clearing House (ACH), wire, or check. You can ask your CDC about any payment questions you have. ## How Long Does It Take to Get an SBA 504 Loan? Once you apply for an SBA 504 loan, processing can take a month or more. SBA loans typically take longer than applying for personal loans or private business loans because you must meet both the lender’s criteria and the SBA’s criteria. ## What Are the Fees Associated with an SBA 504 Loan? Borrowers must pay several fees, such as a processing fee, [guaranty/guarantee fee](https://www.investopedia.com/terms/g/guarantee_fees.asp), and bond broker fee. At the end of 2020, the SBA eliminated certain SBA 504 loan fees, including the third-party lender participation fee and the CDC processing fee. In fiscal year 2023, the upfront guaranty fee is 0%, and the annual service fee is 0.4405% of the outstanding loan balance. ## Can You Pay Off an SBA 504 Loan Early? SBA 504 loans have [prepayment penalties](https://www.investopedia.com/terms/p/prepaymentpenalty.asp) if you prepay within the first 10 years of your loan. The prepayment penalty varies, but it declines each year through the first 10 years of your loan. After 10 years, there are no prepayment penalties. ## Are SBA 504 Loans Fixed? SBA 504 loans are a type of [fixed-rate financing](https://www.investopedia.com/terms/f/fixedinterestrate.asp), so the amount of your payments will not change over time as they would with variable-rate financing. ## What Is the 90% Rule for SBA 504 Loans? If an [appraisal](https://www.investopedia.com/terms/a/appraisal.asp) of commercial real estate is determined to be less than 90% of the estimated value, then the SBA loan amount must be reduced or the CDC must obtain additional collateral from the borrower. ## The Bottom Line SBA 504 loans can be an affordable financing option for small business owners who qualify. Borrowers can compare SBA 504 loan features, fees, interest, and terms with other financing options to decide what works best for their small business.

SBA 504 loans are fixed-rated, long-term loans for small businesses offered through the U.S. Small Business Administration (SBA). The SBA 504 program supports small business growth and job generation. These loans are funded by Certified Development Companies (CDCs) and third-party lenders and guaranteed by the SBA. They typically require the borrower to have at least 10% equity. SBA 504 loans have a number of eligibility requirements and rules on how borrowers can use the funds. Like all financing, SBA 504 loans come with fees, interest, and specific repayment terms. Key Takeaways The U.S. Small Business Administration (SBA) 504 loan program offers a program for small businesses that need fixed-rate financing.Borrowers can use SBA 504 loans to purchase and build assets to grow their businesses, such as equipment and real estate.There are restrictions on how the funds can be used. For example, it cannot be used for working capital.The maximum you can borrow with an SBA 504 loan is $5.5 million. How SBA 504 Loans Work SBA 504 loans are a financing solution for small business owners who want to purchase real estate or equipment. It can be a good option for small business owners who do not qualify for conventional financing. In most cases, the maximum amount you can borrow for an SBA 504 loan is $5 million. But some manufacturing and energy-efficient projects can qualify for up to $5.5 million. The U.S. Small Business Administration (SBA) backs the loans, but it does not provide the funds. CDCs, which are economic development nonprofits, work with banks and credit unions approved by the SBA to provide the funding. A CDC will provide 40% of the funding, while an SBA-approved bank or credit union will provide 50%. Borrowers are responsible for making a 10% contribution. Main Features of an SBA 504 Loan SBA 504 loans have specific features that dictate how much you can borrow, how much the loan will cost, and how you can use the funds. Maximum Amount Certain eligible energy-efficient or manufacturing projects can qualify for up to $5.5 million in funding. In most cases, the maximum SBA 504 loan amount is $5 million. Minimum Credit Score The SBA does not list a minimum credit score requirement for borrowers. SBA lenders may have their own credit score requirements. Down Payment Borrowers typically make a 10% down payment on SBA 504 loans. Fees Fees are typically 3% of the 504 part of the loan. Borrowers may have to pay a processing fee, guaranty fee, funding corporation fee, and bond broker fee. Fees can be rolled into the loan amount and therefore financed. Interest SBA 504 loan rates are fixed-rate loans. The loan interest rates are set to an increment above the market rate for five- and 10-year U.S. Treasury issues. Terms SBA 504 loans are offered for terms of 10, 20, or 25 years. Uses Small business owners can use SBA 504 loans for different purposes. You can: Buy existing buildings or landBuy long-term machinery and equipmentConstruct new facilitiesMake improvements to land, streets, utilities, parking lots, landscaping, and existing facilities You cannot use an SBA 504 loan for working capital or to consolidate, refinance, or repay debt. Time for Funding It can potentially take you months to go through the application period and processing to receive the funds. SBA loans typically take longer to process than private loans because they have requirements from both lenders and the SBA. Eligibility Requirements to Get an SBA 504 Loan To qualify for an SBA 504 loan, you must meet several eligibility criteria. SBA Requirements You must operate a for-profit company.You have to do business in the United States.You need a feasible business plan and relevant management experience.You cannot have other available sources of funding.Your net worth must be less than $15 million.Your average net income must be less than $5 million after taxes for the two years prior.You cannot be engaged in activities like speculation in rental real estate, loan packaging, gambling, multi-sales distribution, or illegal activities.You must be able to demonstrate the ability to repay the loan with projected operating cash flow from your business.You must demonstrate good character, which is defined by a history of paying debts and obeying the law. Lender Requirements Lenders require borrowers to meet all SBA eligibility criteria. SBA lenders may also have their own criteria, such as minimum credit scores or income requirements, which they use to evaluate potential borrowers. Project Requirements Borrowers can use SBA 504 loans to buy or build buildings, land, new facilities, and machinery or equipment. They can also use the loan to improve existing facilities. They cannot use the funds for working capital, debt consolidation, or rental real estate investment. How SBA 504 Loans Compare to Other SBA Loans The SBA also offers 7(a) loans and microloans. Let’s look in more detail at how both of these loan types compare to 504 loans. SBA 504 Loan vs. SBA 7(a) Loan The 7(a) loan program, the SBA’s most common loan program, offers several different types of loans. Small businesses can receive a maximum of $5 million through this program. SBA 7(a) loans can be used for working capital, refinancing business debt, machinery, equipment, furniture, fixtures, and supplies. Borrowers must provide collateral for loans of $25,000 or more. SBA 504 Loan Amount: Maximum of $5.5 million Eligibility: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements. Terms: 10-, 20-, and 25-year terms Interest rates: Tied to five- and 10-year U.S. Treasury issues Fees: Various Collateral: Project assets being financed by the loan serve as collateral. Uses: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment SBA 7(a) Loan Amount: Maximum of $5 million Eligibility: Businesses must operate for profit, operate in the U.S., have owner equity to invest, and exhaust other financial resources before applying. Terms: 10 years for a working capital or inventory loan, 10 years for an equipment loan, and 25 years for a real estate loan Interest rates: Negotiated by borrowers and lenders, not to exceed the SBA’s maximums Fees: Vary depending on the size of the loan Collateral: Required for loans of $25,000 and up Uses: Working capital, real estate, equipment, construction, establishing a new business, inventory, and refinancing business debt SBA 504 Loan vs. SBA Microloan SBA microloans offers small businesses $50,000 or less in funding. Small businesses can use these loans for working capital, equipment, fixtures, furniture supplies, and inventory. SBA 504 Loan Amount: Maximum of $5.5 million Eligibility: Businesses must operate for profit, have a net worth less than $15 million, and meet net income requirements. Terms: 10-, 20-, and 25-year terms Interest rates: Tied to 10-year U.S. Treasury issues Fees: Various Collateral: Project assets being financed by the loan serve as collateral. Uses: Purchase, construction, or improvement of buildings, land, new facilities, and machinery and equipment SBA Microloan Amount: Maximum of $50,000 Eligibility: Criteria specific to the intermediary lender Terms: Maximum of six years Interest rates: Varies depending on the intermediary lender Fees: Calculated based on intermediary’s cost of funds and loan amount Collateral: Typically required Uses: Working capital, inventory, supplies, furniture, fixtures, machinery, and equipment How to Apply for an SBA 504 Loan You will need to find a CDC to apply for an SBA 504 loan. The SBA offers a resource that allows you to search for local CDCs. The CDC and the borrower will complete an application, which the SBA will use to determine the applicant’s eligibility for the loan. You will need to provide personal information and information about your business. Repaying an SBA 504 Loan You will repay your SBA loan in monthly installments determined by your loan total, interest rate, and terms. Payments can be made by Automated Clearing House (ACH), wire, or check. You can ask your CDC about any payment questions you have. How Long Does It Take to Get an SBA 504 Loan? Once you apply for an SBA 504 loan, processing can take a month or more. SBA loans typically take longer than applying for personal loans or private business loans because you must meet both the lender’s criteria and the SBA’s criteria. What Are the Fees Associated with an SBA 504 Loan? Borrowers must pay several fees, such as a processing fee, guaranty/guarantee fee, and bond broker fee. At the end of 2020, the SBA eliminated certain SBA 504 loan fees, including the third-party lender participation fee and the CDC processing fee. In fiscal year 2023, the upfront guaranty fee is 0%, and the annual service fee is 0.4405% of the outstanding loan balance. Can You Pay Off an SBA 504 Loan Early? SBA 504 loans have prepayment penalties if you prepay within the first 10 years of your loan. The prepayment penalty varies, but it declines each year through the first 10 years of your loan. After 10 years, there are no prepayment penalties. Are SBA 504 Loans Fixed? SBA 504 loans are a type of fixed-rate financing, so the amount of your payments will not change over time as they would with variable-rate financing. What Is the 90% Rule for SBA 504 Loans? If an appraisal of commercial real estate is determined to be less than 90% of the estimated value, then the SBA loan amount must be reduced or the CDC must obtain additional collateral from the borrower. The Bottom Line SBA 504 loans can be an affordable financing option for small business owners who qualify. Borrowers can compare SBA 504 loan features, fees, interest, and terms with other financing options to decide what works best for their small business.

https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> If you own a small business or are planning to start one, you have a number of options for securing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">funding</a>. While taking out a loan may be the first idea that comes to mind, you could be overlooking another possibility: cash <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">grants</a> from the federal government, state or local government, or private companies. While grants can be much more competitive and difficult to obtain, unlike loans they don't have to be paid back. Here is what you need to know about getting approved for one. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small business grants, unlike loans, do not normally need to be paid back.</li><li>The federal government, state and local governments, corporations, and nonprofits can all be sources of grants.</li><li>Grant programs tend to have very specific criteria, so it's important to know what they're looking for and whether your business appears to be a good fit.</li><li>Grants are highly competitive and applying for one can represent a significant time commitment.</li></ul></div></div></div> <span class="heading-toc" id="toc-types-of-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Types of Small Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Small business grants are available from a variety of sponsors. Three major sources are the federal government, your state government, and certain corporations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> Federal Small Business Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The U.S. government provides grants and loans to small businesses through many different departments and agencies. The website <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.grants.gov/web/grants/learn-grants/grant-eligibility.html">Grants.gov</a> is a centralized resource where you can learn about many of them, search for ones you might be eligible for, and submit your applications. Major <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant-in-aid.asp">federal grant</a> sources for small businesses include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <strong>U.S. Small Business Administration (SBA)</strong>. Best known for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-an-sba-loan-7551104">SBA loan program</a>, through which it backs loans to small businesses made by private lenders, the SBA also has a limited grants program. While it notes that it "does not provide grants for starting and expanding a business," its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs "encourage small firms to undertake scientific research that helps meet federal research and development objectives and have a high potential for commercialization if successful."<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> In addition, the SBA funds the State Trade Expansion Program (STEP). STEP provides money to states and U.S. territories, enabling them to offer grants and other financial assistance to small businesses looking to export internationally.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> <strong>U.S. Department of Health and Human Services (HHS)</strong>.<strong> </strong>The Department of Health and Human Services Office of Small and Disadvantaged Business Utilization (OSDBU) provides grant money to small businesses that meet its criteria. Its programs are intended to help small businesses compete for federal contracts, with a focus on socially or economically disadvantaged people (the 8(a) Business Development Program), historically underutilized business (HUB) zones (HUBZone Program), and women-owned businesses (the Women-Owned Small Businesses (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) programs, among others. Including its small business programs, HHS says it "distributes the largest amount of grant funding of any federal agency.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> <strong>U.S. Department of Agriculture (USDA)</strong>. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/usda.asp">USDA</a> funds a wide range of financial assistance programs for farmers, ranchers, and other agricultural producers, directly or indirectly. The USDA Rural Development Business Program, for example, partners with lending institutions and community-based organizations to provide grants, loans, and loan guarantees to individuals and businesses in rural areas.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Again, you can find out about all these programs and many others at Grants.gov. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> State Small Business Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> State and local governments can also have grant programs for small businesses, drawing on federal funding, their own resources, or some combination of the two. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The U.S. Department of the Treasury's State Small Business Credit Initiative (SSBCI), for example, provides funding to states, territories, and tribal governments, which they in turn use to support small businesses through cash grants and other means. Ohio, for instance, announced in late 2022 that it was in line to receive up to $182 million in SSBCI funding.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Oregon's Export Promotion Program, partially funded by the federal SBA's STEP program, provides grants to small businesses so that they can participate in international trade shows and trade missions.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> To find grant possibilities in your state, two good resources are the Council for Community and Economic Research's State Business Incentives Database and the Small Business Development Center serving your area.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Corporate Small Business Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Some corporations, as well as nonprofit organizations, also provide grants to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small businesses</a>. In addition to the money, many of these programs offer mentoring and other benefits for the winners. A few examples:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The Amazon Business Small Business Grants program, for example, makes grants to small business customers with no more than $1 million in annual revenue. Like many grant programs, this one is extremely competitive. For 2023, it planned to award a total of 15 grants, ranging from $15,000 to $25,000; in 2022, it received more than 19,000 grant applications.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> The FedEx Small Business Grant Contest awards grants to a limited number of U.S. small businesses "to be applied towards growing or enhancing their business." To be eligible, the business must be a FedEx customer with a valid FedEx business shipping account number and fewer than 99 employees. For 2023, it made 10 awards.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Visa's She's Next Grant Program offers $10,000 grants to 60 Black women-owned businesses in six U.S. cities. The company is also a sponsor of similar grant programs in several other countries.<span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> As with state-funded grants, a good place to start in looking for corporate or nonprofit grants would be the SBA-sponsored Small Business Development Center serving your area.<span class="ql-inline-citation" data-cite="9"></span><strong><br/></strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_41-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_42-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Most 7(a) SBA <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-small-business-loans-5079093">loans</a> have a maximum amount of $5 million.<span class="ql-inline-citation" data-cite="18"></span></p></div></div></div> <span class="heading-toc" id="toc-qualifying-for-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Qualifying for Small Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> As noted in the sections above, grants for small businesses are highly <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/042115/what-factors-influence-competition-microeconomics.asp">competitive</a> and often limited to a certain type of business or business owner. So your first step in qualifying for a grant is to narrow the list to grants with criteria that seem a good match.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Having done that, you'll want to take a careful look at the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/request-for-application.asp">application for each grant program</a>, spend the time to fill it out thoroughly, and make sure you supply any documents or other backup that the application asks for. With so many applicants for a limited number of grants, you don't want to be ruled out simply on a minor technicality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Some grant programs also profile past winners on their websites. This can give you a better idea of what the administrators are looking for and allow you to position your business accordingly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <span class="heading-toc" id="toc-how-to-apply-for-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> How to Apply for Small Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> The first rule in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287">applying for a small business grant</a> is to check on any deadlines. Some programs accept applications throughout the year, while others may have annual or quarterly deadlines. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> While you shouldn't rush yourself in filling out your applications, it is in your best interest to get them in as early as possible. Most grant programs have a limited amount of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/1112/small-business-financing-debt-or-equity.aspx">funds</a> and may stop even reviewing applications once the money is exhausted. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Grant writing, as applying for grants is called, is a craft in its own right and a full-time profession for some people. If you're coming at it for the first time you'll find a lot of useful how-to information in books and online. For example, Grants.gov has a blog devoted to helpful grant-writing tips. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Among them: try to put yourself in the place of a person reviewing your application and enlist some capable proofreaders early in the process not only to spot typos but to point out any issues of logic or structure that may be interfering with your message. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_59-0"><span class="heading-toc" id="toc-who-is-eligible-for-us-business-grants"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Is Eligible for U.S. Business Grants?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To be eligible for U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-a-business-grant-7644272">business grants</a>, a business must already be in operation and also must have (1) taxes in good standing and no outstanding tax amounts or liens; (2) an owner who is the majority owner of the business as well as the decision-maker; (3) a business owner who earns their main income from this business, and (4) an owner who can prove their eligibility by providing government-issued identification.<span class="ql-inline-citation" data-cite="17"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_61-0"><span class="heading-toc" id="toc-can-you-borrow-money-from-the-government-to-start-a-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Borrow Money From the Government to Start a Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, you can borrow money from the government to start a business through the U.S. Small Business Administration (SBA). The SBA offers many different loans with different requirements, most stipulating that a business must already exist.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_63-0"><span class="heading-toc" id="toc-what-is-the-disadvantage-of-a-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Disadvantage of a Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The primary disadvantage of a business grant is that the money needs to be used in a very specific way; you can't use the money in any way you please. However, this is not typically a disadvantage because when you're applying for a grant, you know why you are applying and what the money will be used for, and that will determine whether or not you will receive the grant, based on the grant donor's requirements.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Grants are basically free money and worth pursuing if you believe your small business fits the precise criteria for them. Bear in mind that even in that case, grants are extremely competitive, so you'll want to have other funding sources in mind, as well. <br/> </p></div>

If you own a small business or are planning to start one, you have a number of options for securing [funding](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp). While taking out a loan may be the first idea that comes to mind, you could be overlooking another possibility: cash [grants](https://www.investopedia.com/terms/g/grant.asp) from the federal government, state or local government, or private companies. While grants can be much more competitive and difficult to obtain, unlike loans they don't have to be paid back. Here is what you need to know about getting approved for one. ### Key Takeaways * Small business grants, unlike loans, do not normally need to be paid back. * The federal government, state and local governments, corporations, and nonprofits can all be sources of grants. * Grant programs tend to have very specific criteria, so it's important to know what they're looking for and whether your business appears to be a good fit. * Grants are highly competitive and applying for one can represent a significant time commitment. ## Types of Small Business Grants Small business grants are available from a variety of sponsors. Three major sources are the federal government, your state government, and certain corporations. ### Federal Small Business Grants The U.S. government provides grants and loans to small businesses through many different departments and agencies. The website [Grants.gov](https://www.grants.gov/web/grants/learn-grants/grant-eligibility.html) is a centralized resource where you can learn about many of them, search for ones you might be eligible for, and submit your applications. Major [federal grant](https://www.investopedia.com/terms/g/grant-in-aid.asp) sources for small businesses include: **U.S. Small Business Administration (SBA)**. Best known for the [SBA loan program](https://www.investopedia.com/what-is-an-sba-loan-7551104), through which it backs loans to small businesses made by private lenders, the SBA also has a limited grants program. While it notes that it "does not provide grants for starting and expanding a business," its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs "encourage small firms to undertake scientific research that helps meet federal research and development objectives and have a high potential for commercialization if successful." In addition, the SBA funds the State Trade Expansion Program (STEP). STEP provides money to states and U.S. territories, enabling them to offer grants and other financial assistance to small businesses looking to export internationally. **U.S. Department of Health and Human Services (HHS)**.The Department of Health and Human Services Office of Small and Disadvantaged Business Utilization (OSDBU) provides grant money to small businesses that meet its criteria. Its programs are intended to help small businesses compete for federal contracts, with a focus on socially or economically disadvantaged people (the 8(a) Business Development Program), historically underutilized business (HUB) zones (HUBZone Program), and women-owned businesses (the Women-Owned Small Businesses (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) programs, among others. Including its small business programs, HHS says it "distributes the largest amount of grant funding of any federal agency. **U.S. Department of Agriculture (USDA)**. The [USDA](https://www.investopedia.com/terms/u/usda.asp) funds a wide range of financial assistance programs for farmers, ranchers, and other agricultural producers, directly or indirectly. The USDA Rural Development Business Program, for example, partners with lending institutions and community-based organizations to provide grants, loans, and loan guarantees to individuals and businesses in rural areas. Again, you can find out about all these programs and many others at Grants.gov. ### State Small Business Grants State and local governments can also have grant programs for small businesses, drawing on federal funding, their own resources, or some combination of the two. The U.S. Department of the Treasury's State Small Business Credit Initiative (SSBCI), for example, provides funding to states, territories, and tribal governments, which they in turn use to support small businesses through cash grants and other means. Ohio, for instance, announced in late 2022 that it was in line to receive up to $182 million in SSBCI funding. Oregon's Export Promotion Program, partially funded by the federal SBA's STEP program, provides grants to small businesses so that they can participate in international trade shows and trade missions. To find grant possibilities in your state, two good resources are the Council for Community and Economic Research's State Business Incentives Database and the Small Business Development Center serving your area. ### Corporate Small Business Grants Some corporations, as well as nonprofit organizations, also provide grants to [small businesses](https://www.investopedia.com/small-business-4427743). In addition to the money, many of these programs offer mentoring and other benefits for the winners. A few examples:  The Amazon Business Small Business Grants program, for example, makes grants to small business customers with no more than $1 million in annual revenue. Like many grant programs, this one is extremely competitive. For 2023, it planned to award a total of 15 grants, ranging from $15,000 to $25,000; in 2022, it received more than 19,000 grant applications. The FedEx Small Business Grant Contest awards grants to a limited number of U.S. small businesses "to be applied towards growing or enhancing their business." To be eligible, the business must be a FedEx customer with a valid FedEx business shipping account number and fewer than 99 employees. For 2023, it made 10 awards. Visa's She's Next Grant Program offers $10,000 grants to 60 Black women-owned businesses in six U.S. cities. The company is also a sponsor of similar grant programs in several other countries. As with state-funded grants, a good place to start in looking for corporate or nonprofit grants would be the SBA-sponsored Small Business Development Center serving your area. ### Most 7(a) SBA [loans](https://www.investopedia.com/best-small-business-loans-5079093) have a maximum amount of $5 million. ## Qualifying for Small Business Grants As noted in the sections above, grants for small businesses are highly [competitive](https://www.investopedia.com/ask/answers/042115/what-factors-influence-competition-microeconomics.asp) and often limited to a certain type of business or business owner. So your first step in qualifying for a grant is to narrow the list to grants with criteria that seem a good match.  Having done that, you'll want to take a careful look at the [application for each grant program](https://www.investopedia.com/terms/r/request-for-application.asp), spend the time to fill it out thoroughly, and make sure you supply any documents or other backup that the application asks for. With so many applicants for a limited number of grants, you don't want to be ruled out simply on a minor technicality. Some grant programs also profile past winners on their websites. This can give you a better idea of what the administrators are looking for and allow you to position your business accordingly. ## How to Apply for Small Business Grants The first rule in [applying for a small business grant](https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287) is to check on any deadlines. Some programs accept applications throughout the year, while others may have annual or quarterly deadlines. While you shouldn't rush yourself in filling out your applications, it is in your best interest to get them in as early as possible. Most grant programs have a limited amount of [funds](https://www.investopedia.com/financial-edge/1112/small-business-financing-debt-or-equity.aspx) and may stop even reviewing applications once the money is exhausted. Grant writing, as applying for grants is called, is a craft in its own right and a full-time profession for some people. If you're coming at it for the first time you'll find a lot of useful how-to information in books and online. For example, Grants.gov has a blog devoted to helpful grant-writing tips. Among them: try to put yourself in the place of a person reviewing your application and enlist some capable proofreaders early in the process not only to spot typos but to point out any issues of logic or structure that may be interfering with your message. ## Who Is Eligible for U.S. Business Grants? To be eligible for U.S. [business grants](https://www.investopedia.com/what-is-a-business-grant-7644272), a business must already be in operation and also must have (1) taxes in good standing and no outstanding tax amounts or liens; (2) an owner who is the majority owner of the business as well as the decision-maker; (3) a business owner who earns their main income from this business, and (4) an owner who can prove their eligibility by providing government-issued identification. ## Can You Borrow Money From the Government to Start a Business? Yes, you can borrow money from the government to start a business through the U.S. Small Business Administration (SBA). The SBA offers many different loans with different requirements, most stipulating that a business must already exist. ## What Is the Disadvantage of a Grant? The primary disadvantage of a business grant is that the money needs to be used in a very specific way; you can't use the money in any way you please. However, this is not typically a disadvantage because when you're applying for a grant, you know why you are applying and what the money will be used for, and that will determine whether or not you will receive the grant, based on the grant donor's requirements. ## The Bottom Line Grants are basically free money and worth pursuing if you believe your small business fits the precise criteria for them. Bear in mind that even in that case, grants are extremely competitive, so you'll want to have other funding sources in mind, as well. 

If you own a small business or are planning to start one, you have a number of options for securing funding. While taking out a loan may be the first idea that comes to mind, you could be overlooking another possibility: cash grants from the federal government, state or local government, or private companies. While grants can be much more competitive and difficult to obtain, unlike loans they don't have to be paid back. Here is what you need to know about getting approved for one. Key Takeaways Small business grants, unlike loans, do not normally need to be paid back.The federal government, state and local governments, corporations, and nonprofits can all be sources of grants.Grant programs tend to have very specific criteria, so it's important to know what they're looking for and whether your business appears to be a good fit.Grants are highly competitive and applying for one can represent a significant time commitment. Types of Small Business Grants Small business grants are available from a variety of sponsors. Three major sources are the federal government, your state government, and certain corporations. Federal Small Business Grants The U.S. government provides grants and loans to small businesses through many different departments and agencies. The website Grants.gov is a centralized resource where you can learn about many of them, search for ones you might be eligible for, and submit your applications. Major federal grant sources for small businesses include: U.S. Small Business Administration (SBA). Best known for the SBA loan program, through which it backs loans to small businesses made by private lenders, the SBA also has a limited grants program. While it notes that it "does not provide grants for starting and expanding a business," its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs "encourage small firms to undertake scientific research that helps meet federal research and development objectives and have a high potential for commercialization if successful." In addition, the SBA funds the State Trade Expansion Program (STEP). STEP provides money to states and U.S. territories, enabling them to offer grants and other financial assistance to small businesses looking to export internationally. U.S. Department of Health and Human Services (HHS). The Department of Health and Human Services Office of Small and Disadvantaged Business Utilization (OSDBU) provides grant money to small businesses that meet its criteria. Its programs are intended to help small businesses compete for federal contracts, with a focus on socially or economically disadvantaged people (the 8(a) Business Development Program), historically underutilized business (HUB) zones (HUBZone Program), and women-owned businesses (the Women-Owned Small Businesses (WOSB) and Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) programs, among others. Including its small business programs, HHS says it "distributes the largest amount of grant funding of any federal agency. U.S. Department of Agriculture (USDA). The USDA funds a wide range of financial assistance programs for farmers, ranchers, and other agricultural producers, directly or indirectly. The USDA Rural Development Business Program, for example, partners with lending institutions and community-based organizations to provide grants, loans, and loan guarantees to individuals and businesses in rural areas. Again, you can find out about all these programs and many others at Grants.gov. State Small Business Grants State and local governments can also have grant programs for small businesses, drawing on federal funding, their own resources, or some combination of the two. The U.S. Department of the Treasury's State Small Business Credit Initiative (SSBCI), for example, provides funding to states, territories, and tribal governments, which they in turn use to support small businesses through cash grants and other means. Ohio, for instance, announced in late 2022 that it was in line to receive up to $182 million in SSBCI funding. Oregon's Export Promotion Program, partially funded by the federal SBA's STEP program, provides grants to small businesses so that they can participate in international trade shows and trade missions. To find grant possibilities in your state, two good resources are the Council for Community and Economic Research's State Business Incentives Database and the Small Business Development Center serving your area. Corporate Small Business Grants Some corporations, as well as nonprofit organizations, also provide grants to small businesses. In addition to the money, many of these programs offer mentoring and other benefits for the winners. A few examples:  The Amazon Business Small Business Grants program, for example, makes grants to small business customers with no more than $1 million in annual revenue. Like many grant programs, this one is extremely competitive. For 2023, it planned to award a total of 15 grants, ranging from $15,000 to $25,000; in 2022, it received more than 19,000 grant applications. The FedEx Small Business Grant Contest awards grants to a limited number of U.S. small businesses "to be applied towards growing or enhancing their business." To be eligible, the business must be a FedEx customer with a valid FedEx business shipping account number and fewer than 99 employees. For 2023, it made 10 awards. Visa's She's Next Grant Program offers $10,000 grants to 60 Black women-owned businesses in six U.S. cities. The company is also a sponsor of similar grant programs in several other countries. As with state-funded grants, a good place to start in looking for corporate or nonprofit grants would be the SBA-sponsored Small Business Development Center serving your area. Most 7(a) SBA loans have a maximum amount of $5 million. Qualifying for Small Business Grants As noted in the sections above, grants for small businesses are highly competitive and often limited to a certain type of business or business owner. So your first step in qualifying for a grant is to narrow the list to grants with criteria that seem a good match.  Having done that, you'll want to take a careful look at the application for each grant program, spend the time to fill it out thoroughly, and make sure you supply any documents or other backup that the application asks for. With so many applicants for a limited number of grants, you don't want to be ruled out simply on a minor technicality. Some grant programs also profile past winners on their websites. This can give you a better idea of what the administrators are looking for and allow you to position your business accordingly. How to Apply for Small Business Grants The first rule in applying for a small business grant is to check on any deadlines. Some programs accept applications throughout the year, while others may have annual or quarterly deadlines. While you shouldn't rush yourself in filling out your applications, it is in your best interest to get them in as early as possible. Most grant programs have a limited amount of funds and may stop even reviewing applications once the money is exhausted. Grant writing, as applying for grants is called, is a craft in its own right and a full-time profession for some people. If you're coming at it for the first time you'll find a lot of useful how-to information in books and online. For example, Grants.gov has a blog devoted to helpful grant-writing tips. Among them: try to put yourself in the place of a person reviewing your application and enlist some capable proofreaders early in the process not only to spot typos but to point out any issues of logic or structure that may be interfering with your message. Who Is Eligible for U.S. Business Grants? To be eligible for U.S. business grants, a business must already be in operation and also must have (1) taxes in good standing and no outstanding tax amounts or liens; (2) an owner who is the majority owner of the business as well as the decision-maker; (3) a business owner who earns their main income from this business, and (4) an owner who can prove their eligibility by providing government-issued identification. Can You Borrow Money From the Government to Start a Business? Yes, you can borrow money from the government to start a business through the U.S. Small Business Administration (SBA). The SBA offers many different loans with different requirements, most stipulating that a business must already exist. What Is the Disadvantage of a Grant? The primary disadvantage of a business grant is that the money needs to be used in a very specific way; you can't use the money in any way you please. However, this is not typically a disadvantage because when you're applying for a grant, you know why you are applying and what the money will be used for, and that will determine whether or not you will receive the grant, based on the grant donor's requirements. The Bottom Line Grants are basically free money and worth pursuing if you believe your small business fits the precise criteria for them. Bear in mind that even in that case, grants are extremely competitive, so you'll want to have other funding sources in mind, as well. 

https://www.investopedia.com/small-business-saturday-5085723

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Small Business Saturday is an annual event that was created to encourage consumers to shop in person and online at locally owned <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp">small businesses</a> during the holiday season. The concept was introduced by American Express in 2010 as a way to put small businesses in the spotlight amid the recession resulting from the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp">2007-2008 financial crisis</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small Business Saturday was introduced by American Express in 2010 as a way to promote small businesses in the wake of the Great Recession.</li><li>This annual event takes place each November between Black Friday and Cyber Monday.</li><li>In 2011, the U.S. Senate passed a resolution to support Small Business Saturday, and participation in the event has expanded to all 50 states.</li><li>Consumers spent an estimated $17 billion shopping on Small Business Saturday in 2023.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-small-business-saturday"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> What Is Small Business Saturday? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Small Business Saturday is a one-day event that takes place every November on the Saturday after Thanksgiving. In 2023, that's Nov. 25.<span class="ql-inline-citation" data-cite="31"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The event was created in 2010 by American Express as a way to encourage support for small businesses during the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/great-recession.asp">Great Recession</a>.<span class="ql-inline-citation" data-cite="20"></span> In 2011, the U.S. Senate passed a resolution supporting Small Business Saturday.<span class="ql-inline-citation" data-cite="21"></span> The event has since grown nationwide, with participation in all 50 states.<span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Small Business Saturday falls between <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blackfriday.asp">Black Friday</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cybermonday.asp">Cyber Monday</a>, when consumers may already be shopping at national retailers or online to prepare for the holidays. By focusing on small businesses, the purpose of the event is to highlight their importance in local communities, so they aren't overshadowed by larger competitors.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Small Business Saturday is designed to support all online and brick-and-mortar small businesses, not just those that accept American Express cards as a payment method.</p></div></div></div> <span class="heading-toc" id="toc-who-participates-in-small-business-saturday"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Who Participates in Small Business Saturday? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> This event is intended to encourage consumers to shop at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-8611031">small and locally owned businesses</a>. That includes retail stores and restaurants as well as other small businesses, such as hair salons, grocery stores, and service-based businesses. It also extends to small businesses that exist online. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> offers a broad definition of what constitutes a small business. According to the SBA, any business that generally has fewer than 500 employees qualifies.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> American Express provides an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.americanexpress.com/en-us/maps?cat=Shop-Small&amp;linknav=us-loy-shoppers-shopsmallmap&amp;intlink=us-GABM-Shop_Small_Map" rel="nofollow">online search tool</a> to help consumers find small businesses in their area that they can support on Small Business Saturday and all year round. The Shop Small map includes a variety of businesses that participate in the event via in-person shopping as well as online shopping.<span class="ql-inline-citation" data-cite="32"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Businesses must meet American Express guidelines regarding size and payment acceptance to be added to the Shop Small map.<span class="ql-inline-citation" data-cite="24"></span></p></div></div></div> <span class="heading-toc" id="toc-benefits-of-small-business-saturday"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Benefits of Small Business Saturday </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The main goal of this event is to give small businesses a revenue boost during the holiday shopping season and help them compete with their larger counterparts. Based on the numbers reported by American Express, it would seem that the event has been successful in reaching that goal. For example, consumers spent about $17 billion on Small Business Saturday in 2023 in support of local businesses.<span class="ql-inline-citation" data-cite="33"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> While this amount is a tiny part of the $936.3 billion spent during the 2022 holiday shopping season overall, there is one statistic that stands out: American Express estimates that for every dollar spent at a small business in the United States, 68 cents remains in the local community.<span class="ql-inline-citation" data-cite="28"></span><span class="ql-inline-citation" data-cite="25"></span> By shopping small, consumers can help boost businesses in their own backyard and promote a healthier local economy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">$163 billion</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>The amount American Express estimates shoppers who participated in Small Business Saturday have spent between its inception in 2010 through 2021.<span class="ql-inline-citation" data-cite="29"></span></p></div></div></div> <span class="heading-toc" id="toc-how-to-participate-in-small-business-saturday-as-a-consumer-or-business-owner"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> How to Participate in Small Business Saturday as a Consumer or Business Owner </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The best way to support Small Business Saturday as a consumer is to buy locally and encourage friends and family to do the same. That includes shopping at local brick-and-mortar businesses as well as at small businesses that operate solely online. For example, you might choose to support an online boutique or a digital service-based business. You can also use the #ShopSmall hashtag to promote the event on social media.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> If you're interested in participating in the event as a small business owner, American Express offers a number of tools that can help. They include promotional materials, such as posters and signage that can be used in your store if you operate a business with a physical location, as well as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/digital-marketing.asp">digital marketing</a> materials. These are provided free of charge to businesses that are American Express merchants.<span class="ql-inline-citation" data-cite="34"></span><span class="ql-inline-citation" data-cite="35"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Small business owners can also prepare for the event in other ways, such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <li>Creating special sales events to encourage spending on Small Business Saturday</li><li>Conducting email marketing campaigns to inform customers of Small Business Saturday sales events</li><li>Offering special promotions or discounts as incentives to get customers to shop</li><li>Partnering with other small businesses to raise awareness surrounding Small Business Saturday</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Aside from helping small business owners market themselves for this annual event, American Express offers special discounts and promotions to help businesses save money. The company also aids small business owners in identifying shopping trends to make the most of Small Business Saturday sales events.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The event also gets assistance from Neighborhood Champions, which are organizations that promote Small Business Saturday locally. These organizations include local libraries, visitor centers, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/chamber-of-commerce.asp">chambers of commerce</a>, and other local business associations. Neighborhood Champions can sponsor their own events to market the event and encourage people in the area to get out and shop at small businesses. As a consumer, you can support Neighborhood Champions in your area by volunteering with one of these organizations, if available.<span class="ql-inline-citation" data-cite="30"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-when-is-small-business-saturday"></span> <h2 class="mntl-sc-block-questionandanswer__question">When Is Small Business Saturday?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Small Business Saturday takes place on the Saturday after Thanksgiving in the United States. For 2023, Small Business Saturday was Nov. 25.<span class="ql-inline-citation" data-cite="31"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-what-resources-are-available-to-small-business-owners"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Resources Are Available to Small Business Owners?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>American Express provides a variety of promotional materials ranging from posters and signs to digital marketing materials that can be customized. For businesses that are American Express merchants, they are provided at no cost.<span class="ql-inline-citation" data-cite="34"></span><span class="ql-inline-citation" data-cite="35"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-how-much-money-do-small-businesses-put-back-into-their-communities"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Money Do Small Businesses Put Back Into Their Communities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>According to American Express, 68 cents out of every dollar spent at a small business in the United States goes back into the local community.<span class="ql-inline-citation" data-cite="25"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Small Business Saturday gives shoppers an opportunity to show support for local businesses. It's important to remember that this event is designed to encourage people to shop small not only during the holidays but at any time of the year. By buying locally, you can help small business owners keep their doors open and provide jobs and tax revenue to your community. As a small business owner, taking part in this event could help provide a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashflow.asp">cash flow</a> boost during the holidays. </p></div>

Small Business Saturday is an annual event that was created to encourage consumers to shop in person and online at locally owned [small businesses](https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp) during the holiday season. The concept was introduced by American Express in 2010 as a way to put small businesses in the spotlight amid the recession resulting from the [2007-2008 financial crisis](https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp). ### Key Takeaways * Small Business Saturday was introduced by American Express in 2010 as a way to promote small businesses in the wake of the Great Recession. * This annual event takes place each November between Black Friday and Cyber Monday. * In 2011, the U.S. Senate passed a resolution to support Small Business Saturday, and participation in the event has expanded to all 50 states. * Consumers spent an estimated $17 billion shopping on Small Business Saturday in 2023. ## What Is Small Business Saturday? Small Business Saturday is a one-day event that takes place every November on the Saturday after Thanksgiving. In 2023, that's Nov. 25. The event was created in 2010 by American Express as a way to encourage support for small businesses during the [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp). In 2011, the U.S. Senate passed a resolution supporting Small Business Saturday. The event has since grown nationwide, with participation in all 50 states. Small Business Saturday falls between [Black Friday](https://www.investopedia.com/terms/b/blackfriday.asp) and [Cyber Monday](https://www.investopedia.com/terms/c/cybermonday.asp), when consumers may already be shopping at national retailers or online to prepare for the holidays. By focusing on small businesses, the purpose of the event is to highlight their importance in local communities, so they aren't overshadowed by larger competitors. ### Small Business Saturday is designed to support all online and brick-and-mortar small businesses, not just those that accept American Express cards as a payment method. ## Who Participates in Small Business Saturday? This event is intended to encourage consumers to shop at [small and locally owned businesses](https://www.investopedia.com/small-business-8611031). That includes retail stores and restaurants as well as other small businesses, such as hair salons, grocery stores, and service-based businesses. It also extends to small businesses that exist online. The [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) offers a broad definition of what constitutes a small business. According to the SBA, any business that generally has fewer than 500 employees qualifies. American Express provides an [online search tool](https://www.americanexpress.com/en-us/maps?cat=Shop-Small&linknav=us-loy-shoppers-shopsmallmap&intlink=us-GABM-Shop_Small_Map) to help consumers find small businesses in their area that they can support on Small Business Saturday and all year round. The Shop Small map includes a variety of businesses that participate in the event via in-person shopping as well as online shopping. ### Businesses must meet American Express guidelines regarding size and payment acceptance to be added to the Shop Small map. ## Benefits of Small Business Saturday The main goal of this event is to give small businesses a revenue boost during the holiday shopping season and help them compete with their larger counterparts. Based on the numbers reported by American Express, it would seem that the event has been successful in reaching that goal. For example, consumers spent about $17 billion on Small Business Saturday in 2023 in support of local businesses. While this amount is a tiny part of the $936.3 billion spent during the 2022 holiday shopping season overall, there is one statistic that stands out: American Express estimates that for every dollar spent at a small business in the United States, 68 cents remains in the local community. By shopping small, consumers can help boost businesses in their own backyard and promote a healthier local economy. ### $163 billion The amount American Express estimates shoppers who participated in Small Business Saturday have spent between its inception in 2010 through 2021. ## How to Participate in Small Business Saturday as a Consumer or Business Owner The best way to support Small Business Saturday as a consumer is to buy locally and encourage friends and family to do the same. That includes shopping at local brick-and-mortar businesses as well as at small businesses that operate solely online. For example, you might choose to support an online boutique or a digital service-based business. You can also use the #ShopSmall hashtag to promote the event on social media. If you're interested in participating in the event as a small business owner, American Express offers a number of tools that can help. They include promotional materials, such as posters and signage that can be used in your store if you operate a business with a physical location, as well as [digital marketing](https://www.investopedia.com/terms/d/digital-marketing.asp) materials. These are provided free of charge to businesses that are American Express merchants. Small business owners can also prepare for the event in other ways, such as: * Creating special sales events to encourage spending on Small Business Saturday * Conducting email marketing campaigns to inform customers of Small Business Saturday sales events * Offering special promotions or discounts as incentives to get customers to shop * Partnering with other small businesses to raise awareness surrounding Small Business Saturday Aside from helping small business owners market themselves for this annual event, American Express offers special discounts and promotions to help businesses save money. The company also aids small business owners in identifying shopping trends to make the most of Small Business Saturday sales events. The event also gets assistance from Neighborhood Champions, which are organizations that promote Small Business Saturday locally. These organizations include local libraries, visitor centers, [chambers of commerce](https://www.investopedia.com/terms/c/chamber-of-commerce.asp), and other local business associations. Neighborhood Champions can sponsor their own events to market the event and encourage people in the area to get out and shop at small businesses. As a consumer, you can support Neighborhood Champions in your area by volunteering with one of these organizations, if available. ## When Is Small Business Saturday? Small Business Saturday takes place on the Saturday after Thanksgiving in the United States. For 2023, Small Business Saturday was Nov. 25. ## What Resources Are Available to Small Business Owners? American Express provides a variety of promotional materials ranging from posters and signs to digital marketing materials that can be customized. For businesses that are American Express merchants, they are provided at no cost. ## How Much Money Do Small Businesses Put Back Into Their Communities? According to American Express, 68 cents out of every dollar spent at a small business in the United States goes back into the local community. ## The Bottom Line Small Business Saturday gives shoppers an opportunity to show support for local businesses. It's important to remember that this event is designed to encourage people to shop small not only during the holidays but at any time of the year. By buying locally, you can help small business owners keep their doors open and provide jobs and tax revenue to your community. As a small business owner, taking part in this event could help provide a [cash flow](https://www.investopedia.com/terms/c/cashflow.asp) boost during the holidays.

Small Business Saturday is an annual event that was created to encourage consumers to shop in person and online at locally owned small businesses during the holiday season. The concept was introduced by American Express in 2010 as a way to put small businesses in the spotlight amid the recession resulting from the 2007-2008 financial crisis. Key Takeaways Small Business Saturday was introduced by American Express in 2010 as a way to promote small businesses in the wake of the Great Recession.This annual event takes place each November between Black Friday and Cyber Monday.In 2011, the U.S. Senate passed a resolution to support Small Business Saturday, and participation in the event has expanded to all 50 states.Consumers spent an estimated $17 billion shopping on Small Business Saturday in 2023. What Is Small Business Saturday? Small Business Saturday is a one-day event that takes place every November on the Saturday after Thanksgiving. In 2023, that's Nov. 25. The event was created in 2010 by American Express as a way to encourage support for small businesses during the Great Recession. In 2011, the U.S. Senate passed a resolution supporting Small Business Saturday. The event has since grown nationwide, with participation in all 50 states. Small Business Saturday falls between Black Friday and Cyber Monday, when consumers may already be shopping at national retailers or online to prepare for the holidays. By focusing on small businesses, the purpose of the event is to highlight their importance in local communities, so they aren't overshadowed by larger competitors. Small Business Saturday is designed to support all online and brick-and-mortar small businesses, not just those that accept American Express cards as a payment method. Who Participates in Small Business Saturday? This event is intended to encourage consumers to shop at small and locally owned businesses. That includes retail stores and restaurants as well as other small businesses, such as hair salons, grocery stores, and service-based businesses. It also extends to small businesses that exist online. The Small Business Administration (SBA) offers a broad definition of what constitutes a small business. According to the SBA, any business that generally has fewer than 500 employees qualifies. American Express provides an online search tool to help consumers find small businesses in their area that they can support on Small Business Saturday and all year round. The Shop Small map includes a variety of businesses that participate in the event via in-person shopping as well as online shopping. Businesses must meet American Express guidelines regarding size and payment acceptance to be added to the Shop Small map. Benefits of Small Business Saturday The main goal of this event is to give small businesses a revenue boost during the holiday shopping season and help them compete with their larger counterparts. Based on the numbers reported by American Express, it would seem that the event has been successful in reaching that goal. For example, consumers spent about $17 billion on Small Business Saturday in 2023 in support of local businesses. While this amount is a tiny part of the $936.3 billion spent during the 2022 holiday shopping season overall, there is one statistic that stands out: American Express estimates that for every dollar spent at a small business in the United States, 68 cents remains in the local community. By shopping small, consumers can help boost businesses in their own backyard and promote a healthier local economy. $163 billion The amount American Express estimates shoppers who participated in Small Business Saturday have spent between its inception in 2010 through 2021. How to Participate in Small Business Saturday as a Consumer or Business Owner The best way to support Small Business Saturday as a consumer is to buy locally and encourage friends and family to do the same. That includes shopping at local brick-and-mortar businesses as well as at small businesses that operate solely online. For example, you might choose to support an online boutique or a digital service-based business. You can also use the #ShopSmall hashtag to promote the event on social media. If you're interested in participating in the event as a small business owner, American Express offers a number of tools that can help. They include promotional materials, such as posters and signage that can be used in your store if you operate a business with a physical location, as well as digital marketing materials. These are provided free of charge to businesses that are American Express merchants. Small business owners can also prepare for the event in other ways, such as: Creating special sales events to encourage spending on Small Business SaturdayConducting email marketing campaigns to inform customers of Small Business Saturday sales eventsOffering special promotions or discounts as incentives to get customers to shopPartnering with other small businesses to raise awareness surrounding Small Business Saturday Aside from helping small business owners market themselves for this annual event, American Express offers special discounts and promotions to help businesses save money. The company also aids small business owners in identifying shopping trends to make the most of Small Business Saturday sales events. The event also gets assistance from Neighborhood Champions, which are organizations that promote Small Business Saturday locally. These organizations include local libraries, visitor centers, chambers of commerce, and other local business associations. Neighborhood Champions can sponsor their own events to market the event and encourage people in the area to get out and shop at small businesses. As a consumer, you can support Neighborhood Champions in your area by volunteering with one of these organizations, if available. When Is Small Business Saturday? Small Business Saturday takes place on the Saturday after Thanksgiving in the United States. For 2023, Small Business Saturday was Nov. 25. What Resources Are Available to Small Business Owners? American Express provides a variety of promotional materials ranging from posters and signs to digital marketing materials that can be customized. For businesses that are American Express merchants, they are provided at no cost. How Much Money Do Small Businesses Put Back Into Their Communities? According to American Express, 68 cents out of every dollar spent at a small business in the United States goes back into the local community. The Bottom Line Small Business Saturday gives shoppers an opportunity to show support for local businesses. It's important to remember that this event is designed to encourage people to shop small not only during the holidays but at any time of the year. By buying locally, you can help small business owners keep their doors open and provide jobs and tax revenue to your community. As a small business owner, taking part in this event could help provide a cash flow boost during the holidays.

https://www.investopedia.com/what-is-an-sba-loan-7551104

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA). These loans can be used by businesses to cover startup costs, expansions, real estate purchases, or a wide range of other business expenses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Because SBA loans are guaranteed by a federal agency (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">the SBA</a>), they are lower risk for lenders. However, when you take out an SBA loan, you will be borrowing from a lender, which is a bank or another financial institution. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA).</li><li>You can take out this kind of loan with a bank or other financial institution.</li><li>If you fail to repay an SBA loan, the SBA will repay the lender and then you would be required to repay the SBA.</li><li>SBA loans have fairly strict eligibility requirements, but if you qualify, they can provide low interest rates and low fees.</li><li>SBA loans may also offer high maximum loan amounts and generous repayment schedules.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-do-sba-loans-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How Do SBA Loans Work? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> SBA loans are used by thousands of businesses each year to borrow capital. Though they are called SBA loans after the U.S. Small Business Administration, this agency doesn’t actually do the lending. Instead, the SBA works with a network of approved financial institutions and traditional banks that lend money to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-8611031">small businesses</a>, and the SBA partially guarantees<em> </em>the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loan.asp">loans</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The loan guarantee means that if the borrower is unable to pay back the loan to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">lender</a>, the SBA will step in and pay the lender. This significantly reduces the lenders’ risks, which makes them more willing to lend to small businesses.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Just because the SBA will pay the lender back, however, doesn’t mean the borrower is no longer responsible for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a>. SBA loans require an unconditional <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personal-guarantee.asp">personal guarantee</a> from everyone with at least 20% ownership in a company. This means that these people are personally responsible for repaying the SBA if the business can’t make the payments.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>SBA loans are almost always <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/secured-loans-5076025">secured</a>. Your lender will require collateral to secure the loan.</p></div></div></div> <span class="heading-toc" id="toc-terms-and-requirements-for-sba-7a-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Terms and Requirements for SBA 7(a) Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> There are several types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-lenders-5091699">SBA loans</a>. The most common, the standard 7(a) loan, allows businesses to borrow up to $5 million. The interest rate you’ll pay is the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/primerate.asp">prime rate</a> plus a spread. The prime rate is a benchmark rate based on the federal funds target rate, and it changes based in part on Federal Reserve Board decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The size of the loan spread is dictated by the SBA. It’s determined by the size of your loan, your loan term, and your loan type (whether it is a fixed-rate loan or a variable-rate loan).<span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> For variable-rate loans, the SBA imposes a maximum <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rate</a>, which is from the prime rate plus 2.25% to the prime rate plus 4.75%, depending on the loan size. (As of July 2023, those rates are 10.5% to 13%.)<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_23-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Interest Rates for Variable-Rate Loans</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Amount of loan</b><span data-cite="7"></span></td> <td><b>Maximum rate for loan with less than 7-year terms</b></td> <td><b>Maximum rate for loan with more than 7-year terms</b></td> </tr> <tr> <td>Less than $25,000</td> <td>Base rate + 4.25%</td> <td>Base rate + 4.75%</td> </tr> <tr> <td>$25,000–$50,000</td> <td>Base rate + 3.25%</td> <td>Base rate + 3.75%</td> </tr> <tr> <td>More than $50,000</td> <td>Base rate + 2.25%</td> <td>Base rate + 2.75%</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> For fixed-rate loans, the interest rates can range from the prime rate plus 5% to 8%, depending on the size of the loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_27-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">Interest Rates for Fixed-Rate Loans</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Amount of loan</b><span data-cite="7"></span></td> <td><b>Interest rate (prime rate on first business day of the month plus)</b></td> </tr> <tr> <td>Less than $25,000</td> <td>6% plus the 2% permitted by <a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.govinfo.gov/app/details/CFR-2022-title13-vol1/CFR-2022-title13-vol1-sec120-215/summary">13 CFR § 120.215</a></td> </tr> <tr> <td>$25,000–$50,000</td> <td>6% plus the 1% permitted by 13 CFR § 120.215</td> </tr> <tr> <td>$50,000–$250,000</td> <td>6%</td> </tr> <tr> <td>More than $250,000</td> <td>5%</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> The requirements for getting an SBA loan are relatively strict. Among other requirements, you must prove that your business is a small business as defined by the SBA and that you have sought other forms of financing before applying for an SBA loan.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> You must be able to provide <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> for loans larger than $25,000. You’ll also need a personal <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit score</a> that meets the lender’s criteria, such as 685 or above, and solid annual revenue from your business.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">Calculating SBA Loan Interest</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You can calculate how much interest you’ll pay on an 7(a) SBA loan by using the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba7a.loans/sba-7a-loan-calculator-amortization-schedule/" rel="nofollow">SBA’s loan calculator</a>.</p></div></div></div> <span class="heading-toc" id="toc-sba-loans-vs-traditional-business-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> SBA Loans vs. Traditional Business Loans </span> </h2> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_36-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">Key Differences</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>SBA loans</b></td> <td><b>Traditional business loans</b></td> </tr> <tr> <td>Low interest rates. Variable-rate loans capped at base plus 4.75%.</td> <td>Potentially higher interest rates, but it depends on the lender and your business</td> </tr> <tr> <td>Low fees. You’ll pay an upfront guarantee fee and annual service fee for loans of more than $500,000.</td> <td>Potentially higher fees, but again, this depends on your lender</td> </tr> <tr> <td>Longer terms. If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. If you use it for real estate, you’ll have 25 years.</td> <td>Shorter terms</td> </tr> <tr> <td>Hard to qualify. You’ll need to have been in business for a few years and be generating solid revenue from your business.</td> <td>Can be easier to qualify for, but you should make sure you can easily make the repayments</td> </tr> <tr> <td>Slow to fund. SBA loans can take one to three months to process.</td> <td>Quick to fund. Some lenders will pay you the funds instantly after an online application.</td> </tr> <tr> <td>Personal guarantee required. This puts your personal finances at risk if your business can’t repay the loan.</td> <td>Personal guarantee not necessarily required, though some lenders may ask for this or for you to put up collateral</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0">Can You Get Denied for an SBA?</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>You can potentially get denied for an SBA loan. If you or your business has a low overall credit score, lack adequate collateral or assets to secure the loan, or already has outstanding debts, the SBA may refuse your application.</p></div></div></div> <span class="heading-toc" id="toc-types-of-sba-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Types of SBA Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> There are several different types of SBA loans, though some are only used in very specific circumstances. The most common types are:<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> SBA 7(a) Loans </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <li><strong>Loan limit</strong>: $5 million</li> <li><strong>Interest rate range</strong>: Capped at the prime rate plus 2.25% to 4.75% for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variableinterestrate.asp">variable-rate</a> loans and the prime rate plus 5% to 8% for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedinterestrate.asp">fixed-rate</a> loans<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="8"></span></li> <li><strong>Purpose</strong>: General business expenses or to fund purchases and expansion<span class="ql-inline-citation" data-cite="4"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> SBA Express Loans </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>Loan limit</strong>: $500,000</li><li><strong>Interest rate range</strong>: Capped at the prime rate plus 4.5% to 6.5% for variable-rate loans and the prime rate plus 5% to 8% for fixed-rate loans<span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="8"></span></li><li><strong>Purpose</strong>: Fast funding for working capital, expansion, and real estate and equipment purchases<span class="ql-inline-citation" data-cite="4"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> SBA 504 Loans </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> <li><strong>Loan limit</strong>: $5.5 million</li><li><strong>Interest rate</strong>: Pegged to an increment above the current market rate for 10-year U.S. Treasury issues plus fees, which total approximately 3 % of the loan amount and are rolled into the loan amount</li><li><strong>Purpose</strong>: Purchase of long-term, fixed assets like land, machinery, and facilities<span class="ql-inline-citation" data-cite="10"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-pros-and-cons-of-sba-7a-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> Pros and Cons of SBA 7(a) Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> As with any financial product, SBA loans have both advantages and disadvantages over their competitors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_55-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_56-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Competitive rates<br/></p></li> <li><p>Low fees</p></li> <li><p>Long terms<br/></p></li> <li><p>Large loan amounts</p><p><br/></p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Hard to qualify</p></li> <li><p>Slow to fund</p></li> <li><p>Personal guarantee required</p><p><br/></p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-subheading__text"> Pros Explained </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <li><strong>Competitive rates</strong>: SBA loan interest rates are calculated using the prime rate, to which is added an extra percentage that is known as the spread. The SBA imposes a maximum limit on what lenders can charge for SBA loans, depending on the type and size of the loan.<span class="ql-inline-citation" data-cite="8"></span></li><li><strong>Low fees</strong>: SBA loans for less than $500,000 have no fees at all. Loans for more than that charge an upfront guarantee fee. The fees are a percentage of the guaranteed portion (the portion of the loan amount that the SBA is guaranteeing) of the total or outstanding loan amount.<span class="ql-inline-citation" data-cite="13"></span></li><li><strong>Long terms:</strong> If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. Use it for real estate, and you’ll have 25 years.</li><li><strong>Large loan amounts</strong>: Commercial lenders normally cap their maximum loan amounts at $500,000 or $1 million. SBA loans can be much larger—up to $5 million for a 7(a) loan.<span class="ql-inline-citation" data-cite="7"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> Cons Explained </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> <li><strong>Hard to qualify</strong>: To be eligible, your business needs to meet fairly strict requirements.<span class="ql-inline-citation" data-cite="5"></span></li><li><strong>Slow to fund</strong>: The SBA loan application process requires quite a lot of documentation, and even after you apply, you’ll have to wait one to three months for the funds to be released.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="9"></span></li><li><strong>Personal guarantee required</strong>: The personal guarantee means that if your business can’t make repayments, you’ll be personally liable to repay the SBA.<span class="ql-inline-citation" data-cite="7"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <span class="heading-toc" id="toc-how-to-apply-for-an-sba-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> How to Apply for an SBA Loan </span> </h2> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <li><strong>Check eligibility</strong>: Make sure your business is eligible by checking the SBA requirements.</li> <li><strong>Choose a lender</strong>: The SBA offers a convenient <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/funding-programs/loans/lender-match-connects-you-lenders">Lender Match</a> tool to match potential borrowers with lenders within two days. You should look for a lender with extensive SBA experience.</li> <li><strong>Gather your documentation</strong>: SBA loan applications can require a great deal of paperwork, but your lender will be able to help you gather the necessary documents.</li> <li><strong>Submit your application</strong>: You’ll send your application to your lender, who will forward it to the SBA for approval.</li> <li><strong>Wait</strong>: For a 7(a) loan, you might have to wait three months for the loan to be approved and funded. An SBA Express loan has lower limits, and you will pay an interest rate premium, but it is faster to fund. The SBA aims to process an SBA Express loan application within 36 hours.<span class="ql-inline-citation" data-cite="4"></span><br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-is-it-hard-to-get-an-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is It Hard to Get an SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It can be difficult to get an SBA loan because eligibility requirements are relatively strict. You’ll have to prove that your business has been generating revenue for a few years and that you have good credit to get an SBA loan.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-get-an-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Get an SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It can take one to three months to get a standard SBA 7(a) loan. An SBA Express loan is processed much more quickly, typically within 36 hours.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-what-is-the-most-common-type-of-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Most Common Type of SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA 7(a) loan is the most common type of SBA loan. It has a maximum loan amount of $5 million, and it can be used for a wide variety of business expenses.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-what-is-the-easiest-sba-loan-to-get-approved-for"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Easiest SBA Loan to Get Approved for?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SBA Express loans have slightly less strict eligibility requirements than standard 7(a) loans, but they have a smaller maximum amount as well. SBA Express loans are a type of 7(a) loan.<span class="ql-inline-citation" data-cite="4"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_75-0"><span class="heading-toc" id="toc-what-is-the-smallest-sba-loan-amount"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Smallest SBA Loan Amount?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Technically, there is no lower limit for an SBA loan, but an application for $5 is not likely to be approved.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> If your business meets the relatively strict requirements for an SBA loan, and if you can provide collateral and a personal guarantee, then this type of loan can be a good alternative to a traditional business loan. SBA loans have low interest rates and fees and generous repayment schedules. </p></div>

An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA). These loans can be used by businesses to cover startup costs, expansions, real estate purchases, or a wide range of other business expenses. Because SBA loans are guaranteed by a federal agency ([the SBA](https://www.investopedia.com/terms/s/small-business-administration.asp)), they are lower risk for lenders. However, when you take out an SBA loan, you will be borrowing from a lender, which is a bank or another financial institution. ### Key Takeaways * An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA). * You can take out this kind of loan with a bank or other financial institution. * If you fail to repay an SBA loan, the SBA will repay the lender and then you would be required to repay the SBA. * SBA loans have fairly strict eligibility requirements, but if you qualify, they can provide low interest rates and low fees. * SBA loans may also offer high maximum loan amounts and generous repayment schedules. ## How Do SBA Loans Work? SBA loans are used by thousands of businesses each year to borrow capital. Though they are called SBA loans after the U.S. Small Business Administration, this agency doesn’t actually do the lending. Instead, the SBA works with a network of approved financial institutions and traditional banks that lend money to [small businesses](https://www.investopedia.com/small-business-8611031), and the SBA partially guaranteesthe [loans](https://www.investopedia.com/terms/l/loan.asp). The loan guarantee means that if the borrower is unable to pay back the loan to the [lender](https://www.investopedia.com/terms/l/lender.asp), the SBA will step in and pay the lender. This significantly reduces the lenders’ risks, which makes them more willing to lend to small businesses. Just because the SBA will pay the lender back, however, doesn’t mean the borrower is no longer responsible for [repayment](https://www.investopedia.com/terms/r/repayment.asp). SBA loans require an unconditional [personal guarantee](https://www.investopedia.com/terms/p/personal-guarantee.asp) from everyone with at least 20% ownership in a company. This means that these people are personally responsible for repaying the SBA if the business can’t make the payments. ### SBA loans are almost always [secured](https://www.investopedia.com/secured-loans-5076025). Your lender will require collateral to secure the loan. ## Terms and Requirements for SBA 7(a) Loans There are several types of [SBA loans](https://www.investopedia.com/best-sba-lenders-5091699). The most common, the standard 7(a) loan, allows businesses to borrow up to $5 million. The interest rate you’ll pay is the [prime rate](https://www.investopedia.com/terms/p/primerate.asp) plus a spread. The prime rate is a benchmark rate based on the federal funds target rate, and it changes based in part on Federal Reserve Board decisions. The size of the loan spread is dictated by the SBA. It’s determined by the size of your loan, your loan term, and your loan type (whether it is a fixed-rate loan or a variable-rate loan). For variable-rate loans, the SBA imposes a maximum [interest rate](https://www.investopedia.com/terms/i/interestrate.asp), which is from the prime rate plus 2.25% to the prime rate plus 4.75%, depending on the loan size. (As of July 2023, those rates are 10.5% to 13%.) | Interest Rates for Variable-Rate Loans | | | | --- | --- | --- | | **Amount of loan** | **Maximum rate for loan with less than 7-year terms** | **Maximum rate for loan with more than 7-year terms** | | Less than $25,000 | Base rate + 4.25% | Base rate + 4.75% | | $25,000–$50,000 | Base rate + 3.25% | Base rate + 3.75% | | More than $50,000 | Base rate + 2.25% | Base rate + 2.75% | For fixed-rate loans, the interest rates can range from the prime rate plus 5% to 8%, depending on the size of the loan. | Interest Rates for Fixed-Rate Loans | | | --- | --- | | **Amount of loan** | **Interest rate (prime rate on first business day of the month plus)** | | Less than $25,000 | 6% plus the 2% permitted by [13 CFR § 120.215](https://www.govinfo.gov/app/details/CFR-2022-title13-vol1/CFR-2022-title13-vol1-sec120-215/summary) | | $25,000–$50,000 | 6% plus the 1% permitted by 13 CFR § 120.215 | | $50,000–$250,000 | 6% | | More than $250,000 | 5% | The requirements for getting an SBA loan are relatively strict. Among other requirements, you must prove that your business is a small business as defined by the SBA and that you have sought other forms of financing before applying for an SBA loan. You must be able to provide [collateral](https://www.investopedia.com/terms/c/collateral.asp) for loans larger than $25,000. You’ll also need a personal [credit score](https://www.investopedia.com/terms/c/credit_score.asp) that meets the lender’s criteria, such as 685 or above, and solid annual revenue from your business. ### Calculating SBA Loan Interest You can calculate how much interest you’ll pay on an 7(a) SBA loan by using the [SBA’s loan calculator](https://www.sba7a.loans/sba-7a-loan-calculator-amortization-schedule/). ## SBA Loans vs. Traditional Business Loans | Key Differences | | | --- | --- | | **SBA loans** | **Traditional business loans** | | Low interest rates. Variable-rate loans capped at base plus 4.75%. | Potentially higher interest rates, but it depends on the lender and your business | | Low fees. You’ll pay an upfront guarantee fee and annual service fee for loans of more than $500,000. | Potentially higher fees, but again, this depends on your lender | | Longer terms. If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. If you use it for real estate, you’ll have 25 years. | Shorter terms | | Hard to qualify. You’ll need to have been in business for a few years and be generating solid revenue from your business. | Can be easier to qualify for, but you should make sure you can easily make the repayments | | Slow to fund. SBA loans can take one to three months to process. | Quick to fund. Some lenders will pay you the funds instantly after an online application. | | Personal guarantee required. This puts your personal finances at risk if your business can’t repay the loan. | Personal guarantee not necessarily required, though some lenders may ask for this or for you to put up collateral | ### Can You Get Denied for an SBA? You can potentially get denied for an SBA loan. If you or your business has a low overall credit score, lack adequate collateral or assets to secure the loan, or already has outstanding debts, the SBA may refuse your application. ## Types of SBA Loans There are several different types of SBA loans, though some are only used in very specific circumstances. The most common types are: ### SBA 7(a) Loans * **Loan limit**: $5 million * **Interest rate range**: Capped at the prime rate plus 2.25% to 4.75% for [variable-rate](https://www.investopedia.com/terms/v/variableinterestrate.asp) loans and the prime rate plus 5% to 8% for [fixed-rate](https://www.investopedia.com/terms/f/fixedinterestrate.asp) loans * **Purpose**: General business expenses or to fund purchases and expansion ### SBA Express Loans * **Loan limit**: $500,000 * **Interest rate range**: Capped at the prime rate plus 4.5% to 6.5% for variable-rate loans and the prime rate plus 5% to 8% for fixed-rate loans * **Purpose**: Fast funding for working capital, expansion, and real estate and equipment purchases ### SBA 504 Loans * **Loan limit**: $5.5 million * **Interest rate**: Pegged to an increment above the current market rate for 10-year U.S. Treasury issues plus fees, which total approximately 3 % of the loan amount and are rolled into the loan amount * **Purpose**: Purchase of long-term, fixed assets like land, machinery, and facilities ## Pros and Cons of SBA 7(a) Loans As with any financial product, SBA loans have both advantages and disadvantages over their competitors. Pros * Competitive rates * Low fees * Long terms * Large loan amounts Cons * Hard to qualify * Slow to fund * Personal guarantee required ### Pros Explained * **Competitive rates**: SBA loan interest rates are calculated using the prime rate, to which is added an extra percentage that is known as the spread. The SBA imposes a maximum limit on what lenders can charge for SBA loans, depending on the type and size of the loan. * **Low fees**: SBA loans for less than $500,000 have no fees at all. Loans for more than that charge an upfront guarantee fee. The fees are a percentage of the guaranteed portion (the portion of the loan amount that the SBA is guaranteeing) of the total or outstanding loan amount. * **Long terms:** If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. Use it for real estate, and you’ll have 25 years. * **Large loan amounts**: Commercial lenders normally cap their maximum loan amounts at $500,000 or $1 million. SBA loans can be much larger—up to $5 million for a 7(a) loan. ### Cons Explained * **Hard to qualify**: To be eligible, your business needs to meet fairly strict requirements. * **Slow to fund**: The SBA loan application process requires quite a lot of documentation, and even after you apply, you’ll have to wait one to three months for the funds to be released. * **Personal guarantee required**: The personal guarantee means that if your business can’t make repayments, you’ll be personally liable to repay the SBA. ## How to Apply for an SBA Loan 1. **Check eligibility**: Make sure your business is eligible by checking the SBA requirements. 2. **Choose a lender**: The SBA offers a convenient [Lender Match](https://www.sba.gov/funding-programs/loans/lender-match-connects-you-lenders) tool to match potential borrowers with lenders within two days. You should look for a lender with extensive SBA experience. 3. **Gather your documentation**: SBA loan applications can require a great deal of paperwork, but your lender will be able to help you gather the necessary documents. 4. **Submit your application**: You’ll send your application to your lender, who will forward it to the SBA for approval. 5. **Wait**: For a 7(a) loan, you might have to wait three months for the loan to be approved and funded. An SBA Express loan has lower limits, and you will pay an interest rate premium, but it is faster to fund. The SBA aims to process an SBA Express loan application within 36 hours. ## Is It Hard to Get an SBA Loan? It can be difficult to get an SBA loan because eligibility requirements are relatively strict. You’ll have to prove that your business has been generating revenue for a few years and that you have good credit to get an SBA loan. ## How Long Does It Take to Get an SBA Loan? It can take one to three months to get a standard SBA 7(a) loan. An SBA Express loan is processed much more quickly, typically within 36 hours. ## What Is the Most Common Type of SBA Loan? The SBA 7(a) loan is the most common type of SBA loan. It has a maximum loan amount of $5 million, and it can be used for a wide variety of business expenses. ## What Is the Easiest SBA Loan to Get Approved for? SBA Express loans have slightly less strict eligibility requirements than standard 7(a) loans, but they have a smaller maximum amount as well. SBA Express loans are a type of 7(a) loan. ## What Is the Smallest SBA Loan Amount? Technically, there is no lower limit for an SBA loan, but an application for $5 is not likely to be approved. ## The Bottom Line If your business meets the relatively strict requirements for an SBA loan, and if you can provide collateral and a personal guarantee, then this type of loan can be a good alternative to a traditional business loan. SBA loans have low interest rates and fees and generous repayment schedules.

An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA). These loans can be used by businesses to cover startup costs, expansions, real estate purchases, or a wide range of other business expenses. Because SBA loans are guaranteed by a federal agency (the SBA), they are lower risk for lenders. However, when you take out an SBA loan, you will be borrowing from a lender, which is a bank or another financial institution. Key Takeaways An SBA loan is a business loan that is guaranteed by the U.S. Small Business Administration (SBA).You can take out this kind of loan with a bank or other financial institution.If you fail to repay an SBA loan, the SBA will repay the lender and then you would be required to repay the SBA.SBA loans have fairly strict eligibility requirements, but if you qualify, they can provide low interest rates and low fees.SBA loans may also offer high maximum loan amounts and generous repayment schedules. How Do SBA Loans Work? SBA loans are used by thousands of businesses each year to borrow capital. Though they are called SBA loans after the U.S. Small Business Administration, this agency doesn’t actually do the lending. Instead, the SBA works with a network of approved financial institutions and traditional banks that lend money to small businesses, and the SBA partially guarantees the loans. The loan guarantee means that if the borrower is unable to pay back the loan to the lender, the SBA will step in and pay the lender. This significantly reduces the lenders’ risks, which makes them more willing to lend to small businesses. Just because the SBA will pay the lender back, however, doesn’t mean the borrower is no longer responsible for repayment. SBA loans require an unconditional personal guarantee from everyone with at least 20% ownership in a company. This means that these people are personally responsible for repaying the SBA if the business can’t make the payments. SBA loans are almost always secured. Your lender will require collateral to secure the loan. Terms and Requirements for SBA 7(a) Loans There are several types of SBA loans. The most common, the standard 7(a) loan, allows businesses to borrow up to $5 million. The interest rate you’ll pay is the prime rate plus a spread. The prime rate is a benchmark rate based on the federal funds target rate, and it changes based in part on Federal Reserve Board decisions. The size of the loan spread is dictated by the SBA. It’s determined by the size of your loan, your loan term, and your loan type (whether it is a fixed-rate loan or a variable-rate loan). For variable-rate loans, the SBA imposes a maximum interest rate, which is from the prime rate plus 2.25% to the prime rate plus 4.75%, depending on the loan size. (As of July 2023, those rates are 10.5% to 13%.) Interest Rates for Variable-Rate Loans Amount of loan Maximum rate for loan with less than 7-year terms Maximum rate for loan with more than 7-year terms Less than $25,000 Base rate + 4.25% Base rate + 4.75% $25,000–$50,000 Base rate + 3.25% Base rate + 3.75% More than $50,000 Base rate + 2.25% Base rate + 2.75% For fixed-rate loans, the interest rates can range from the prime rate plus 5% to 8%, depending on the size of the loan. Interest Rates for Fixed-Rate Loans Amount of loan Interest rate (prime rate on first business day of the month plus) Less than $25,000 6% plus the 2% permitted by 13 CFR § 120.215 $25,000–$50,000 6% plus the 1% permitted by 13 CFR § 120.215 $50,000–$250,000 6% More than $250,000 5% The requirements for getting an SBA loan are relatively strict. Among other requirements, you must prove that your business is a small business as defined by the SBA and that you have sought other forms of financing before applying for an SBA loan. You must be able to provide collateral for loans larger than $25,000. You’ll also need a personal credit score that meets the lender’s criteria, such as 685 or above, and solid annual revenue from your business. Calculating SBA Loan Interest You can calculate how much interest you’ll pay on an 7(a) SBA loan by using the SBA’s loan calculator. SBA Loans vs. Traditional Business Loans Key Differences SBA loans Traditional business loans Low interest rates. Variable-rate loans capped at base plus 4.75%. Potentially higher interest rates, but it depends on the lender and your business Low fees. You’ll pay an upfront guarantee fee and annual service fee for loans of more than $500,000. Potentially higher fees, but again, this depends on your lender Longer terms. If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. If you use it for real estate, you’ll have 25 years. Shorter terms Hard to qualify. You’ll need to have been in business for a few years and be generating solid revenue from your business. Can be easier to qualify for, but you should make sure you can easily make the repayments Slow to fund. SBA loans can take one to three months to process. Quick to fund. Some lenders will pay you the funds instantly after an online application. Personal guarantee required. This puts your personal finances at risk if your business can’t repay the loan. Personal guarantee not necessarily required, though some lenders may ask for this or for you to put up collateral Can You Get Denied for an SBA? You can potentially get denied for an SBA loan. If you or your business has a low overall credit score, lack adequate collateral or assets to secure the loan, or already has outstanding debts, the SBA may refuse your application. Types of SBA Loans There are several different types of SBA loans, though some are only used in very specific circumstances. The most common types are: SBA 7(a) Loans Loan limit: $5 million Interest rate range: Capped at the prime rate plus 2.25% to 4.75% for variable-rate loans and the prime rate plus 5% to 8% for fixed-rate loans Purpose: General business expenses or to fund purchases and expansion SBA Express Loans Loan limit: $500,000Interest rate range: Capped at the prime rate plus 4.5% to 6.5% for variable-rate loans and the prime rate plus 5% to 8% for fixed-rate loansPurpose: Fast funding for working capital, expansion, and real estate and equipment purchases SBA 504 Loans Loan limit: $5.5 millionInterest rate: Pegged to an increment above the current market rate for 10-year U.S. Treasury issues plus fees, which total approximately 3 % of the loan amount and are rolled into the loan amountPurpose: Purchase of long-term, fixed assets like land, machinery, and facilities Pros and Cons of SBA 7(a) Loans As with any financial product, SBA loans have both advantages and disadvantages over their competitors. Pros Competitive rates Low fees Long terms Large loan amounts Cons Hard to qualify Slow to fund Personal guarantee required Pros Explained Competitive rates: SBA loan interest rates are calculated using the prime rate, to which is added an extra percentage that is known as the spread. The SBA imposes a maximum limit on what lenders can charge for SBA loans, depending on the type and size of the loan.Low fees: SBA loans for less than $500,000 have no fees at all. Loans for more than that charge an upfront guarantee fee. The fees are a percentage of the guaranteed portion (the portion of the loan amount that the SBA is guaranteeing) of the total or outstanding loan amount.Long terms: If you use your SBA loan for working capital, inventory, or equipment, you’ll have 10 years to pay it back. Use it for real estate, and you’ll have 25 years.Large loan amounts: Commercial lenders normally cap their maximum loan amounts at $500,000 or $1 million. SBA loans can be much larger—up to $5 million for a 7(a) loan. Cons Explained Hard to qualify: To be eligible, your business needs to meet fairly strict requirements.Slow to fund: The SBA loan application process requires quite a lot of documentation, and even after you apply, you’ll have to wait one to three months for the funds to be released.Personal guarantee required: The personal guarantee means that if your business can’t make repayments, you’ll be personally liable to repay the SBA. How to Apply for an SBA Loan Check eligibility: Make sure your business is eligible by checking the SBA requirements. Choose a lender: The SBA offers a convenient Lender Match tool to match potential borrowers with lenders within two days. You should look for a lender with extensive SBA experience. Gather your documentation: SBA loan applications can require a great deal of paperwork, but your lender will be able to help you gather the necessary documents. Submit your application: You’ll send your application to your lender, who will forward it to the SBA for approval. Wait: For a 7(a) loan, you might have to wait three months for the loan to be approved and funded. An SBA Express loan has lower limits, and you will pay an interest rate premium, but it is faster to fund. The SBA aims to process an SBA Express loan application within 36 hours. Is It Hard to Get an SBA Loan? It can be difficult to get an SBA loan because eligibility requirements are relatively strict. You’ll have to prove that your business has been generating revenue for a few years and that you have good credit to get an SBA loan. How Long Does It Take to Get an SBA Loan? It can take one to three months to get a standard SBA 7(a) loan. An SBA Express loan is processed much more quickly, typically within 36 hours. What Is the Most Common Type of SBA Loan? The SBA 7(a) loan is the most common type of SBA loan. It has a maximum loan amount of $5 million, and it can be used for a wide variety of business expenses. What Is the Easiest SBA Loan to Get Approved for? SBA Express loans have slightly less strict eligibility requirements than standard 7(a) loans, but they have a smaller maximum amount as well. SBA Express loans are a type of 7(a) loan. What Is the Smallest SBA Loan Amount? Technically, there is no lower limit for an SBA loan, but an application for $5 is not likely to be approved. The Bottom Line If your business meets the relatively strict requirements for an SBA loan, and if you can provide collateral and a personal guarantee, then this type of loan can be a good alternative to a traditional business loan. SBA loans have low interest rates and fees and generous repayment schedules.

https://www.investopedia.com/terms/c/conferencecall.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-conference-call"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Conference Call? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. A meeting organizer commonly assembles a participant list and invites attendees before the event. A conference call connects parties by phone or computer rather than in person. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. </li><li>Audio, video, and web platforms are common types of conference calling.</li><li>Companies may use conference calls for training, weekly meetings, or an "earnings call" to discuss the company's financials.</li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-types-of-conference-calls"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Types of Conference Calls </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> <li><strong>Audio:</strong> Users connect and communicate via landline or any VoIP-based phone service.</li><li><strong>Video: </strong>Participants join a shared virtual space using webcams in a real-time, audio-visual call.</li><li><strong>Web:</strong> Users can conduct a presentation or event online, and participants interact through screen sharing.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <span class="heading-toc" id="toc-how-a-conference-call-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> How a Conference Call Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Service providers commonly facilitate conference calls. Conference call services make communication accessible even when employees are geographically distanced. In 2022, nearly 1.3 billion global visitors visited Zoom.us, a videoconferencing platform for remote work, distance education, and online social meetings.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Companies may use conference calls for training, weekly meetings, or an "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings-call.asp">earnings call</a>" to discuss the company's financials and other <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/k/kpi.asp">key performance indicators (KPI)</a> that drive business operations. Earnings calls are held four times yearly, typically after each quarterly <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings-announcement.asp">earnings announcement</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> For many companies, the conference call can allay fears created during the quarter or reinforce the message of positive future growth. If a company was the center of controversy, missed analyst estimates, or issued weak guidance, the call is an opportunity for management to address that weakness. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-service-providers"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Service Providers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Many conference calling services offer free trials before users commit to a particular plan. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-call-center-services-5116577">RingCentral</a>, AT&amp;T, and GoToMeeting offer voice conference calling services. Zoom, Microsoft Teams, and Slack provide video conferencing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_19-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_20-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>See our picks for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-video-conferencing-software-5181123">best video conferencing software</a>.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Audio and video conferencing solutions will have features such as screen sharing, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cloud-storage.asp">cloud</a> recordings, breakout rooms, closed captioning, and file sharing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_23-0"><span class="heading-toc" id="toc-what-are-common-features-of-video-conferencing-software"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Common Features of Video Conferencing Software?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Some services are best for one-on-one calls, some are ideal for small groups, and others can handle large meetings or webinars. The best video conferencing software should be reliable and easy to use.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_25-0"><span class="heading-toc" id="toc-what-is-the-difference-between-free-or-paid-conferencing-services"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between Free or Paid Conferencing Services?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A free conference call service provides basic service, usually for a limited time. Paid services commonly support more call participants with access to collaboration features.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_27-0"><span class="heading-toc" id="toc-what-is-an-earnings-conference-call"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is an Earnings Conference Call?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An earnings conference call is an event in which investors listen to a company's management team detail aspects of the current quarter and projected earnings growth.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> A conference call connects participants via audio, video, or web to a conference room if the users are geographically distant. Service providers like Zoom or AT&amp;T provide access to audio, video, and web conference calling. Companies may use conference calls for training, weekly meetings, or earnings calls. </p></div>

## What Is a Conference Call? A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. A meeting organizer commonly assembles a participant list and invites attendees before the event. A conference call connects parties by phone or computer rather than in person. ### Key Takeaways * A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. * Audio, video, and web platforms are common types of conference calling. * Companies may use conference calls for training, weekly meetings, or an "earnings call" to discuss the company's financials. ## Types of Conference Calls * **Audio:** Users connect and communicate via landline or any VoIP-based phone service. * **Video:** Participants join a shared virtual space using webcams in a real-time, audio-visual call. * **Web:** Users can conduct a presentation or event online, and participants interact through screen sharing. ## How a Conference Call Works Service providers commonly facilitate conference calls. Conference call services make communication accessible even when employees are geographically distanced. In 2022, nearly 1.3 billion global visitors visited Zoom.us, a videoconferencing platform for remote work, distance education, and online social meetings. Companies may use conference calls for training, weekly meetings, or an "[earnings call](https://www.investopedia.com/terms/e/earnings-call.asp)" to discuss the company's financials and other [key performance indicators (KPI)](https://www.investopedia.com/terms/k/kpi.asp) that drive business operations. Earnings calls are held four times yearly, typically after each quarterly [earnings announcement](https://www.investopedia.com/terms/e/earnings-announcement.asp). For many companies, the conference call can allay fears created during the quarter or reinforce the message of positive future growth. If a company was the center of controversy, missed analyst estimates, or issued weak guidance, the call is an opportunity for management to address that weakness. ## Service Providers Many conference calling services offer free trials before users commit to a particular plan. [RingCentral](https://www.investopedia.com/best-call-center-services-5116577), AT&T, and GoToMeeting offer voice conference calling services. Zoom, Microsoft Teams, and Slack provide video conferencing. ### See our picks for the [best video conferencing software](https://www.investopedia.com/best-video-conferencing-software-5181123). Audio and video conferencing solutions will have features such as screen sharing, [cloud](https://www.investopedia.com/terms/c/cloud-storage.asp) recordings, breakout rooms, closed captioning, and file sharing. ## What Are Common Features of Video Conferencing Software? Some services are best for one-on-one calls, some are ideal for small groups, and others can handle large meetings or webinars. The best video conferencing software should be reliable and easy to use. ## What Is the Difference Between Free or Paid Conferencing Services? A free conference call service provides basic service, usually for a limited time. Paid services commonly support more call participants with access to collaboration features. ## What Is an Earnings Conference Call? An earnings conference call is an event in which investors listen to a company's management team detail aspects of the current quarter and projected earnings growth. ## The Bottom Line A conference call connects participants via audio, video, or web to a conference room if the users are geographically distant. Service providers like Zoom or AT&T provide access to audio, video, and web conference calling. Companies may use conference calls for training, weekly meetings, or earnings calls.

What Is a Conference Call? A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. A meeting organizer commonly assembles a participant list and invites attendees before the event. A conference call connects parties by phone or computer rather than in person. Key Takeaways A conference call is a meeting where participants connect via audio, video, or web to a conference room using an access number. Audio, video, and web platforms are common types of conference calling.Companies may use conference calls for training, weekly meetings, or an "earnings call" to discuss the company's financials. Types of Conference Calls Audio: Users connect and communicate via landline or any VoIP-based phone service.Video: Participants join a shared virtual space using webcams in a real-time, audio-visual call.Web: Users can conduct a presentation or event online, and participants interact through screen sharing. How a Conference Call Works Service providers commonly facilitate conference calls. Conference call services make communication accessible even when employees are geographically distanced. In 2022, nearly 1.3 billion global visitors visited Zoom.us, a videoconferencing platform for remote work, distance education, and online social meetings. Companies may use conference calls for training, weekly meetings, or an "earnings call" to discuss the company's financials and other key performance indicators (KPI) that drive business operations. Earnings calls are held four times yearly, typically after each quarterly earnings announcement. For many companies, the conference call can allay fears created during the quarter or reinforce the message of positive future growth. If a company was the center of controversy, missed analyst estimates, or issued weak guidance, the call is an opportunity for management to address that weakness. Service Providers Many conference calling services offer free trials before users commit to a particular plan. RingCentral, AT&T, and GoToMeeting offer voice conference calling services. Zoom, Microsoft Teams, and Slack provide video conferencing. See our picks for the best video conferencing software. Audio and video conferencing solutions will have features such as screen sharing, cloud recordings, breakout rooms, closed captioning, and file sharing. What Are Common Features of Video Conferencing Software? Some services are best for one-on-one calls, some are ideal for small groups, and others can handle large meetings or webinars. The best video conferencing software should be reliable and easy to use. What Is the Difference Between Free or Paid Conferencing Services? A free conference call service provides basic service, usually for a limited time. Paid services commonly support more call participants with access to collaboration features. What Is an Earnings Conference Call? An earnings conference call is an event in which investors listen to a company's management team detail aspects of the current quarter and projected earnings growth. The Bottom Line A conference call connects participants via audio, video, or web to a conference room if the users are geographically distant. Service providers like Zoom or AT&T provide access to audio, video, and web conference calling. Companies may use conference calls for training, weekly meetings, or earnings calls.

https://www.investopedia.com/terms/s/small-business-administration.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-small-business-administration-sba"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Small Business Administration (SBA)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Small Business Administration (SBA) is a U.S. government agency designed to bolster and promote the economy by assisting the country’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small businesses</a>. Established in 1953, the SBA’s primary function is to counsel individuals who want to start and grow their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/momandpop.asp">own businesses</a>. It provides a series of tools on its website to assist new and existing small business owners.<span class="ql-inline-citation" data-cite="6"></span> The agency is headed by an administrator and deputy administrator and also has a chief counsel for advocacy and inspector general—all of whom are confirmed by the Senate.<span class="ql-inline-citation" data-cite="21"></span> The SBA has at least one office in every state, the District of Columbia, and various American territories.<span class="ql-inline-citation" data-cite="22"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Small Business Administration, established in 1953, is a government agency designed to bolster and promote the economy by providing assistance to small businesses.</li><li>The SBA is headed by an administrator and a deputy administrator who are confirmed by the Senate.</li><li>The agency offers various resources to small businesses, including access to capital, entrepreneurial development, government contracting, and advocacy services.</li><li>The SBA’s loan guarantee program is one of its most visible elements.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-sba"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the SBA </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The SBA offers substantial educational information with a specific focus on assisting small businesses to develop and grow. As noted above, the agency has numerous tools for businesses that can be accessed on its website, including a small business planner and additional training programs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> According to its website, the SBA provides the following services to small businesses:<span class="ql-inline-citation" data-cite="27"></span><span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li><strong>Access to capital: </strong>The agency offers a variety of financial resources for small businesses, including microlending, or small loans that are issued to those who wouldn't otherwise qualify for financing. Loans are issued by partner banks, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit unions</a>, and other financial institutions.</li> <li><strong>Entrepreneurial development: </strong>This is driven by counseling services and low-cost training provided by the SBA and is available to both new and existing business owners in more than 1,800 locations across the United States. There's also a mentor program that connects new business owners with retired and/or existing entrepreneurs.</li> <li><strong>Contracting: </strong>The SBA reserves 23% in government contracting dollars for small businesses with the help of other federal departments and agencies. The agency guarantees 5% of these contracting dollars for women and another 3% for business owners who are disabled and veterans.</li> <li><strong>Advocacy: </strong>The agency acts as an advocate by reviewing legislation and protecting the interests of small business owners across the country. The agency also advocates for business owners at the state and federal government levels.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The agency has helped countless small businesses across the country get access to loans, loan guarantees, contracts, and other services. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/who-is-isabel-guzman-5112773">Isabella Casillas Guzman</a> is the administrator of the SBA. Prior to holding this office, she served as the director of California's Office of the Small Business Advocate.<span class="ql-inline-citation" data-cite="20"></span> </p></div></div></div> <span class="heading-toc" id="toc-the-sba-loan-program"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> The SBA Loan Program </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The loan programs offered through the SBA are among the agency's most visible offerings, and they come with longer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a> periods for small businesses. The agency doesn’t actually issue loans itself (with the exception of disaster relief loans). Instead, loans are backed or guaranteed by the SBA and issued directly by lenders that meet the agency’s guidelines.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Loans backed by the SBA include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>The 504 loan (or the grow loan), which provides a small business with up to $5.5 million in financing to buy the fixed assets it needs to run its operations, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/realestate.asp">real estate</a>.<span class="ql-inline-citation" data-cite="13"></span></li> <li>The 7(a) loan, which is the agency's primary loan program. The maximum loan amount guaranteed under this program is $5 million.<span class="ql-inline-citation" data-cite="14"></span></li> <li>A disaster loan is intended to help businesses and homeowners recover from declared disasters.<span class="ql-inline-citation" data-cite="24"></span></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/040715/what-microlending-and-how-does-it-work.asp">Microloans</a> of up to $50,000 (the average amount is about $13,000) are meant to help small businesses and some nonprofit childcare centers start up or expand.<span class="ql-inline-citation" data-cite="23"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Small businesses qualify for loans more easily when they are guaranteed by the SBA. The agency also allows entrepreneurs to make lower payments for a longer period of time. Despite numerous attempts to do away with the SBA entirely, many political officials and offices continue to support it. The SBA’s ability to offer loans was also significantly strengthened by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/american-recovery-and-reinvestment-act.asp">American Recovery and Reinvestment Act (ARRA) of 2009</a> and the Small Business Jobs Act of 2010. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The SBA has local offices throughout the United States and associated territories that provide more-personalized special events for small business owners. These offices provide in-person, one-on-one counseling services that include instruction on writing a business plan and assistance with small business loans.</p></div></div></div> <span class="heading-toc" id="toc-how-the-sba-can-help-you-start-your-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> How the SBA Can Help You Start Your Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> The SBA has many resources available for people who want to start their own small businesses. If you have an idea for a business, this section highlights some of these resources, which can take you from start to finish. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Business planning </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> This section of the website outlines steps and provides resources related to the development of your business. These include conducting relevant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market-research.asp">market research</a>, developing a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-plan.asp">business plan</a>, and funding. You can also learn about what you need to do to choose:<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li>A location for your business</li><li>A suitable business structure</li><li>A business name</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The SBA also provides key information about what you need to register your company, as well as how to get the appropriate tax documents, permits, and licenses. You can also find out what you need to open a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-banking.asp">business bank account</a>.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Launching your business </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Launching your business is just as important as starting it, which is why you’ll find some of the same resources from the section above seeping into this one. For instance, choosing your location will depend a lot on local <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/z/zoning-ordinance.asp">zoning ordinances</a> and laws. It will also affect the kind of incentives and taxes that apply to your organization.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The SBA's website has more information on these topics and also provides information on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-insurance.asp">business insurance</a>, which is a very important part of safeguarding your interests.<span class="ql-inline-citation" data-cite="17"></span> It helps protect your business from any unforeseen losses that take place during normal operations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-how-the-sba-can-help-you-manage-and-grow-your-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> How the SBA Can Help You Manage and Grow Your Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> The agency doesn’t just help people start and launch their own businesses; it also has resources available to help manage and grow them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Management </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> You can learn valuable tips and tricks on how to manage your finances, hire employees, and pay taxes. Other important information includes staying compliant, how-tos for purchasing assets, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">marketing</a> and sales strategies.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Because <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cybersecurity.asp">cybersecurity</a> is a key threat to many businesses, the SBA also provides some common sense tips to stay safe. This section can help business owners spot some of the most common scams (such as malware and ransomware) and understand and assess their risk. They can also use some of the agency's best practices to avoid cyber attacks and access SBA training and events.<span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> This section also deals with hiring people with disabilities, what to do when you must close your business, and how to recover from disasters.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-subheading__text"> Growing your business </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> It isn’t enough just to learn how to start and run your business, which is why the SBA also has resources to help you grow. Some of the aids in this section cover how to access additional funding, how to expand, and what to expect from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mergersandacquisitions.asp">mergers and acquisitions (M&amp;A)</a>.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Part of the SBA’s mandate is to guarantee a certain percentage of federal contracts to small business owners. As such, the agency encourages businesses to become federal contractors and has an easy registration process.<span class="ql-inline-citation" data-cite="26"></span> You can also get the resources you need to improve your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bottomline.asp">bottom line</a>, via connecting with partners to help export your products and services.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> You’ll also find useful information about different types of businesses, such as those owned by women, Native Americans, veterans, minorities, and members of the LGBTQ+ community, as well as rural businesses.<span class="ql-inline-citation" data-cite="19"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <span class="heading-toc" id="toc-the-history-of-the-sba"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_60-0"> <span class="mntl-sc-block-heading__text"> The History of the SBA </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> The SBA was established by President Dwight Eisenhower when he signed the Small Business Act in the summer of 1953. It replaced the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rfc.asp">Reconstruction Finance Corporation (RFC)</a>, which was created under President Herbert Hoover in 1932 after the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/great_depression.asp">Great Depression</a>. The mandate of the newly formed SBA was to aid and protect the country’s small businesses and ensure that they received a fair portion of government contracts and surplus property sales.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> The SBA has had a rocky history. In 1996 the agency was under threat of being eliminated by the House of Representatives.<span class="ql-inline-citation" data-cite="3"></span> However, the agency survived this threat and went on to receive a record budget in 2000.<span class="ql-inline-citation" data-cite="4"></span> There was also a lot of resistance to its loan program, which led to repeated cuts between 2001 and 2004. That’s when certain SBA expenditures were frozen altogether.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Small business owners were among some of the hardest hit during the COVID-19 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/special-economic-impact-of-pandemics-4800597">pandemic</a>. The SBA helped these owners, providing them with two different types of funding:<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> <li><strong>Economic Injury Disaster Loan (EIDL): </strong>This program was designed to let businesses use approved funds for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workingcapital.asp">working capital</a> and other day-to-day expenses. As capital is loaned, it must be repaid. The SBA stopped accepting applications as of Jan. 1, 2022, and as of May 6, 2022, stopped accepting loan increase requests or requests for reconsideration of loan applications that had previously been declined.<span class="ql-inline-citation" data-cite="8"></span></li> <li><strong>EIDL Advance Programs: </strong>Funds were granted to people who filed for EIDL assistance as long as they met certain criteria. Unlike the loan program, funds approved through this program don’t have to be repaid.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-what-does-the-small-business-administration-sba-do"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does the Small Business Administration (SBA) Do?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Small Business Administration (SBA) is a U.S. government agency that provides assistance to small business owners. It has a series of tools available for new and existing entrepreneurs. Its goals include providing business owners with access to capital, developing entrepreneurial spirit, reserving contracting dollars for certain business owners, and advocating on behalf of small business owners.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-where-does-the-sba-get-its-funding"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Does the SBA Get Its Funding?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA receives an annual budget approved by the federal government. This money goes toward salaries, grant and loan programs, and administrative costs. Keep in mind that the SBA doesn’t actually provide loans to small businesses. Instead, the majority of loans issued to small business owners through SBA programs are guaranteed by the agency and issued by approved financial institutions and other lenders. This source of capital helps individuals start and grow their businesses.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-who-qualifies-for-an-sba-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Qualifies for an SBA Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA generally doesn’t issue grants, but it does provide <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596">grants to certain organizations that promote business ownership</a> in their communities. These include nonprofit organizations, organizations that provide their communities with training and funding (known as “resource partners”), and educational organizations. Grants are not provided to owners who want to expand an existing business or to startups.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="10"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_75-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> The SBA is the federal government’s main resource for nurturing the growth of small businesses in the U.S. It not only provides loans, mostly through third parties, to help start or grow your business; it also offers plenty of programs designed to increase your knowledge and expertise in keeping your business healthy, from how to pay taxes to marketing and sales to cybersecurity and more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> The SBA doesn’t normally issue any grants, except for a few that go to organizations, many of them nonprofit, that promote entrepreneurship in their communities. It also advocates on behalf of small business owners. Local offices exist in all 50 states, the District of Columbia, and American territories. During the COVID-19 pandemic, the SBA provided crucial financial support through both loans and grants to the small-business community, which was gravely impacted by the crisis. </p></div>

## What Is the Small Business Administration (SBA)? The Small Business Administration (SBA) is a U.S. government agency designed to bolster and promote the economy by assisting the country’s [small businesses](https://www.investopedia.com/small-business-4427743). Established in 1953, the SBA’s primary function is to counsel individuals who want to start and grow their [own businesses](https://www.investopedia.com/terms/m/momandpop.asp). It provides a series of tools on its website to assist new and existing small business owners. The agency is headed by an administrator and deputy administrator and also has a chief counsel for advocacy and inspector general—all of whom are confirmed by the Senate. The SBA has at least one office in every state, the District of Columbia, and various American territories. ### Key Takeaways * The Small Business Administration, established in 1953, is a government agency designed to bolster and promote the economy by providing assistance to small businesses. * The SBA is headed by an administrator and a deputy administrator who are confirmed by the Senate. * The agency offers various resources to small businesses, including access to capital, entrepreneurial development, government contracting, and advocacy services. * The SBA’s loan guarantee program is one of its most visible elements. ## Understanding the SBA The SBA offers substantial educational information with a specific focus on assisting small businesses to develop and grow. As noted above, the agency has numerous tools for businesses that can be accessed on its website, including a small business planner and additional training programs. According to its website, the SBA provides the following services to small businesses: * **Access to capital:** The agency offers a variety of financial resources for small businesses, including microlending, or small loans that are issued to those who wouldn't otherwise qualify for financing. Loans are issued by partner banks, [credit unions](https://www.investopedia.com/terms/c/creditunion.asp), and other financial institutions. * **Entrepreneurial development:** This is driven by counseling services and low-cost training provided by the SBA and is available to both new and existing business owners in more than 1,800 locations across the United States. There's also a mentor program that connects new business owners with retired and/or existing entrepreneurs. * **Contracting:** The SBA reserves 23% in government contracting dollars for small businesses with the help of other federal departments and agencies. The agency guarantees 5% of these contracting dollars for women and another 3% for business owners who are disabled and veterans. * **Advocacy:** The agency acts as an advocate by reviewing legislation and protecting the interests of small business owners across the country. The agency also advocates for business owners at the state and federal government levels. The agency has helped countless small businesses across the country get access to loans, loan guarantees, contracts, and other services. ### [Isabella Casillas Guzman](https://www.investopedia.com/who-is-isabel-guzman-5112773) is the administrator of the SBA. Prior to holding this office, she served as the director of California's Office of the Small Business Advocate.  ## The SBA Loan Program The loan programs offered through the SBA are among the agency's most visible offerings, and they come with longer [repayment](https://www.investopedia.com/terms/r/repayment.asp) periods for small businesses. The agency doesn’t actually issue loans itself (with the exception of disaster relief loans). Instead, loans are backed or guaranteed by the SBA and issued directly by lenders that meet the agency’s guidelines. Loans backed by the SBA include: * The 504 loan (or the grow loan), which provides a small business with up to $5.5 million in financing to buy the fixed assets it needs to run its operations, including [real estate](https://www.investopedia.com/terms/r/realestate.asp). * The 7(a) loan, which is the agency's primary loan program. The maximum loan amount guaranteed under this program is $5 million. * A disaster loan is intended to help businesses and homeowners recover from declared disasters. * [Microloans](https://www.investopedia.com/articles/personal-finance/040715/what-microlending-and-how-does-it-work.asp) of up to $50,000 (the average amount is about $13,000) are meant to help small businesses and some nonprofit childcare centers start up or expand. Small businesses qualify for loans more easily when they are guaranteed by the SBA. The agency also allows entrepreneurs to make lower payments for a longer period of time. Despite numerous attempts to do away with the SBA entirely, many political officials and offices continue to support it. The SBA’s ability to offer loans was also significantly strengthened by the [American Recovery and Reinvestment Act (ARRA) of 2009](https://www.investopedia.com/terms/a/american-recovery-and-reinvestment-act.asp) and the Small Business Jobs Act of 2010. ### The SBA has local offices throughout the United States and associated territories that provide more-personalized special events for small business owners. These offices provide in-person, one-on-one counseling services that include instruction on writing a business plan and assistance with small business loans. ## How the SBA Can Help You Start Your Business The SBA has many resources available for people who want to start their own small businesses. If you have an idea for a business, this section highlights some of these resources, which can take you from start to finish. ### Business planning This section of the website outlines steps and provides resources related to the development of your business. These include conducting relevant [market research](https://www.investopedia.com/terms/m/market-research.asp), developing a [business plan](https://www.investopedia.com/terms/b/business-plan.asp), and funding. You can also learn about what you need to do to choose: * A location for your business * A suitable business structure * A business name The SBA also provides key information about what you need to register your company, as well as how to get the appropriate tax documents, permits, and licenses. You can also find out what you need to open a [business bank account](https://www.investopedia.com/terms/b/business-banking.asp). ### Launching your business Launching your business is just as important as starting it, which is why you’ll find some of the same resources from the section above seeping into this one. For instance, choosing your location will depend a lot on local [zoning ordinances](https://www.investopedia.com/terms/z/zoning-ordinance.asp) and laws. It will also affect the kind of incentives and taxes that apply to your organization. The SBA's website has more information on these topics and also provides information on [business insurance](https://www.investopedia.com/terms/b/business-insurance.asp), which is a very important part of safeguarding your interests. It helps protect your business from any unforeseen losses that take place during normal operations. ## How the SBA Can Help You Manage and Grow Your Business The agency doesn’t just help people start and launch their own businesses; it also has resources available to help manage and grow them. ### Management You can learn valuable tips and tricks on how to manage your finances, hire employees, and pay taxes. Other important information includes staying compliant, how-tos for purchasing assets, and [marketing](https://www.investopedia.com/terms/m/marketing.asp) and sales strategies. Because [cybersecurity](https://www.investopedia.com/terms/c/cybersecurity.asp) is a key threat to many businesses, the SBA also provides some common sense tips to stay safe. This section can help business owners spot some of the most common scams (such as malware and ransomware) and understand and assess their risk. They can also use some of the agency's best practices to avoid cyber attacks and access SBA training and events. This section also deals with hiring people with disabilities, what to do when you must close your business, and how to recover from disasters. ### Growing your business It isn’t enough just to learn how to start and run your business, which is why the SBA also has resources to help you grow. Some of the aids in this section cover how to access additional funding, how to expand, and what to expect from [mergers and acquisitions (M&A)](https://www.investopedia.com/terms/m/mergersandacquisitions.asp). Part of the SBA’s mandate is to guarantee a certain percentage of federal contracts to small business owners. As such, the agency encourages businesses to become federal contractors and has an easy registration process. You can also get the resources you need to improve your [bottom line](https://www.investopedia.com/terms/b/bottomline.asp), via connecting with partners to help export your products and services. You’ll also find useful information about different types of businesses, such as those owned by women, Native Americans, veterans, minorities, and members of the LGBTQ+ community, as well as rural businesses. ## The History of the SBA The SBA was established by President Dwight Eisenhower when he signed the Small Business Act in the summer of 1953. It replaced the [Reconstruction Finance Corporation (RFC)](https://www.investopedia.com/terms/r/rfc.asp), which was created under President Herbert Hoover in 1932 after the [Great Depression](https://www.investopedia.com/terms/g/great_depression.asp). The mandate of the newly formed SBA was to aid and protect the country’s small businesses and ensure that they received a fair portion of government contracts and surplus property sales. The SBA has had a rocky history. In 1996 the agency was under threat of being eliminated by the House of Representatives. However, the agency survived this threat and went on to receive a record budget in 2000. There was also a lot of resistance to its loan program, which led to repeated cuts between 2001 and 2004. That’s when certain SBA expenditures were frozen altogether. Small business owners were among some of the hardest hit during the COVID-19 [pandemic](https://www.investopedia.com/special-economic-impact-of-pandemics-4800597). The SBA helped these owners, providing them with two different types of funding: * **Economic Injury Disaster Loan (EIDL):** This program was designed to let businesses use approved funds for [working capital](https://www.investopedia.com/terms/w/workingcapital.asp) and other day-to-day expenses. As capital is loaned, it must be repaid. The SBA stopped accepting applications as of Jan. 1, 2022, and as of May 6, 2022, stopped accepting loan increase requests or requests for reconsideration of loan applications that had previously been declined. * **EIDL Advance Programs:** Funds were granted to people who filed for EIDL assistance as long as they met certain criteria. Unlike the loan program, funds approved through this program don’t have to be repaid. ## What Does the Small Business Administration (SBA) Do? The Small Business Administration (SBA) is a U.S. government agency that provides assistance to small business owners. It has a series of tools available for new and existing entrepreneurs. Its goals include providing business owners with access to capital, developing entrepreneurial spirit, reserving contracting dollars for certain business owners, and advocating on behalf of small business owners. ## Where Does the SBA Get Its Funding? The SBA receives an annual budget approved by the federal government. This money goes toward salaries, grant and loan programs, and administrative costs. Keep in mind that the SBA doesn’t actually provide loans to small businesses. Instead, the majority of loans issued to small business owners through SBA programs are guaranteed by the agency and issued by approved financial institutions and other lenders. This source of capital helps individuals start and grow their businesses. ## Who Qualifies for an SBA Grant? The SBA generally doesn’t issue grants, but it does provide [grants to certain organizations that promote business ownership](https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596) in their communities. These include nonprofit organizations, organizations that provide their communities with training and funding (known as “resource partners”), and educational organizations. Grants are not provided to owners who want to expand an existing business or to startups. ## The Bottom Line The SBA is the federal government’s main resource for nurturing the growth of small businesses in the U.S. It not only provides loans, mostly through third parties, to help start or grow your business; it also offers plenty of programs designed to increase your knowledge and expertise in keeping your business healthy, from how to pay taxes to marketing and sales to cybersecurity and more. The SBA doesn’t normally issue any grants, except for a few that go to organizations, many of them nonprofit, that promote entrepreneurship in their communities. It also advocates on behalf of small business owners. Local offices exist in all 50 states, the District of Columbia, and American territories. During the COVID-19 pandemic, the SBA provided crucial financial support through both loans and grants to the small-business community, which was gravely impacted by the crisis.

What Is the Small Business Administration (SBA)? The Small Business Administration (SBA) is a U.S. government agency designed to bolster and promote the economy by assisting the country’s small businesses. Established in 1953, the SBA’s primary function is to counsel individuals who want to start and grow their own businesses. It provides a series of tools on its website to assist new and existing small business owners. The agency is headed by an administrator and deputy administrator and also has a chief counsel for advocacy and inspector general—all of whom are confirmed by the Senate. The SBA has at least one office in every state, the District of Columbia, and various American territories. Key Takeaways The Small Business Administration, established in 1953, is a government agency designed to bolster and promote the economy by providing assistance to small businesses.The SBA is headed by an administrator and a deputy administrator who are confirmed by the Senate.The agency offers various resources to small businesses, including access to capital, entrepreneurial development, government contracting, and advocacy services.The SBA’s loan guarantee program is one of its most visible elements. Understanding the SBA The SBA offers substantial educational information with a specific focus on assisting small businesses to develop and grow. As noted above, the agency has numerous tools for businesses that can be accessed on its website, including a small business planner and additional training programs. According to its website, the SBA provides the following services to small businesses: Access to capital: The agency offers a variety of financial resources for small businesses, including microlending, or small loans that are issued to those who wouldn't otherwise qualify for financing. Loans are issued by partner banks, credit unions, and other financial institutions. Entrepreneurial development: This is driven by counseling services and low-cost training provided by the SBA and is available to both new and existing business owners in more than 1,800 locations across the United States. There's also a mentor program that connects new business owners with retired and/or existing entrepreneurs. Contracting: The SBA reserves 23% in government contracting dollars for small businesses with the help of other federal departments and agencies. The agency guarantees 5% of these contracting dollars for women and another 3% for business owners who are disabled and veterans. Advocacy: The agency acts as an advocate by reviewing legislation and protecting the interests of small business owners across the country. The agency also advocates for business owners at the state and federal government levels. The agency has helped countless small businesses across the country get access to loans, loan guarantees, contracts, and other services. Isabella Casillas Guzman is the administrator of the SBA. Prior to holding this office, she served as the director of California's Office of the Small Business Advocate.  The SBA Loan Program The loan programs offered through the SBA are among the agency's most visible offerings, and they come with longer repayment periods for small businesses. The agency doesn’t actually issue loans itself (with the exception of disaster relief loans). Instead, loans are backed or guaranteed by the SBA and issued directly by lenders that meet the agency’s guidelines. Loans backed by the SBA include: The 504 loan (or the grow loan), which provides a small business with up to $5.5 million in financing to buy the fixed assets it needs to run its operations, including real estate. The 7(a) loan, which is the agency's primary loan program. The maximum loan amount guaranteed under this program is $5 million. A disaster loan is intended to help businesses and homeowners recover from declared disasters. Microloans of up to $50,000 (the average amount is about $13,000) are meant to help small businesses and some nonprofit childcare centers start up or expand. Small businesses qualify for loans more easily when they are guaranteed by the SBA. The agency also allows entrepreneurs to make lower payments for a longer period of time. Despite numerous attempts to do away with the SBA entirely, many political officials and offices continue to support it. The SBA’s ability to offer loans was also significantly strengthened by the American Recovery and Reinvestment Act (ARRA) of 2009 and the Small Business Jobs Act of 2010. The SBA has local offices throughout the United States and associated territories that provide more-personalized special events for small business owners. These offices provide in-person, one-on-one counseling services that include instruction on writing a business plan and assistance with small business loans. How the SBA Can Help You Start Your Business The SBA has many resources available for people who want to start their own small businesses. If you have an idea for a business, this section highlights some of these resources, which can take you from start to finish. Business planning This section of the website outlines steps and provides resources related to the development of your business. These include conducting relevant market research, developing a business plan, and funding. You can also learn about what you need to do to choose: A location for your businessA suitable business structureA business name The SBA also provides key information about what you need to register your company, as well as how to get the appropriate tax documents, permits, and licenses. You can also find out what you need to open a business bank account. Launching your business Launching your business is just as important as starting it, which is why you’ll find some of the same resources from the section above seeping into this one. For instance, choosing your location will depend a lot on local zoning ordinances and laws. It will also affect the kind of incentives and taxes that apply to your organization. The SBA's website has more information on these topics and also provides information on business insurance, which is a very important part of safeguarding your interests. It helps protect your business from any unforeseen losses that take place during normal operations. How the SBA Can Help You Manage and Grow Your Business The agency doesn’t just help people start and launch their own businesses; it also has resources available to help manage and grow them. Management You can learn valuable tips and tricks on how to manage your finances, hire employees, and pay taxes. Other important information includes staying compliant, how-tos for purchasing assets, and marketing and sales strategies. Because cybersecurity is a key threat to many businesses, the SBA also provides some common sense tips to stay safe. This section can help business owners spot some of the most common scams (such as malware and ransomware) and understand and assess their risk. They can also use some of the agency's best practices to avoid cyber attacks and access SBA training and events. This section also deals with hiring people with disabilities, what to do when you must close your business, and how to recover from disasters. Growing your business It isn’t enough just to learn how to start and run your business, which is why the SBA also has resources to help you grow. Some of the aids in this section cover how to access additional funding, how to expand, and what to expect from mergers and acquisitions (M&A). Part of the SBA’s mandate is to guarantee a certain percentage of federal contracts to small business owners. As such, the agency encourages businesses to become federal contractors and has an easy registration process. You can also get the resources you need to improve your bottom line, via connecting with partners to help export your products and services. You’ll also find useful information about different types of businesses, such as those owned by women, Native Americans, veterans, minorities, and members of the LGBTQ+ community, as well as rural businesses. The History of the SBA The SBA was established by President Dwight Eisenhower when he signed the Small Business Act in the summer of 1953. It replaced the Reconstruction Finance Corporation (RFC), which was created under President Herbert Hoover in 1932 after the Great Depression. The mandate of the newly formed SBA was to aid and protect the country’s small businesses and ensure that they received a fair portion of government contracts and surplus property sales. The SBA has had a rocky history. In 1996 the agency was under threat of being eliminated by the House of Representatives. However, the agency survived this threat and went on to receive a record budget in 2000. There was also a lot of resistance to its loan program, which led to repeated cuts between 2001 and 2004. That’s when certain SBA expenditures were frozen altogether. Small business owners were among some of the hardest hit during the COVID-19 pandemic. The SBA helped these owners, providing them with two different types of funding: Economic Injury Disaster Loan (EIDL): This program was designed to let businesses use approved funds for working capital and other day-to-day expenses. As capital is loaned, it must be repaid. The SBA stopped accepting applications as of Jan. 1, 2022, and as of May 6, 2022, stopped accepting loan increase requests or requests for reconsideration of loan applications that had previously been declined. EIDL Advance Programs: Funds were granted to people who filed for EIDL assistance as long as they met certain criteria. Unlike the loan program, funds approved through this program don’t have to be repaid. What Does the Small Business Administration (SBA) Do? The Small Business Administration (SBA) is a U.S. government agency that provides assistance to small business owners. It has a series of tools available for new and existing entrepreneurs. Its goals include providing business owners with access to capital, developing entrepreneurial spirit, reserving contracting dollars for certain business owners, and advocating on behalf of small business owners. Where Does the SBA Get Its Funding? The SBA receives an annual budget approved by the federal government. This money goes toward salaries, grant and loan programs, and administrative costs. Keep in mind that the SBA doesn’t actually provide loans to small businesses. Instead, the majority of loans issued to small business owners through SBA programs are guaranteed by the agency and issued by approved financial institutions and other lenders. This source of capital helps individuals start and grow their businesses. Who Qualifies for an SBA Grant? The SBA generally doesn’t issue grants, but it does provide grants to certain organizations that promote business ownership in their communities. These include nonprofit organizations, organizations that provide their communities with training and funding (known as “resource partners”), and educational organizations. Grants are not provided to owners who want to expand an existing business or to startups. The Bottom Line The SBA is the federal government’s main resource for nurturing the growth of small businesses in the U.S. It not only provides loans, mostly through third parties, to help start or grow your business; it also offers plenty of programs designed to increase your knowledge and expertise in keeping your business healthy, from how to pay taxes to marketing and sales to cybersecurity and more. The SBA doesn’t normally issue any grants, except for a few that go to organizations, many of them nonprofit, that promote entrepreneurship in their communities. It also advocates on behalf of small business owners. Local offices exist in all 50 states, the District of Columbia, and American territories. During the COVID-19 pandemic, the SBA provided crucial financial support through both loans and grants to the small-business community, which was gravely impacted by the crisis.

https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-small-and-midsize-enterprises-smes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are Small and Midsize Enterprises (SMEs)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Small and midsize enterprises (SMEs) are businesses that maintain <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenues</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">assets</a>, or a number of employees below a certain threshold. Each country has its own definition of what constitutes a small and midsize enterprise. Certain size criteria must be met, and occasionally, the industry in which the company operates is taken into account as well.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small and midsize enterprises (SMEs) are businesses that have revenues, assets, or a number of employees below a certain threshold.</li><li>Each country has its own definition of what constitutes a small and midsize enterprise.</li><li>Each country may also set different guidelines across industries to define what a small business is across sectors.<br/></li><li>SMEs play an important role in an economy, employing vast numbers of people and helping to shape innovation.</li><li>Governments regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_6-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:71.8%;"> <img alt="Image" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/L09dD3a_hssQ0T6LugeaqoO0OOM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/L09dD3a_hssQ0T6LugeaqoO0OOM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg" data-srcset="https://www.investopedia.com/thmb/1gX0hh6rsKRaEvd3oZAhyYZjPgc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg 750w" data-tracking-container="true" height="3835" id="mntl-sc-block-image_1-0" width="5334"/> <noscript> <img alt="Image" class="img--noscript universal-image__image" height="3835" sizes="750px" src="https://www.investopedia.com/thmb/L09dD3a_hssQ0T6LugeaqoO0OOM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg" srcset="https://www.investopedia.com/thmb/1gX0hh6rsKRaEvd3oZAhyYZjPgc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg 750w" width="5334"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Image by Sabrina Jiang © Investopedia 2020</p></span> </figcaption></figure> <span class="heading-toc" id="toc-what-is-the-role-of-smes-in-an-economy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is the Role of SMEs in an Economy? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Though small, SMEs play an important role in an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economy.asp">economy</a>. They outnumber large firms, employ vast numbers of people, and are generally <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/entrepreneur.asp">entrepreneurial</a> in nature, helping to shape <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-essentials-4689832">innovation</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Small and midsize enterprises can exist in almost any industry but are more likely to reside within industries requiring fewer employees and smaller up-front <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital-investment.asp">capital investments</a>. Common types of SMEs include legal firms, dental offices, restaurants, and bars. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> SMEs are segregated from large, multinational companies because they fundamentally operate differently. Large, complex firms may require advanced <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/erp.asp">enterprise resource planning (ERP)</a> systems—for accounting, supply chain management and financial reporting, and interconnectivity across offices around the world—or deeper organizational processes.<span class="ql-inline-citation" data-cite="20"></span> SMEs, on the other hand, may require fewer systems given their narrower scope of operations.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-small-and-midsize-enterprises-smes-around-the-world"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Small and Midsize Enterprises (SMEs) Around the World </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> SMEs in the U.S. </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> In the United States, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> classifies a small business according to its ownership structure, number of employees, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp">earnings</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/industry.asp">industry</a>.<span class="ql-inline-citation" data-cite="2"></span> For example, in manufacturing, an SME is a firm with 500 or fewer employees.<span class="ql-inline-citation" data-cite="21"></span> In contrast, businesses that mine copper ore and nickel ore can have up to 1,500 employees and still be identified as SMEs. Like the European Union (EU), the U.S. distinctly classifies companies with fewer than 10 employees as a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-office-home-office-soho.asp">small office/home office (SOHO)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> When it comes to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-accounting.asp">tax reporting</a>, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a> does not categorize businesses into SMEs. Instead, it separates small businesses and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/self-employed.asp">self-employed</a> individuals into one group and midsize to large businesses into another.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="5"></span> The IRS classifies small businesses as companies with assets of $10 million or less and large businesses as those with more than $10 million in assets.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The SBA Office of Advocacy reported almost 33.2 million <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-8611031">small businesses</a> in the U.S., based on the most recent available data.<span class="ql-inline-citation" data-cite="9"></span> Of these, 82% did not have any employees. Within the U.S. economy, small businesses comprise 99.9% of all firms, 99.7% of all firms with paid employees, and 97.3% of exporters.<span class="ql-inline-citation" data-cite="9"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>SMEs are disproportionally owned by White males, highlighting the lack of access to financial and entrepreneurial resources across races and genders. For example, a March 2023 report by the SBA found only 19.6% of employer firms were owned by minorities and only 21.7% of employer firms owned by women.<span class="ql-inline-citation" data-cite="9"></span></p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-subheading__text"> SMEs in Canada </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The Canadian government issues Canadian Industry Statistics that define each type of business based on the number of employees it has. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li>Micro businesses have 1–4 employees.</li><li>Small businesses have 5–99 employees.</li><li>Medium businesses have 100–499 employees.</li><li>Large businesses have 500+ employees.<span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> In 2022, small businesses comprised 98% of all employer businesses in Canada. Small businesses employed 10.3 million individuals—three-plus times as many individuals as were employed by medium-size businesses.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> SMEs in the European Union (EU) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/europeanunion.asp">European Union (EU)</a> offers definitions of what constitutes a small-size company as well. Small-size enterprises are companies with fewer than 50 employees, and medium-size enterprises are ones with fewer than 250 employees. In addition to small and midsize companies, there are <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/microenterprise.asp">micro-companies</a>, which employ up to 10 employees.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> As is the case in other countries, SMEs represent 99% of all businesses within the EU. SMEs employ an estimated 100 million individuals and generate more than half of the European Union’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gdp.asp">gross domestic product (GDP)</a>.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> SMEs in China </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> China’s system of classifying the size of Chinese companies is complex. In general, companies are defined based on their operating revenue, number of employees, or total assets. The following examples highlight these classifications: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>Chinese retail companies are small if they employ 10 to 49 employees and have annual operating revenue of at least $1 million.</li><li>Chinese real estate developers are small if they have annual operating revenue of $1 million to $10 million and total assets of $20 million to $50 million.</li><li>Chinese agriculture companies are small if their annual operating revenue is $0.5 million to $5 million.<span class="ql-inline-citation" data-cite="13"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> From 2021 to 2025, China is expected to invest heavily in its small and midsize enterprises. The country is expected to cultivate 1 million SMEs and 100,000 SMEs that feature innovation during this time, according to the Department of Industry and Information Technology.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> SMEs in Developing Countries </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> In developing countries such as Kenya, small and midsize enterprises go by the acronym MSME, short for micro, small, and medium-size enterprises. In India, the acronym is MSMED, or micro, small, and medium enterprise development. Despite the differences in nomenclature, countries share the commonality of separating businesses according to size or structure. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Many people in emerging economies find work in small and midsize enterprises. SMEs contribute roughly 50% of total employment and 40% of GDP in these countries, according to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/oecd.asp">Organisation for Economic Co-operation and Development (OCED)</a>.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> The World Bank estimates that a majority of formal jobs in emerging markets (seven out of 10 jobs) are generated by SMEs. However, these small businesses often face greater financing challenges compared to their developed-country counterparts. The World Bank estimates that MSMEs in developing countries have unmet financing needs in excess of $5 trillion every year.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <span class="heading-toc" id="toc-the-importance-of-small-and-midsize-enterprises-smes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> The Importance of Small and Midsize Enterprises (SMEs) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> A plethora of data demonstrates the massive economic impact that SMEs have on a country’s economy. Specific to the United States, SMEs play a vital role in the success of the nation’s economy by contributing in a variety of ways. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> <li>Small businesses comprise more than 99% of all firms in the U.S.</li><li>Small businesses contribute to 43.5% of the entire U.S. GDP.</li><li>Small businesses pay 39.7% of the entire U.S. private payroll.</li><li>Small businesses created 4.8 million more new U.S. jobs from 1995 to 2020 compared to large businesses.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Small businesses also have distinct advantages over larger companies: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> <li>SMEs can often operate more flexibly. Large companies with broader processes touching more employees may find it more difficult to act as nimbly.</li><li>SMEs often garner a stronger sense of community. Slogans such as “shop local” are geared toward supporting SMEs that don’t have branches across the nation.</li><li>SMEs are more likely to financially support their own community. Instead of collecting revenue and investing it in a new store across the country, SMEs are more likely to remain local, sustain local business, contribute local tax dollars, and buy from nearby suppliers.</li><li>SMEs may be engrained with a rich history. Larger, complex companies may have a long history as well (especially if they’ve been financially successful). However, SMEs are more likely to carry family tradition, preserve how generations have done things, and pass down the family business.</li><li>SMEs may have a narrower, more direct focus than larger businesses. Think of Apple, for example. Developing iPhones, iPads, Macs, Apple Watches, accessories, and streaming services requires the staff to support each of these departments. But an SME with limited staff must limit the scope of what it offers. Instead of attempting to have a broad market presence, successful SMEs often deeply integrate themselves into a smaller target market.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_59-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_60-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">30 million</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Estimated number of SMEs in the United States, according to the Office of the United States Trade Representative.<span class="ql-inline-citation" data-cite="19"></span></p></div></div></div> <span class="heading-toc" id="toc-what-incentives-are-offered-to-smes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> What Incentives Are Offered to SMEs? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> U.S. SMEs can gain access to education programs and coaching help from the Small Business Administration. These insights are meant to help owners make their businesses grow and survive, as well as target high-risk areas and boost tax compliance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-subheading__text"> Government Incentives </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Life as a small and midsize enterprise isn’t always easy. These businesses generally struggle to attract <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a> to fund their endeavors and often have difficulty paying taxes and meeting regulatory compliance obligations. Governments recognize the importance of SMEs to their economies and regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business. Types of loans include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> <li>7(a) loans that guarantee portions of the total amount, cap interest rates, and limit fees</li><li>504 loans that offer fixed-rate financing over a longer duration for the purchase or repair of assets such as real estate or equipment</li><li>Microloans for up to $50,000 to help an SME get off the ground or expand<span class="ql-inline-citation" data-cite="16"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_69-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_70-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>SME loans through the SBA can range from $500 to $5.5 million.<span class="ql-inline-citation" data-cite="16"></span></p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-subheading__text"> Small Business Investment Companies (SBICs) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> The Small Business Administration also provides funding to specific small business investment companies (SBICs). These SBICs can then use their expertise to invest private funds in small businesses. SBICs can invest debt, equity, or a combination of both. To garner consideration from an SBIC for funding, a business must meet the following universal requirements at a minimum: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> <li>The business must be a U.S. business. At least 51% of the company’s employees and assets must be within the United States.</li><li>The business must meet the definition of a small business. This qualification refers to the SBA sizing standards.</li><li>The business must reside in an approved industry. Specific industries, including farmland, real estate, and financing, are excluded from receiving funding.<br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-what-does-sme-mean"></span> <h2 class="mntl-sc-block-questionandanswer__question">What does SME mean?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SME stands for small and midsize enterprise. As opposed to multinational conglomerates with locations around the world, SMEs are much smaller businesses that create a majority of jobs across the world economy.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-what-is-an-example-of-an-sme"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is an example of an SME?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In 1971, a company called Starbucks opened its first store in Seattle’s historic Pike Place Market.<span class="ql-inline-citation" data-cite="17"></span> At the time, it might have been able to claim to be an SME. But with Starbucks locations now all over the world, the company can no longer make that claim. That option has passed to other coffee shops, such as Lighthouse Roasters, an independent and locally owned coffee roaster. With a single address in Seattle, Lighthouse Roasters is considered an SME.<span class="ql-inline-citation" data-cite="18"></span><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_80-0"><span class="heading-toc" id="toc-how-many-employees-are-employed-by-small-to-midsize-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">How many employees are employed by small to midsize businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The latest U.S. Census data available states that employer firms with fewer than 500 workers accounted for 46.4% of private-sector payrolls, while companies with fewer than 100 employees accounted for 32.4%.<span class="ql-inline-citation" data-cite="6"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_82-0"><span class="heading-toc" id="toc-what-is-the-definition-of-a-small-to-midsize-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the definition of a small to midsize business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There is no set definition of a small to midsize business, and it varies by country. In the United States, the definition can also vary by industry. Note that Gartner, the information technology (IT) consulting service, describes small businesses as those with fewer than 100 employees and midsize businesses as those with 100 to 999 employees.<span class="ql-inline-citation" data-cite="7"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-is-the-percentage-of-small-to-midsize-businesses-in-the-united-states"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the percentage of small to midsize businesses in the United States?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most recent U.S. Census data for SMEs found that there were 6.1 million employer firms in the U.S. Firms with fewer than 500 employees made up 99.7% of those businesses. Companies with fewer than 100 employees made up 98.1%.<span class="ql-inline-citation" data-cite="6"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_86-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> Small and midsize enterprises play a vital part in many economies around the world. Their innovation, flexibility, creativity, efficiency, and locality all play a part in making them successful. Through conscious consumer behavior, government assistance, and reliance on their communities, SMEs have established themselves as an important part of the broader economy. </p></div>

## What Are Small and Midsize Enterprises (SMEs)? Small and midsize enterprises (SMEs) are businesses that maintain [revenues](https://www.investopedia.com/terms/r/revenue.asp), [assets](https://www.investopedia.com/terms/a/asset.asp), or a number of employees below a certain threshold. Each country has its own definition of what constitutes a small and midsize enterprise. Certain size criteria must be met, and occasionally, the industry in which the company operates is taken into account as well. ### Key Takeaways * Small and midsize enterprises (SMEs) are businesses that have revenues, assets, or a number of employees below a certain threshold. * Each country has its own definition of what constitutes a small and midsize enterprise. * Each country may also set different guidelines across industries to define what a small business is across sectors. * SMEs play an important role in an economy, employing vast numbers of people and helping to shape innovation. * Governments regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business. ![Image]() :max_bytes(150000):strip_icc()/dotdash_Final_Small_and_Mid-size_Enterprise_SME_Jun_2020-01-167470ed3ba847aaa6a9acc411e039a3.jpg) Image by Sabrina Jiang © Investopedia 2020 ## What Is the Role of SMEs in an Economy? Though small, SMEs play an important role in an [economy](https://www.investopedia.com/terms/e/economy.asp). They outnumber large firms, employ vast numbers of people, and are generally [entrepreneurial](https://www.investopedia.com/terms/e/entrepreneur.asp) in nature, helping to shape [innovation](https://www.investopedia.com/business-essentials-4689832). Small and midsize enterprises can exist in almost any industry but are more likely to reside within industries requiring fewer employees and smaller up-front [capital investments](https://www.investopedia.com/terms/c/capital-investment.asp). Common types of SMEs include legal firms, dental offices, restaurants, and bars. SMEs are segregated from large, multinational companies because they fundamentally operate differently. Large, complex firms may require advanced [enterprise resource planning (ERP)](https://www.investopedia.com/terms/e/erp.asp) systems—for accounting, supply chain management and financial reporting, and interconnectivity across offices around the world—or deeper organizational processes. SMEs, on the other hand, may require fewer systems given their narrower scope of operations. ## Small and Midsize Enterprises (SMEs) Around the World ### SMEs in the U.S. In the United States, the [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) classifies a small business according to its ownership structure, number of employees, [earnings](https://www.investopedia.com/terms/e/earnings.asp), and [industry](https://www.investopedia.com/terms/i/industry.asp). For example, in manufacturing, an SME is a firm with 500 or fewer employees. In contrast, businesses that mine copper ore and nickel ore can have up to 1,500 employees and still be identified as SMEs. Like the European Union (EU), the U.S. distinctly classifies companies with fewer than 10 employees as a [small office/home office (SOHO)](https://www.investopedia.com/terms/s/small-office-home-office-soho.asp). When it comes to [tax reporting](https://www.investopedia.com/terms/t/tax-accounting.asp), the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) does not categorize businesses into SMEs. Instead, it separates small businesses and [self-employed](https://www.investopedia.com/terms/s/self-employed.asp) individuals into one group and midsize to large businesses into another. The IRS classifies small businesses as companies with assets of $10 million or less and large businesses as those with more than $10 million in assets. The SBA Office of Advocacy reported almost 33.2 million [small businesses](https://www.investopedia.com/small-business-8611031) in the U.S., based on the most recent available data. Of these, 82% did not have any employees. Within the U.S. economy, small businesses comprise 99.9% of all firms, 99.7% of all firms with paid employees, and 97.3% of exporters. ### SMEs are disproportionally owned by White males, highlighting the lack of access to financial and entrepreneurial resources across races and genders. For example, a March 2023 report by the SBA found only 19.6% of employer firms were owned by minorities and only 21.7% of employer firms owned by women. ### SMEs in Canada The Canadian government issues Canadian Industry Statistics that define each type of business based on the number of employees it has. * Micro businesses have 1–4 employees. * Small businesses have 5–99 employees. * Medium businesses have 100–499 employees. * Large businesses have 500+ employees. In 2022, small businesses comprised 98% of all employer businesses in Canada. Small businesses employed 10.3 million individuals—three-plus times as many individuals as were employed by medium-size businesses. ### SMEs in the European Union (EU) The [European Union (EU)](https://www.investopedia.com/terms/e/europeanunion.asp) offers definitions of what constitutes a small-size company as well. Small-size enterprises are companies with fewer than 50 employees, and medium-size enterprises are ones with fewer than 250 employees. In addition to small and midsize companies, there are [micro-companies](https://www.investopedia.com/terms/m/microenterprise.asp), which employ up to 10 employees. As is the case in other countries, SMEs represent 99% of all businesses within the EU. SMEs employ an estimated 100 million individuals and generate more than half of the European Union’s [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp). ### SMEs in China China’s system of classifying the size of Chinese companies is complex. In general, companies are defined based on their operating revenue, number of employees, or total assets. The following examples highlight these classifications: * Chinese retail companies are small if they employ 10 to 49 employees and have annual operating revenue of at least $1 million. * Chinese real estate developers are small if they have annual operating revenue of $1 million to $10 million and total assets of $20 million to $50 million. * Chinese agriculture companies are small if their annual operating revenue is $0.5 million to $5 million. From 2021 to 2025, China is expected to invest heavily in its small and midsize enterprises. The country is expected to cultivate 1 million SMEs and 100,000 SMEs that feature innovation during this time, according to the Department of Industry and Information Technology. ### SMEs in Developing Countries In developing countries such as Kenya, small and midsize enterprises go by the acronym MSME, short for micro, small, and medium-size enterprises. In India, the acronym is MSMED, or micro, small, and medium enterprise development. Despite the differences in nomenclature, countries share the commonality of separating businesses according to size or structure. Many people in emerging economies find work in small and midsize enterprises. SMEs contribute roughly 50% of total employment and 40% of GDP in these countries, according to the [Organisation for Economic Co-operation and Development (OCED)](https://www.investopedia.com/terms/o/oecd.asp). The World Bank estimates that a majority of formal jobs in emerging markets (seven out of 10 jobs) are generated by SMEs. However, these small businesses often face greater financing challenges compared to their developed-country counterparts. The World Bank estimates that MSMEs in developing countries have unmet financing needs in excess of $5 trillion every year. ## The Importance of Small and Midsize Enterprises (SMEs) A plethora of data demonstrates the massive economic impact that SMEs have on a country’s economy. Specific to the United States, SMEs play a vital role in the success of the nation’s economy by contributing in a variety of ways. * Small businesses comprise more than 99% of all firms in the U.S. * Small businesses contribute to 43.5% of the entire U.S. GDP. * Small businesses pay 39.7% of the entire U.S. private payroll. * Small businesses created 4.8 million more new U.S. jobs from 1995 to 2020 compared to large businesses. Small businesses also have distinct advantages over larger companies: * SMEs can often operate more flexibly. Large companies with broader processes touching more employees may find it more difficult to act as nimbly. * SMEs often garner a stronger sense of community. Slogans such as “shop local” are geared toward supporting SMEs that don’t have branches across the nation. * SMEs are more likely to financially support their own community. Instead of collecting revenue and investing it in a new store across the country, SMEs are more likely to remain local, sustain local business, contribute local tax dollars, and buy from nearby suppliers. * SMEs may be engrained with a rich history. Larger, complex companies may have a long history as well (especially if they’ve been financially successful). However, SMEs are more likely to carry family tradition, preserve how generations have done things, and pass down the family business. * SMEs may have a narrower, more direct focus than larger businesses. Think of Apple, for example. Developing iPhones, iPads, Macs, Apple Watches, accessories, and streaming services requires the staff to support each of these departments. But an SME with limited staff must limit the scope of what it offers. Instead of attempting to have a broad market presence, successful SMEs often deeply integrate themselves into a smaller target market. ### 30 million Estimated number of SMEs in the United States, according to the Office of the United States Trade Representative. ## What Incentives Are Offered to SMEs? U.S. SMEs can gain access to education programs and coaching help from the Small Business Administration. These insights are meant to help owners make their businesses grow and survive, as well as target high-risk areas and boost tax compliance. ### Government Incentives Life as a small and midsize enterprise isn’t always easy. These businesses generally struggle to attract [capital](https://www.investopedia.com/terms/c/capital.asp) to fund their endeavors and often have difficulty paying taxes and meeting regulatory compliance obligations. Governments recognize the importance of SMEs to their economies and regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business. Types of loans include: * 7(a) loans that guarantee portions of the total amount, cap interest rates, and limit fees * 504 loans that offer fixed-rate financing over a longer duration for the purchase or repair of assets such as real estate or equipment * Microloans for up to $50,000 to help an SME get off the ground or expand ### SME loans through the SBA can range from $500 to $5.5 million. ### Small Business Investment Companies (SBICs) The Small Business Administration also provides funding to specific small business investment companies (SBICs). These SBICs can then use their expertise to invest private funds in small businesses. SBICs can invest debt, equity, or a combination of both. To garner consideration from an SBIC for funding, a business must meet the following universal requirements at a minimum: 1. The business must be a U.S. business. At least 51% of the company’s employees and assets must be within the United States. 2. The business must meet the definition of a small business. This qualification refers to the SBA sizing standards. 3. The business must reside in an approved industry. Specific industries, including farmland, real estate, and financing, are excluded from receiving funding. ## What does SME mean? SME stands for small and midsize enterprise. As opposed to multinational conglomerates with locations around the world, SMEs are much smaller businesses that create a majority of jobs across the world economy. ## What is an example of an SME? In 1971, a company called Starbucks opened its first store in Seattle’s historic Pike Place Market. At the time, it might have been able to claim to be an SME. But with Starbucks locations now all over the world, the company can no longer make that claim. That option has passed to other coffee shops, such as Lighthouse Roasters, an independent and locally owned coffee roaster. With a single address in Seattle, Lighthouse Roasters is considered an SME. ## How many employees are employed by small to midsize businesses? The latest U.S. Census data available states that employer firms with fewer than 500 workers accounted for 46.4% of private-sector payrolls, while companies with fewer than 100 employees accounted for 32.4%. ## What is the definition of a small to midsize business? There is no set definition of a small to midsize business, and it varies by country. In the United States, the definition can also vary by industry. Note that Gartner, the information technology (IT) consulting service, describes small businesses as those with fewer than 100 employees and midsize businesses as those with 100 to 999 employees. ## What is the percentage of small to midsize businesses in the United States? The most recent U.S. Census data for SMEs found that there were 6.1 million employer firms in the U.S. Firms with fewer than 500 employees made up 99.7% of those businesses. Companies with fewer than 100 employees made up 98.1%. ## The Bottom Line Small and midsize enterprises play a vital part in many economies around the world. Their innovation, flexibility, creativity, efficiency, and locality all play a part in making them successful. Through conscious consumer behavior, government assistance, and reliance on their communities, SMEs have established themselves as an important part of the broader economy.

What Are Small and Midsize Enterprises (SMEs)? Small and midsize enterprises (SMEs) are businesses that maintain revenues, assets, or a number of employees below a certain threshold. Each country has its own definition of what constitutes a small and midsize enterprise. Certain size criteria must be met, and occasionally, the industry in which the company operates is taken into account as well. Key Takeaways Small and midsize enterprises (SMEs) are businesses that have revenues, assets, or a number of employees below a certain threshold.Each country has its own definition of what constitutes a small and midsize enterprise.Each country may also set different guidelines across industries to define what a small business is across sectors.SMEs play an important role in an economy, employing vast numbers of people and helping to shape innovation.Governments regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business. Image by Sabrina Jiang © Investopedia 2020 What Is the Role of SMEs in an Economy? Though small, SMEs play an important role in an economy. They outnumber large firms, employ vast numbers of people, and are generally entrepreneurial in nature, helping to shape innovation. Small and midsize enterprises can exist in almost any industry but are more likely to reside within industries requiring fewer employees and smaller up-front capital investments. Common types of SMEs include legal firms, dental offices, restaurants, and bars. SMEs are segregated from large, multinational companies because they fundamentally operate differently. Large, complex firms may require advanced enterprise resource planning (ERP) systems—for accounting, supply chain management and financial reporting, and interconnectivity across offices around the world—or deeper organizational processes. SMEs, on the other hand, may require fewer systems given their narrower scope of operations. Small and Midsize Enterprises (SMEs) Around the World SMEs in the U.S. In the United States, the Small Business Administration (SBA) classifies a small business according to its ownership structure, number of employees, earnings, and industry. For example, in manufacturing, an SME is a firm with 500 or fewer employees. In contrast, businesses that mine copper ore and nickel ore can have up to 1,500 employees and still be identified as SMEs. Like the European Union (EU), the U.S. distinctly classifies companies with fewer than 10 employees as a small office/home office (SOHO). When it comes to tax reporting, the Internal Revenue Service (IRS) does not categorize businesses into SMEs. Instead, it separates small businesses and self-employed individuals into one group and midsize to large businesses into another. The IRS classifies small businesses as companies with assets of $10 million or less and large businesses as those with more than $10 million in assets. The SBA Office of Advocacy reported almost 33.2 million small businesses in the U.S., based on the most recent available data. Of these, 82% did not have any employees. Within the U.S. economy, small businesses comprise 99.9% of all firms, 99.7% of all firms with paid employees, and 97.3% of exporters. SMEs are disproportionally owned by White males, highlighting the lack of access to financial and entrepreneurial resources across races and genders. For example, a March 2023 report by the SBA found only 19.6% of employer firms were owned by minorities and only 21.7% of employer firms owned by women. SMEs in Canada The Canadian government issues Canadian Industry Statistics that define each type of business based on the number of employees it has. Micro businesses have 1–4 employees.Small businesses have 5–99 employees.Medium businesses have 100–499 employees.Large businesses have 500+ employees. In 2022, small businesses comprised 98% of all employer businesses in Canada. Small businesses employed 10.3 million individuals—three-plus times as many individuals as were employed by medium-size businesses. SMEs in the European Union (EU) The European Union (EU) offers definitions of what constitutes a small-size company as well. Small-size enterprises are companies with fewer than 50 employees, and medium-size enterprises are ones with fewer than 250 employees. In addition to small and midsize companies, there are micro-companies, which employ up to 10 employees. As is the case in other countries, SMEs represent 99% of all businesses within the EU. SMEs employ an estimated 100 million individuals and generate more than half of the European Union’s gross domestic product (GDP). SMEs in China China’s system of classifying the size of Chinese companies is complex. In general, companies are defined based on their operating revenue, number of employees, or total assets. The following examples highlight these classifications: Chinese retail companies are small if they employ 10 to 49 employees and have annual operating revenue of at least $1 million.Chinese real estate developers are small if they have annual operating revenue of $1 million to $10 million and total assets of $20 million to $50 million.Chinese agriculture companies are small if their annual operating revenue is $0.5 million to $5 million. From 2021 to 2025, China is expected to invest heavily in its small and midsize enterprises. The country is expected to cultivate 1 million SMEs and 100,000 SMEs that feature innovation during this time, according to the Department of Industry and Information Technology. SMEs in Developing Countries In developing countries such as Kenya, small and midsize enterprises go by the acronym MSME, short for micro, small, and medium-size enterprises. In India, the acronym is MSMED, or micro, small, and medium enterprise development. Despite the differences in nomenclature, countries share the commonality of separating businesses according to size or structure. Many people in emerging economies find work in small and midsize enterprises. SMEs contribute roughly 50% of total employment and 40% of GDP in these countries, according to the Organisation for Economic Co-operation and Development (OCED). The World Bank estimates that a majority of formal jobs in emerging markets (seven out of 10 jobs) are generated by SMEs. However, these small businesses often face greater financing challenges compared to their developed-country counterparts. The World Bank estimates that MSMEs in developing countries have unmet financing needs in excess of $5 trillion every year. The Importance of Small and Midsize Enterprises (SMEs) A plethora of data demonstrates the massive economic impact that SMEs have on a country’s economy. Specific to the United States, SMEs play a vital role in the success of the nation’s economy by contributing in a variety of ways. Small businesses comprise more than 99% of all firms in the U.S.Small businesses contribute to 43.5% of the entire U.S. GDP.Small businesses pay 39.7% of the entire U.S. private payroll.Small businesses created 4.8 million more new U.S. jobs from 1995 to 2020 compared to large businesses. Small businesses also have distinct advantages over larger companies: SMEs can often operate more flexibly. Large companies with broader processes touching more employees may find it more difficult to act as nimbly.SMEs often garner a stronger sense of community. Slogans such as “shop local” are geared toward supporting SMEs that don’t have branches across the nation.SMEs are more likely to financially support their own community. Instead of collecting revenue and investing it in a new store across the country, SMEs are more likely to remain local, sustain local business, contribute local tax dollars, and buy from nearby suppliers.SMEs may be engrained with a rich history. Larger, complex companies may have a long history as well (especially if they’ve been financially successful). However, SMEs are more likely to carry family tradition, preserve how generations have done things, and pass down the family business.SMEs may have a narrower, more direct focus than larger businesses. Think of Apple, for example. Developing iPhones, iPads, Macs, Apple Watches, accessories, and streaming services requires the staff to support each of these departments. But an SME with limited staff must limit the scope of what it offers. Instead of attempting to have a broad market presence, successful SMEs often deeply integrate themselves into a smaller target market. 30 million Estimated number of SMEs in the United States, according to the Office of the United States Trade Representative. What Incentives Are Offered to SMEs? U.S. SMEs can gain access to education programs and coaching help from the Small Business Administration. These insights are meant to help owners make their businesses grow and survive, as well as target high-risk areas and boost tax compliance. Government Incentives Life as a small and midsize enterprise isn’t always easy. These businesses generally struggle to attract capital to fund their endeavors and often have difficulty paying taxes and meeting regulatory compliance obligations. Governments recognize the importance of SMEs to their economies and regularly offer incentives, including favorable tax treatment and better access to loans, to help keep SMEs in business. Types of loans include: 7(a) loans that guarantee portions of the total amount, cap interest rates, and limit fees504 loans that offer fixed-rate financing over a longer duration for the purchase or repair of assets such as real estate or equipmentMicroloans for up to $50,000 to help an SME get off the ground or expand SME loans through the SBA can range from $500 to $5.5 million. Small Business Investment Companies (SBICs) The Small Business Administration also provides funding to specific small business investment companies (SBICs). These SBICs can then use their expertise to invest private funds in small businesses. SBICs can invest debt, equity, or a combination of both. To garner consideration from an SBIC for funding, a business must meet the following universal requirements at a minimum: The business must be a U.S. business. At least 51% of the company’s employees and assets must be within the United States.The business must meet the definition of a small business. This qualification refers to the SBA sizing standards.The business must reside in an approved industry. Specific industries, including farmland, real estate, and financing, are excluded from receiving funding. What does SME mean? SME stands for small and midsize enterprise. As opposed to multinational conglomerates with locations around the world, SMEs are much smaller businesses that create a majority of jobs across the world economy. What is an example of an SME? In 1971, a company called Starbucks opened its first store in Seattle’s historic Pike Place Market. At the time, it might have been able to claim to be an SME. But with Starbucks locations now all over the world, the company can no longer make that claim. That option has passed to other coffee shops, such as Lighthouse Roasters, an independent and locally owned coffee roaster. With a single address in Seattle, Lighthouse Roasters is considered an SME. How many employees are employed by small to midsize businesses? The latest U.S. Census data available states that employer firms with fewer than 500 workers accounted for 46.4% of private-sector payrolls, while companies with fewer than 100 employees accounted for 32.4%. What is the definition of a small to midsize business? There is no set definition of a small to midsize business, and it varies by country. In the United States, the definition can also vary by industry. Note that Gartner, the information technology (IT) consulting service, describes small businesses as those with fewer than 100 employees and midsize businesses as those with 100 to 999 employees. What is the percentage of small to midsize businesses in the United States? The most recent U.S. Census data for SMEs found that there were 6.1 million employer firms in the U.S. Firms with fewer than 500 employees made up 99.7% of those businesses. Companies with fewer than 100 employees made up 98.1%. The Bottom Line Small and midsize enterprises play a vital part in many economies around the world. Their innovation, flexibility, creativity, efficiency, and locality all play a part in making them successful. Through conscious consumer behavior, government assistance, and reliance on their communities, SMEs have established themselves as an important part of the broader economy.

https://www.investopedia.com/how-to-reopen-your-small-business-safely-4844160

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> As entrepreneurs, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small business owners are used to setting goals and solving problems</a>. However, the COVID-19 pandemic has forced many small businesses into the unenviable position of deciding how to reopen safely. Regulations vary by state and the details are complex and not always clear. Small business owners have to problem-solve and make their own plans to keep employees and customers safe. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Here are some things to keep in mind to help you reopen your small business safely, including workplace safety advice from the U.S. Centers for Disease Control and Prevention (CDC). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Regulations and guidelines vary by state and local municipalities, so make sure to check and monitor them.</li><li>As you reopen your small business, keep social distancing guidelines in place.</li><li>Encourage workers to wash their hands and use hand sanitizer frequently.</li><li>Clean and disinfect frequently touched surfaces at least once a day and more often in high-traffic areas.</li><li>Develop a policy for working from home that treats all workers fairly.</li><li>Federal law says employees can be barred from the workplace if they refuse to get a COVID-19 vaccine.</li><li>If you don’t require employees to be vaccinated or have workers who are high risk, consider guidelines on how to keep your workplace safe for all.</li></ul></div></div></div> <span class="heading-toc" id="toc-monitor-state-and-local-requirements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Monitor State and Local Requirements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> How you safely reopen your small business will in part be determined by state and local requirements and the type of business you run. Requirements can vary by state and your local municipality. A restaurant or retail business will have different needs than a small office, where there is little or no interaction with customers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The CDC recommends that all businesses should:<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>Create a plan specific to their workplace</li><li>Identify all areas and job tasks with potential exposure to COVID-19</li><li>Implement measures to eliminate or reduce that exposure</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The CDC also advises employers to “monitor federal, state, and local public health communications about COVID-19 regulations, guidance, and recommendations and ensure that workers have access to the information.”<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You can find guidelines for specific industries on the CDC’s website.<span class="ql-inline-citation" data-cite="17"></span></p><p> </p></div></div></div> <span class="heading-toc" id="toc-vaccines-and-testing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Vaccines and Testing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As a small business owner, you’ll have to decide whether or not to require that employees be vaccinated before returning to the workplace. In guidelines issued in December, the federal government said that employers can require workers to get a COVID-19 vaccine—and bar them from the workplace if they refuse to do so.<span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Employers are also generally able to require COVID-19 testing. According to guidelines from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equal-employment-opportunity-commission-eeoc.asp">Equal Employment Opportunity Commission (EEOC)</a>, “An employer may choose to administer COVID-19 testing to employees before initially permitting them to enter the workplace and/or periodically to determine if their presence in the workplace poses a direct threat to others.” Employers should ensure that the tests are considered accurate and reliable. Also, antibody tests—which determine if you’ve ever had the virus—should not be used to make decisions about returning employees to the workplace.<span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> In late April 2021 the CDC said that fully vaccinated people could resume activities without wearing a mask or practicing social distancing, except when required by federal, state, or local regulations, including local business and workplace guidance.<span class="ql-inline-citation" data-cite="19"></span> It rescinded that advice in late July 2021, due to the sudden surge of the Delta variant of the virus. As of Aug. 22, 2021, even fully vaccinated people are advised to wear a mask in indoor settings, as well as crowded outdoor ones, in areas of the country that have “substantial or high transmission.”<span class="ql-inline-citation" data-cite="12"></span> As of Aug. 21, 2021, that was all of the United States.<span class="ql-inline-citation" data-cite="18"></span> For small businesses, it specifically maintains that everyone in the workplace should still wear masks, social distance, and wash hands frequently, as well as continue to follow all guidelines to open and operate safely.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The following are guidelines from the CDC and the Occupational Safety and Health Administration (OSHA) that small businesses owners and managers should carefully review and follow. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_27-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_28-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>According to the CDC, employers should continue to encourage employees to stay home if sick, even if they are vaccinated. Businesses should also keep workplace health and safety measures, such as barrier protections, in place after employees are vaccinated.<span class="ql-inline-citation" data-cite="13"></span></p></div></div></div> <span class="heading-toc" id="toc-follow-social-distancing-guidelines"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Follow Social Distancing Guidelines </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Though social distancing is a proven and effective way to slow the spread of COVID-19, it can be difficult to maintain in the workplace. Still, social distancing is the new norm—and it will be for the foreseeable future. Depending on your workspace, here are some ways the CDC recommends to help employees and customers keep a safe distance:<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li>Rethink desks, displays, and workspaces to create more distance</li><li>Move some staff to different workstations or stagger work hours to limit the number of workers in one area at any given time</li><li>Limit the number of seats in common areas</li><li>Use tape to mark six-foot intervals in places where workers or customers wait in lines</li><li>Manage break rooms to limit the number of people who gather at one time</li><li>Post signs outside the office or shop that advise people not to enter if they have had COVID-19 symptoms or have been in contact with someone who has been infected</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Set a good example for your workers and customers. If you’re asking them to wear a mask, you should, too. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-wash-your-hands"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Wash Your Hands </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> It’s also essential to bump up your efforts to maintain a clean and sanitary workplace. Start by installing signs to encourage workers to wash their hands with soap and water for at least 20 seconds (about as long as it takes to sing “Happy Birthday to You” twice):<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>After they’ve been in a public place</li><li>When they get to work</li><li>After they sneeze, cough, or blow their nose</li><li>Before and after eating</li><li>Before and after touching their eyes, nose, and mouth</li><li>After they interact with coworkers and customers</li><li>After they touch displays and other equipment</li><li>After they visit the restroom or take breaks</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> When handwashing isn’t practical, encourage workers to use hand sanitizer. It’s a good idea to make hand sanitizer available to workers, customers, and visitors. If you don’t have them already, install hand sanitizer dispensers in common areas, at workstations, and anywhere people are likely to interact or touch surfaces. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-clean-and-disinfect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Clean and Disinfect </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> It’s always smart to maintain a clean workspace, but it’s especially important now. Clean and disinfect frequently touched surfaces at least once a day—and much more frequently in high-traffic areas, such as checkout counters or office kitchen counters and break areas.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Be sure to clean doorknobs, light switches, countertops, handles, tables, desks, keyboards, remote controls, elevator buttons, toilets (including handles), faucets, sinks, cash registers/point of sale (POS) displays, business equipment, and phones. Encourage workers to clean their personal phones, too, as well as any other equipment they bring from home into the workplace.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Of course, all of these cleaning and disinfecting supplies can be dangerous if not used properly. Be sure to provide guidelines for using them safely and provide the proper equipment—such as gloves and masks—and adequate ventilation to limit chemical exposure. Better yet, hire professional cleaners who already have safety systems in place.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <span class="heading-toc" id="toc-guidance-for-at-risk-employees"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> Guidance for At-Risk Employees </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> OSHA offers guidance in terms of keeping at-risk and unvaccinated employees safe. It defines at-risk employees as those who are vaccinated but, due to a medical condition, may not have a full immune response to the vaccine. OSHA recommends the following:<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> <li>Providing time off for employees to be vaccinated</li><li>Telling all employees (vaccinated and unvaccinated) who have COVID-19 or its symptoms to stay home</li><li>Implementing social distancing for unvaccinated and at-risk employees in communal work areas</li><li>Limiting the number of these employees in the same place, at the same time</li><li>Providing unvaccinated and at-risk employees with face coverings or surgical masks at no cost</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Like the CDC, OSHA recommends that all businesses comply with state and local rules. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <span class="heading-toc" id="toc-telework"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-heading__text"> Telework </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> If it’s feasible for the type of business you run, it’s likely that some (or all) of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/work-from-home-guide/">your workers have worked from home</a> during the pandemic—and that some would like to continue to do so. Now is the time to develop a policy for how you’ll handle operations if people want to keep working from home, full or part time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> You may already have set up systems for conducting business online (think Zoom, Slack, Skype, and the like). Think about what you need going forward if you plan to allow employees to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-great-work-from-home-migration-5184172">work from home</a> indefinitely. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_62-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_63-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>To avoid trouble, create a work-from-home policy that is fair to all employees.</p></div></div></div> <span class="heading-toc" id="toc-health-screenings"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> Health Screenings </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> It may seem like a smart safety measure to take your workers’ temperatures before they enter the workplace. However, managing the practice is easier said than done, because it introduces potential problems such as:<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> <li>How do you keep the biometric data private after you gather it?</li><li>How do you maintain social distancing while workers wait in line?</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> Some states have guidelines in place that can help you navigate health screenings. Still, you may have to find creative ways to mitigate any potential problems. For example, you could use instant-read thermometers, not record any data, and stagger work hours so that employees don’t have to wait in line to be tested. If possible, contract with healthcare professionals to perform the testing instead of relying on untrained staffers to do so. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Also keep in mind that some people with COVID-19 do not have a fever, so employers should be aware that temperature checks don’t guarantee safety. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Being an entrepreneur is never easy, but the COVID-19 pandemic has introduced a whole new level of problem-solving for small businesses. Taking these steps can help to ensure that you’re doing everything possible to protect yourself, your workers, and your customers.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-can-employees-be-required-to-get-vaccinated-for-covid-19"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Employees Be Required to Get Vaccinated for COVID-19?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, the federal government has said that an employer can require an employee to be vaccinated for COVID-19, and it can bar them from the workplace if they don’t acquiesce.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-can-fully-vaccinated-people-stop-wearing-masks"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Fully Vaccinated People Stop Wearing Masks?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Only in some instances. The CDC did rescind its mask mandate in April 2021 for fully vaccinated people, but it reintroduced it in late July 27 due to the rise of the Delta variant. As of August 2021, fully vaccinated people should wear a mask in all indoor settings and crowded outdoor settings if the area of the country they are in has a high or substantial level of transmission.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_80-0"><span class="heading-toc" id="toc-should-a-small-business-keep-using-covid-19-mitigation-measures-if-every-employee-is-vaccinated"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should a Small Business Keep Using COVID-19 Mitigation Measures if Every Employee is Vaccinated?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. The CDC recommends keeping social distancing, mask wearing, barrier protections, and other means of reducing the spread of COVID-19 in place even if all employees are vaccinated.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0">   </p></div>

As entrepreneurs, [small business owners are used to setting goals and solving problems](https://www.investopedia.com/small-business-4427743). However, the COVID-19 pandemic has forced many small businesses into the unenviable position of deciding how to reopen safely. Regulations vary by state and the details are complex and not always clear. Small business owners have to problem-solve and make their own plans to keep employees and customers safe. Here are some things to keep in mind to help you reopen your small business safely, including workplace safety advice from the U.S. Centers for Disease Control and Prevention (CDC). ### Key Takeaways * Regulations and guidelines vary by state and local municipalities, so make sure to check and monitor them. * As you reopen your small business, keep social distancing guidelines in place. * Encourage workers to wash their hands and use hand sanitizer frequently. * Clean and disinfect frequently touched surfaces at least once a day and more often in high-traffic areas. * Develop a policy for working from home that treats all workers fairly. * Federal law says employees can be barred from the workplace if they refuse to get a COVID-19 vaccine. * If you don’t require employees to be vaccinated or have workers who are high risk, consider guidelines on how to keep your workplace safe for all. ## Monitor State and Local Requirements How you safely reopen your small business will in part be determined by state and local requirements and the type of business you run. Requirements can vary by state and your local municipality. A restaurant or retail business will have different needs than a small office, where there is little or no interaction with customers. The CDC recommends that all businesses should: * Create a plan specific to their workplace * Identify all areas and job tasks with potential exposure to COVID-19 * Implement measures to eliminate or reduce that exposure The CDC also advises employers to “monitor federal, state, and local public health communications about COVID-19 regulations, guidance, and recommendations and ensure that workers have access to the information.” ### You can find guidelines for specific industries on the CDC’s website.   ## Vaccines and Testing As a small business owner, you’ll have to decide whether or not to require that employees be vaccinated before returning to the workplace. In guidelines issued in December, the federal government said that employers can require workers to get a COVID-19 vaccine—and bar them from the workplace if they refuse to do so. Employers are also generally able to require COVID-19 testing. According to guidelines from the [Equal Employment Opportunity Commission (EEOC)](https://www.investopedia.com/terms/e/equal-employment-opportunity-commission-eeoc.asp), “An employer may choose to administer COVID-19 testing to employees before initially permitting them to enter the workplace and/or periodically to determine if their presence in the workplace poses a direct threat to others.” Employers should ensure that the tests are considered accurate and reliable. Also, antibody tests—which determine if you’ve ever had the virus—should not be used to make decisions about returning employees to the workplace. In late April 2021 the CDC said that fully vaccinated people could resume activities without wearing a mask or practicing social distancing, except when required by federal, state, or local regulations, including local business and workplace guidance. It rescinded that advice in late July 2021, due to the sudden surge of the Delta variant of the virus. As of Aug. 22, 2021, even fully vaccinated people are advised to wear a mask in indoor settings, as well as crowded outdoor ones, in areas of the country that have “substantial or high transmission.” As of Aug. 21, 2021, that was all of the United States. For small businesses, it specifically maintains that everyone in the workplace should still wear masks, social distance, and wash hands frequently, as well as continue to follow all guidelines to open and operate safely. The following are guidelines from the CDC and the Occupational Safety and Health Administration (OSHA) that small businesses owners and managers should carefully review and follow. ### According to the CDC, employers should continue to encourage employees to stay home if sick, even if they are vaccinated. Businesses should also keep workplace health and safety measures, such as barrier protections, in place after employees are vaccinated. ## Follow Social Distancing Guidelines Though social distancing is a proven and effective way to slow the spread of COVID-19, it can be difficult to maintain in the workplace. Still, social distancing is the new norm—and it will be for the foreseeable future. Depending on your workspace, here are some ways the CDC recommends to help employees and customers keep a safe distance: * Rethink desks, displays, and workspaces to create more distance * Move some staff to different workstations or stagger work hours to limit the number of workers in one area at any given time * Limit the number of seats in common areas * Use tape to mark six-foot intervals in places where workers or customers wait in lines * Manage break rooms to limit the number of people who gather at one time * Post signs outside the office or shop that advise people not to enter if they have had COVID-19 symptoms or have been in contact with someone who has been infected Set a good example for your workers and customers. If you’re asking them to wear a mask, you should, too. ## Wash Your Hands It’s also essential to bump up your efforts to maintain a clean and sanitary workplace. Start by installing signs to encourage workers to wash their hands with soap and water for at least 20 seconds (about as long as it takes to sing “Happy Birthday to You” twice): * After they’ve been in a public place * When they get to work * After they sneeze, cough, or blow their nose * Before and after eating * Before and after touching their eyes, nose, and mouth * After they interact with coworkers and customers * After they touch displays and other equipment * After they visit the restroom or take breaks When handwashing isn’t practical, encourage workers to use hand sanitizer. It’s a good idea to make hand sanitizer available to workers, customers, and visitors. If you don’t have them already, install hand sanitizer dispensers in common areas, at workstations, and anywhere people are likely to interact or touch surfaces. ## Clean and Disinfect It’s always smart to maintain a clean workspace, but it’s especially important now. Clean and disinfect frequently touched surfaces at least once a day—and much more frequently in high-traffic areas, such as checkout counters or office kitchen counters and break areas. Be sure to clean doorknobs, light switches, countertops, handles, tables, desks, keyboards, remote controls, elevator buttons, toilets (including handles), faucets, sinks, cash registers/point of sale (POS) displays, business equipment, and phones. Encourage workers to clean their personal phones, too, as well as any other equipment they bring from home into the workplace. Of course, all of these cleaning and disinfecting supplies can be dangerous if not used properly. Be sure to provide guidelines for using them safely and provide the proper equipment—such as gloves and masks—and adequate ventilation to limit chemical exposure. Better yet, hire professional cleaners who already have safety systems in place.  ## Guidance for At-Risk Employees OSHA offers guidance in terms of keeping at-risk and unvaccinated employees safe. It defines at-risk employees as those who are vaccinated but, due to a medical condition, may not have a full immune response to the vaccine. OSHA recommends the following: * Providing time off for employees to be vaccinated * Telling all employees (vaccinated and unvaccinated) who have COVID-19 or its symptoms to stay home * Implementing social distancing for unvaccinated and at-risk employees in communal work areas * Limiting the number of these employees in the same place, at the same time * Providing unvaccinated and at-risk employees with face coverings or surgical masks at no cost Like the CDC, OSHA recommends that all businesses comply with state and local rules. ## Telework If it’s feasible for the type of business you run, it’s likely that some (or all) of [your workers have worked from home](https://www.investopedia.com/personal-finance/work-from-home-guide/) during the pandemic—and that some would like to continue to do so. Now is the time to develop a policy for how you’ll handle operations if people want to keep working from home, full or part time. You may already have set up systems for conducting business online (think Zoom, Slack, Skype, and the like). Think about what you need going forward if you plan to allow employees to [work from home](https://www.investopedia.com/the-great-work-from-home-migration-5184172) indefinitely. ### To avoid trouble, create a work-from-home policy that is fair to all employees. ## Health Screenings It may seem like a smart safety measure to take your workers’ temperatures before they enter the workplace. However, managing the practice is easier said than done, because it introduces potential problems such as: * How do you keep the biometric data private after you gather it? * How do you maintain social distancing while workers wait in line? Some states have guidelines in place that can help you navigate health screenings. Still, you may have to find creative ways to mitigate any potential problems. For example, you could use instant-read thermometers, not record any data, and stagger work hours so that employees don’t have to wait in line to be tested. If possible, contract with healthcare professionals to perform the testing instead of relying on untrained staffers to do so. Also keep in mind that some people with COVID-19 do not have a fever, so employers should be aware that temperature checks don’t guarantee safety. ## The Bottom Line Being an entrepreneur is never easy, but the COVID-19 pandemic has introduced a whole new level of problem-solving for small businesses. Taking these steps can help to ensure that you’re doing everything possible to protect yourself, your workers, and your customers.  ## Can Employees Be Required to Get Vaccinated for COVID-19? Yes, the federal government has said that an employer can require an employee to be vaccinated for COVID-19, and it can bar them from the workplace if they don’t acquiesce. ## Can Fully Vaccinated People Stop Wearing Masks? Only in some instances. The CDC did rescind its mask mandate in April 2021 for fully vaccinated people, but it reintroduced it in late July 27 due to the rise of the Delta variant. As of August 2021, fully vaccinated people should wear a mask in all indoor settings and crowded outdoor settings if the area of the country they are in has a high or substantial level of transmission. ## Should a Small Business Keep Using COVID-19 Mitigation Measures if Every Employee is Vaccinated? Yes. The CDC recommends keeping social distancing, mask wearing, barrier protections, and other means of reducing the spread of COVID-19 in place even if all employees are vaccinated.  

As entrepreneurs, small business owners are used to setting goals and solving problems. However, the COVID-19 pandemic has forced many small businesses into the unenviable position of deciding how to reopen safely. Regulations vary by state and the details are complex and not always clear. Small business owners have to problem-solve and make their own plans to keep employees and customers safe. Here are some things to keep in mind to help you reopen your small business safely, including workplace safety advice from the U.S. Centers for Disease Control and Prevention (CDC). Key Takeaways Regulations and guidelines vary by state and local municipalities, so make sure to check and monitor them.As you reopen your small business, keep social distancing guidelines in place.Encourage workers to wash their hands and use hand sanitizer frequently.Clean and disinfect frequently touched surfaces at least once a day and more often in high-traffic areas.Develop a policy for working from home that treats all workers fairly.Federal law says employees can be barred from the workplace if they refuse to get a COVID-19 vaccine.If you don’t require employees to be vaccinated or have workers who are high risk, consider guidelines on how to keep your workplace safe for all. Monitor State and Local Requirements How you safely reopen your small business will in part be determined by state and local requirements and the type of business you run. Requirements can vary by state and your local municipality. A restaurant or retail business will have different needs than a small office, where there is little or no interaction with customers. The CDC recommends that all businesses should: Create a plan specific to their workplaceIdentify all areas and job tasks with potential exposure to COVID-19Implement measures to eliminate or reduce that exposure The CDC also advises employers to “monitor federal, state, and local public health communications about COVID-19 regulations, guidance, and recommendations and ensure that workers have access to the information.” You can find guidelines for specific industries on the CDC’s website.  Vaccines and Testing As a small business owner, you’ll have to decide whether or not to require that employees be vaccinated before returning to the workplace. In guidelines issued in December, the federal government said that employers can require workers to get a COVID-19 vaccine—and bar them from the workplace if they refuse to do so. Employers are also generally able to require COVID-19 testing. According to guidelines from the Equal Employment Opportunity Commission (EEOC), “An employer may choose to administer COVID-19 testing to employees before initially permitting them to enter the workplace and/or periodically to determine if their presence in the workplace poses a direct threat to others.” Employers should ensure that the tests are considered accurate and reliable. Also, antibody tests—which determine if you’ve ever had the virus—should not be used to make decisions about returning employees to the workplace. In late April 2021 the CDC said that fully vaccinated people could resume activities without wearing a mask or practicing social distancing, except when required by federal, state, or local regulations, including local business and workplace guidance. It rescinded that advice in late July 2021, due to the sudden surge of the Delta variant of the virus. As of Aug. 22, 2021, even fully vaccinated people are advised to wear a mask in indoor settings, as well as crowded outdoor ones, in areas of the country that have “substantial or high transmission.” As of Aug. 21, 2021, that was all of the United States. For small businesses, it specifically maintains that everyone in the workplace should still wear masks, social distance, and wash hands frequently, as well as continue to follow all guidelines to open and operate safely. The following are guidelines from the CDC and the Occupational Safety and Health Administration (OSHA) that small businesses owners and managers should carefully review and follow. According to the CDC, employers should continue to encourage employees to stay home if sick, even if they are vaccinated. Businesses should also keep workplace health and safety measures, such as barrier protections, in place after employees are vaccinated. Follow Social Distancing Guidelines Though social distancing is a proven and effective way to slow the spread of COVID-19, it can be difficult to maintain in the workplace. Still, social distancing is the new norm—and it will be for the foreseeable future. Depending on your workspace, here are some ways the CDC recommends to help employees and customers keep a safe distance: Rethink desks, displays, and workspaces to create more distanceMove some staff to different workstations or stagger work hours to limit the number of workers in one area at any given timeLimit the number of seats in common areasUse tape to mark six-foot intervals in places where workers or customers wait in linesManage break rooms to limit the number of people who gather at one timePost signs outside the office or shop that advise people not to enter if they have had COVID-19 symptoms or have been in contact with someone who has been infected Set a good example for your workers and customers. If you’re asking them to wear a mask, you should, too. Wash Your Hands It’s also essential to bump up your efforts to maintain a clean and sanitary workplace. Start by installing signs to encourage workers to wash their hands with soap and water for at least 20 seconds (about as long as it takes to sing “Happy Birthday to You” twice): After they’ve been in a public placeWhen they get to workAfter they sneeze, cough, or blow their noseBefore and after eatingBefore and after touching their eyes, nose, and mouthAfter they interact with coworkers and customersAfter they touch displays and other equipmentAfter they visit the restroom or take breaks When handwashing isn’t practical, encourage workers to use hand sanitizer. It’s a good idea to make hand sanitizer available to workers, customers, and visitors. If you don’t have them already, install hand sanitizer dispensers in common areas, at workstations, and anywhere people are likely to interact or touch surfaces. Clean and Disinfect It’s always smart to maintain a clean workspace, but it’s especially important now. Clean and disinfect frequently touched surfaces at least once a day—and much more frequently in high-traffic areas, such as checkout counters or office kitchen counters and break areas. Be sure to clean doorknobs, light switches, countertops, handles, tables, desks, keyboards, remote controls, elevator buttons, toilets (including handles), faucets, sinks, cash registers/point of sale (POS) displays, business equipment, and phones. Encourage workers to clean their personal phones, too, as well as any other equipment they bring from home into the workplace. Of course, all of these cleaning and disinfecting supplies can be dangerous if not used properly. Be sure to provide guidelines for using them safely and provide the proper equipment—such as gloves and masks—and adequate ventilation to limit chemical exposure. Better yet, hire professional cleaners who already have safety systems in place.  Guidance for At-Risk Employees OSHA offers guidance in terms of keeping at-risk and unvaccinated employees safe. It defines at-risk employees as those who are vaccinated but, due to a medical condition, may not have a full immune response to the vaccine. OSHA recommends the following: Providing time off for employees to be vaccinatedTelling all employees (vaccinated and unvaccinated) who have COVID-19 or its symptoms to stay homeImplementing social distancing for unvaccinated and at-risk employees in communal work areasLimiting the number of these employees in the same place, at the same timeProviding unvaccinated and at-risk employees with face coverings or surgical masks at no cost Like the CDC, OSHA recommends that all businesses comply with state and local rules. Telework If it’s feasible for the type of business you run, it’s likely that some (or all) of your workers have worked from home during the pandemic—and that some would like to continue to do so. Now is the time to develop a policy for how you’ll handle operations if people want to keep working from home, full or part time. You may already have set up systems for conducting business online (think Zoom, Slack, Skype, and the like). Think about what you need going forward if you plan to allow employees to work from home indefinitely. To avoid trouble, create a work-from-home policy that is fair to all employees. Health Screenings It may seem like a smart safety measure to take your workers’ temperatures before they enter the workplace. However, managing the practice is easier said than done, because it introduces potential problems such as: How do you keep the biometric data private after you gather it?How do you maintain social distancing while workers wait in line? Some states have guidelines in place that can help you navigate health screenings. Still, you may have to find creative ways to mitigate any potential problems. For example, you could use instant-read thermometers, not record any data, and stagger work hours so that employees don’t have to wait in line to be tested. If possible, contract with healthcare professionals to perform the testing instead of relying on untrained staffers to do so. Also keep in mind that some people with COVID-19 do not have a fever, so employers should be aware that temperature checks don’t guarantee safety. The Bottom Line Being an entrepreneur is never easy, but the COVID-19 pandemic has introduced a whole new level of problem-solving for small businesses. Taking these steps can help to ensure that you’re doing everything possible to protect yourself, your workers, and your customers.  Can Employees Be Required to Get Vaccinated for COVID-19? Yes, the federal government has said that an employer can require an employee to be vaccinated for COVID-19, and it can bar them from the workplace if they don’t acquiesce. Can Fully Vaccinated People Stop Wearing Masks? Only in some instances. The CDC did rescind its mask mandate in April 2021 for fully vaccinated people, but it reintroduced it in late July 27 due to the rise of the Delta variant. As of August 2021, fully vaccinated people should wear a mask in all indoor settings and crowded outdoor settings if the area of the country they are in has a high or substantial level of transmission. Should a Small Business Keep Using COVID-19 Mitigation Measures if Every Employee is Vaccinated? Yes. The CDC recommends keeping social distancing, mask wearing, barrier protections, and other means of reducing the spread of COVID-19 in place even if all employees are vaccinated.  

https://www.investopedia.com/terms/g/gig-economy.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-gig-economy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Gig Economy? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Many employers save money by avoiding paying benefits such as health coverage and paid vacation time. Others pay for some benefits to gig workers but outsource the benefits programs and other management tasks to external agencies.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform.</li><li>The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles.</li><li>At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-gig-economy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding a Gig Economy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Large numbers of people work in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/102115/6-benefits-working-part-time-instead-full-time.asp">part-time</a> or temporary positions or as independent contractors in a gig economy. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> People who don’t use technological services such as the internet may be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A wide variety of positions fall into the category of a gig. The work can range from driving for <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/013015/how-do-ridesharing-companies-uber-make-money.asp">Uber</a> or delivering food to writing code or freelance articles. Adjunct and part-time professors, for example, are contracted employees as opposed to tenure-track or tenured professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Gig workers make up a significant portion of the employment pool in the United States. As many as 64 million Americans are freelancers or gig workers, according to a 2023 Upwork report. This represents 38% of the U.S. workforce. These workers contributed as much as $1.27 trillion to the U.S. economy.<span class="ql-inline-citation" data-cite="5"></span> This figure could rise, as these positions facilitate independent contracting work, with many of them not requiring a freelancer to come into an office. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The term “gig economy” is borrowed from the music world, where performers book gigs that are single or short-term engagements at various venues.</p></div></div></div> <span class="heading-toc" id="toc-the-factors-behind-a-gig-economy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> The Factors Behind a Gig Economy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Employers have a wider range of applicants to choose from within the gig economy because they don’t have to hire someone based on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> On the employee’s side of the equation, people often find they need to move or take multiple positions to afford the lifestyle they want. It’s also common to change careers many times throughout a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> The gig economy experienced significant increases in 2020, as gig workers delivered necessities to homebound consumers. Those whose jobs were eliminated turned to part-time and contract work for income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>In the modern digital world, it’s becoming increasingly common for people to work remotely or from home. This trend accelerated during the 2020 COVID-19 pandemic.</p></div></div></div> <span class="heading-toc" id="toc-criticisms-of-gig-economies"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Criticisms of Gig Economies </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Despite its benefits, there are some downsides to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers, since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The flexibility of working gigs can disrupt the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/061113/maintaining-worklife-balance-financial-professionals.asp">work-life balance</a>, sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available anytime gigs come up, regardless of their other needs. As such, they must always be on the hunt for the next gig. And unemployment insurance usually doesn’t cover gig workers who can’t find employment, although 2020’s <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">Coronavirus Aid, Relief, and Economic Security (CARES) Act</a> made an exception. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits—including a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">retirement account</a>—and a daily routine are rapidly becoming a thing of the past. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Long-term relationships between workers, employers, clients, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/vendor.asp">vendors</a> can erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. The gig economy may also discourage investment in relationship-specific assets that would otherwise be profitable to pursue, since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-what-is-an-example-of-a-gig-economy"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is an Example of a Gig Economy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Examples of a gig economy are those jobs that individuals discover and access through online platforms that list such jobs. These jobs are often one-time or short-term contract jobs. These include driving for a ride-sharing service, painting someone’s house, freelance work, coaching, fitness training, and tutoring. The job is exchanged for cash and there are no other benefits, such as health insurance.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-what-are-the-benefits-of-the-gig-economy"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Benefits of the Gig Economy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The gig economy has many benefits for both the employee and employer. An employer has access to a wide range of talent that they can hire. If the talent proves to be less than acceptable, there is no contract to keep the employee on or issues of letting them go. In addition, in a time when it has become difficult to attract full-time workers, employers can hire from the gig economy.</p><p>In addition, hiring gig workers can be more affordable, as companies don’t have to pay for health insurance or other benefits. For employees, the gig economy’s benefits include having the option to do multiple jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-is-the-gig-economy-worth-it"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is the Gig Economy Worth It?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To the individuals working in the gig economy, it is worth it. Studies show that 79% of individuals who work in the gig economy are more satisfied than when they were working traditional jobs.<span class="ql-inline-citation" data-cite="3"></span><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> The employment and labor pool has shifted, especially since the onset of the COVID-19 pandemic. Temporary, freelance, and part-time work, collectively known informally as the gig economy, is now more common. This provides workers more flexibility while allowing companies to cut down on certain costs. </p></div>

## What Is a Gig Economy? A gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security. Many employers save money by avoiding paying benefits such as health coverage and paid vacation time. Others pay for some benefits to gig workers but outsource the benefits programs and other management tasks to external agencies. ### Key Takeaways * The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform. * The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles. * At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients. ## Understanding a Gig Economy Large numbers of people work in [part-time](https://www.investopedia.com/articles/professionals/102115/6-benefits-working-part-time-instead-full-time.asp) or temporary positions or as independent contractors in a gig economy. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them. People who don’t use technological services such as the internet may be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy. A wide variety of positions fall into the category of a gig. The work can range from driving for [Uber](https://www.investopedia.com/ask/answers/013015/how-do-ridesharing-companies-uber-make-money.asp) or delivering food to writing code or freelance articles. Adjunct and part-time professors, for example, are contracted employees as opposed to tenure-track or tenured professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors. Gig workers make up a significant portion of the employment pool in the United States. As many as 64 million Americans are freelancers or gig workers, according to a 2023 Upwork report. This represents 38% of the U.S. workforce. These workers contributed as much as $1.27 trillion to the U.S. economy. This figure could rise, as these positions facilitate independent contracting work, with many of them not requiring a freelancer to come into an office. ### The term “gig economy” is borrowed from the music world, where performers book gigs that are single or short-term engagements at various venues. ## The Factors Behind a Gig Economy Employers have a wider range of applicants to choose from within the gig economy because they don’t have to hire someone based on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person. Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects. On the employee’s side of the equation, people often find they need to move or take multiple positions to afford the lifestyle they want. It’s also common to change careers many times throughout a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale. The gig economy experienced significant increases in 2020, as gig workers delivered necessities to homebound consumers. Those whose jobs were eliminated turned to part-time and contract work for income. ### In the modern digital world, it’s becoming increasingly common for people to work remotely or from home. This trend accelerated during the 2020 COVID-19 pandemic. ## Criticisms of Gig Economies Despite its benefits, there are some downsides to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers, since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries. The flexibility of working gigs can disrupt the [work-life balance](https://www.investopedia.com/articles/professionals/061113/maintaining-worklife-balance-financial-professionals.asp), sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available anytime gigs come up, regardless of their other needs. As such, they must always be on the hunt for the next gig. And unemployment insurance usually doesn’t cover gig workers who can’t find employment, although 2020’s [Coronavirus Aid, Relief, and Economic Security (CARES) Act](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707) made an exception. Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits—including a [retirement account](https://www.investopedia.com/terms/r/retirement-planning.asp)—and a daily routine are rapidly becoming a thing of the past. Long-term relationships between workers, employers, clients, and [vendors](https://www.investopedia.com/terms/v/vendor.asp) can erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. The gig economy may also discourage investment in relationship-specific assets that would otherwise be profitable to pursue, since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along. ## What Is an Example of a Gig Economy? Examples of a gig economy are those jobs that individuals discover and access through online platforms that list such jobs. These jobs are often one-time or short-term contract jobs. These include driving for a ride-sharing service, painting someone’s house, freelance work, coaching, fitness training, and tutoring. The job is exchanged for cash and there are no other benefits, such as health insurance. ## What Are the Benefits of the Gig Economy? The gig economy has many benefits for both the employee and employer. An employer has access to a wide range of talent that they can hire. If the talent proves to be less than acceptable, there is no contract to keep the employee on or issues of letting them go. In addition, in a time when it has become difficult to attract full-time workers, employers can hire from the gig economy. In addition, hiring gig workers can be more affordable, as companies don’t have to pay for health insurance or other benefits. For employees, the gig economy’s benefits include having the option to do multiple jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine. ## Is the Gig Economy Worth It? To the individuals working in the gig economy, it is worth it. Studies show that 79% of individuals who work in the gig economy are more satisfied than when they were working traditional jobs. ## The Bottom Line The employment and labor pool has shifted, especially since the onset of the COVID-19 pandemic. Temporary, freelance, and part-time work, collectively known informally as the gig economy, is now more common. This provides workers more flexibility while allowing companies to cut down on certain costs.

What Is a Gig Economy? A gig economy is a labor market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security. Many employers save money by avoiding paying benefits such as health coverage and paid vacation time. Others pay for some benefits to gig workers but outsource the benefits programs and other management tasks to external agencies. Key Takeaways The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform.The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles.At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients. Understanding a Gig Economy Large numbers of people work in part-time or temporary positions or as independent contractors in a gig economy. The result of a gig economy is cheaper, more efficient services, such as Uber or Airbnb, for those willing to use them. People who don’t use technological services such as the internet may be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy. A wide variety of positions fall into the category of a gig. The work can range from driving for Uber or delivering food to writing code or freelance articles. Adjunct and part-time professors, for example, are contracted employees as opposed to tenure-track or tenured professors. Colleges and universities can cut costs and match professors to their academic needs by hiring more adjunct and part-time professors. Gig workers make up a significant portion of the employment pool in the United States. As many as 64 million Americans are freelancers or gig workers, according to a 2023 Upwork report. This represents 38% of the U.S. workforce. These workers contributed as much as $1.27 trillion to the U.S. economy. This figure could rise, as these positions facilitate independent contracting work, with many of them not requiring a freelancer to come into an office. The term “gig economy” is borrowed from the music world, where performers book gigs that are single or short-term engagements at various venues. The Factors Behind a Gig Economy Employers have a wider range of applicants to choose from within the gig economy because they don’t have to hire someone based on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person. Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects. On the employee’s side of the equation, people often find they need to move or take multiple positions to afford the lifestyle they want. It’s also common to change careers many times throughout a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale. The gig economy experienced significant increases in 2020, as gig workers delivered necessities to homebound consumers. Those whose jobs were eliminated turned to part-time and contract work for income. In the modern digital world, it’s becoming increasingly common for people to work remotely or from home. This trend accelerated during the 2020 COVID-19 pandemic. Criticisms of Gig Economies Despite its benefits, there are some downsides to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers, since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries. The flexibility of working gigs can disrupt the work-life balance, sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available anytime gigs come up, regardless of their other needs. As such, they must always be on the hunt for the next gig. And unemployment insurance usually doesn’t cover gig workers who can’t find employment, although 2020’s Coronavirus Aid, Relief, and Economic Security (CARES) Act made an exception. Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits—including a retirement account—and a daily routine are rapidly becoming a thing of the past. Long-term relationships between workers, employers, clients, and vendors can erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. The gig economy may also discourage investment in relationship-specific assets that would otherwise be profitable to pursue, since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along. What Is an Example of a Gig Economy? Examples of a gig economy are those jobs that individuals discover and access through online platforms that list such jobs. These jobs are often one-time or short-term contract jobs. These include driving for a ride-sharing service, painting someone’s house, freelance work, coaching, fitness training, and tutoring. The job is exchanged for cash and there are no other benefits, such as health insurance. What Are the Benefits of the Gig Economy? The gig economy has many benefits for both the employee and employer. An employer has access to a wide range of talent that they can hire. If the talent proves to be less than acceptable, there is no contract to keep the employee on or issues of letting them go. In addition, in a time when it has become difficult to attract full-time workers, employers can hire from the gig economy.In addition, hiring gig workers can be more affordable, as companies don’t have to pay for health insurance or other benefits. For employees, the gig economy’s benefits include having the option to do multiple jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine. Is the Gig Economy Worth It? To the individuals working in the gig economy, it is worth it. Studies show that 79% of individuals who work in the gig economy are more satisfied than when they were working traditional jobs. The Bottom Line The employment and labor pool has shifted, especially since the onset of the COVID-19 pandemic. Temporary, freelance, and part-time work, collectively known informally as the gig economy, is now more common. This provides workers more flexibility while allowing companies to cut down on certain costs.

https://www.investopedia.com/best-small-business-insurance-4844202

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="star-icon"><svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Small business insurance protects you from damages and lost income when the unexpected happens—whether it's a lawsuit, a natural disaster, or an accident. A good policy could save you thousands of dollars or more if you ever face such unhappy circumstances. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> After extensive research, our experts found that Next is the best business insurance company overall because it offers a wide range of policy types and an easy online application process that lets you sign up in about 10 minutes. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> To choose the best commercial insurance companies for small businesses, we evaluated 19 national and regional insurers on 53 criteria in the following categories: cost, quote and application experience, customer satisfaction, coverage, accessibility, and financial stability. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp top-pick-dynamic" id="top-pick-dynamic_1-0"> <div class="product_main"> <div class="product_main_title">Our Top Pick</div> <div class="product_main_wrapper"> <div class="product_left_wrapper"> <div class="product_logo_wrapper"> <img alt="" height="320" src="" width="1065"/> </div> <div class="product_title_wrapper"> <span class="key-spec__title has-tooltip"> <strong></strong> </span> <span class="tool_after"></span> </div> <div class="product_content_wrapper"> <b></b> <span></span> </div> </div> <div class="product_right_wrapper"> <div class="product_rating_main"> <div class="product_rating_title"></div> <div class="product_rating_divider"></div> <div class="product_rating_wrapper"> <span class="rating_image"> <img alt="Rating Icon" class="" height="320" src="//res.cloudinary.com/spiralyze/image/upload/f_auto/DotDash/1005/rating.png" width="1065"/> </span> <span class="rating_val"></span> </div> </div> <div class="product_cta_wrapper"> <a href="" rel="noopener nofollow sponsored nocaes" target="_blank"></a> </div> <div class="product_short_desc"> <a href="" rel="noopener nofollow sponsored nocaes" target="_blank"> <span class="short_cont"></span> <span> <img alt="Arrow" src="//res.cloudinary.com/spiralyze/image/upload/v1671543853/DotDash/1005/arrow_up.svg" title="Arrow"> </img></span> </a> </div> </div> </div> </div> </div><!-- end: comp top-pick-dynamic --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Small Business Insurance Companies for May 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://nextinsurance.sjv.io/c/2104074/1418806/14516" rel="nofollow noskim noopener nocaes" target="_blank"> Next</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Independent Contractors:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.kqzyfj.com/click-100173779-13205187" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Hiscox</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Restaurant Insurance:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://huckleberry.com/small-business-insurance/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Huckleberry</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Financial Stability:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.tkqlhce.com/click-100125493-15530179" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> biBERK</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Budget Coverage:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://thimble.sjv.io/c/2104074/953017/12231" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Thimble</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Workers' Compensation Insurance:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="kw1=${DOC_ID}&amp;kw2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://tivly.com/redirect/S6PAAWFL1W" rel="nofollow noskim noopener nocaes" target="_blank"> The Hartford</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Larger Small Businesses:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_content=${DOC_ID}&amp;utm_term=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://dotdash.insureon.com/chubb?utm_source=DDM&amp;utm_medium=Partner" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Chubb</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Highest Customer Satisfaction:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.statefarm.com/small-business-solutions/insurance" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> State Farm</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Use an insurance marketplace like <a data-affiliate-link-rewriter="utm_content=${DOC_ID}&amp;utm_term=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.insureon.com/?utm_source=Partnership&amp;utm_campaign=Dot_Dash_Article" rel="sponsored nofollow">Insureon</a> to get matched to the best provider for your business.<br/></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Small Business Insurance Companies for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Small Business Insurance Companies for May 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Small Business Insurance Companies for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Next" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Next" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-next" rel="nocaes"> <span class="link__wrapper">Next</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item 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nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Thimble" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Thimble" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-budget-coverage-thimble" rel="nocaes"> <span class="link__wrapper">Thimble</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-The Hartford" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Hartford" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-workers-compensation-insurance-the-hartford" rel="nocaes"> <span class="link__wrapper">The Hartford</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Chubb" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Chubb" data-tracking-container="true" 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</li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is Small Business Insurance?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-small-business-insurance" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">What Is Small Business Insurance?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" 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class="link__wrapper">How Much Is Small Business Insurance?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-a-small-business-insurance-company" id="mntl-toc__list-item-link_1-0-6" rel="nocaes"><span class="link__wrapper">How to Choose</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block 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end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Next" data-retailer-type="other" data-tracking-container="true" href="https://nextinsurance.sjv.io/c/2104074/1418806/14516" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> Next provides a way to get a wide range of affordable business insurance coverages entirely online in about 10 minutes. But you also have the option of speaking with a U.S.-based advisor in your area. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-5"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers a live certificate of insurance for easy sharing</p></li> <li><p>Allows you to customize your business insurance policy with a variety of coverages</p></li> <li><p>100% online quote and application with assistance available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fewer specialized coverages than some other companies</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Next offers a wide array of commercial insurance coverage types, which can be purchased online for same-day coverage. Next offers a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/business-owners-policy.asp">business owner’s policy</a> (general liability insurance and commercial property insurance), commercial auto insurance, workers' compensation coverage, professional liability insurance, tools &amp; equipment insurance, and more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> The company also offers a variety of digital policy management tools, including the ability to share a live <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificate_of_insurance.asp">certificate of insurance</a> and quickly add an additional insured, free of charge. Monthly payments are available, and eligible customers can save up to 25% with discounts.<span class="ql-inline-citation" data-cite="49"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Next Insurance has an A- (Excellent) financial strength rating with AM Best.<span class="ql-inline-citation" data-cite="48"></span> However, other companies offer more enhancements and specialized coverages. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Based in Palo Alto, California, Next was founded in 2016 and uses artificial intelligence and machine learning to streamline the insurance buying process. In November 2023, it raised $265 million in funding from Allstate and Allianz X—one of the largest rounds of funding raised in the insuretech industry that year, according to Crunchbase.<span class="ql-inline-citation" data-cite="67"></span> The deals include a strategic partnership with Allstate to develop new commercial auto insurance products. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-independent-contractors-hiscox"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Independent Contractors</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Hiscox</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-1"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4.7 out of 5 stars" class="comp star-rating" id="star-rating_5-0-1"> <span class="star-rating__label">4.7</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0-1" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="60%" stop-color="#333e8b"></stop> <stop offset="60%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-empty star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-1);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-11" style="--imgWidth: 839px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Hiscox" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/NJWJ3VjPIUWa62YkRKWdcEow-tw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/hiscox-cd5132a542e5459ca37b9d8baa589e61.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Hiscox" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/NJWJ3VjPIUWa62YkRKWdcEow-tw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/hiscox-cd5132a542e5459ca37b9d8baa589e61.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Hiscox</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-12"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Hiscox" data-retailer-type="other" data-tracking-container="true" href="https://www.kqzyfj.com/click-100173779-13205187" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Hiscox offers several solutions for freelancers that make the company our top pick for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-independent-contractor-insurance-4845558">best independent contractor insurance</a> among small commercial insurance providers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-16"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Customization options for independent contractors</p></li> <li><p>Monthly payments with no fees</p></li> <li><p>Offers short-term liability insurance for business</p></li> <li><p>100% online quote and application with assistance available<br/></p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Higher than expected number of complaints with the NAIC</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> Hiscox offers a straightforward business owner’s policy (BOP) that can be customized with business interruption insurance, electronic data loss insurance, professional liability insurance, and more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> You can also choose standalone policies for professional liability and general liability insurance, and you can get either coverage on demand for short-term projects. Plus, Hiscox allows you to pay for your business insurance policy in monthly payments, which can help freelancers better manage their cash flow.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> Hiscox has an A (Excellent) rating with AM Best, indicating excellent financial strength; however, the company received somewhat more complaints than expected over the last three years given its size.<span class="ql-inline-citation" data-cite="50"></span><span class="ql-inline-citation" data-cite="43"></span> This indicates that Hiscox may have issues with customer satisfaction, although the company did receive fewer complaints each year, indicating improvement. BOPs start at around $500 per year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> You can get a business insurance quote online or speak with an agent by phone. You can also file claims online or by phone. Claims services can be accessed online 24/7. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> With roots dating back to 1901, Hiscox USA is based in Atlanta. It is part of the Hiscox Group, an international company with more than 3.000 employees. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-restaurant-insurance-huckleberry"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Restaurant Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Huckleberry</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-2"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4.6 out of 5 stars" class="comp star-rating" id="star-rating_5-0-2"> <span class="star-rating__label">4.6</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0-2" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="50%" stop-color="#333e8b"></stop> <stop offset="50%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-empty star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-2);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-23" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Huckleberry Insurance logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/q8RwzvJ3NlEqO1s7CiSPtL1hVwo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Huckleberry-logo-a84d6f1ae1de4b33adaa43eaaad47c50.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Huckleberry Insurance logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/q8RwzvJ3NlEqO1s7CiSPtL1hVwo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Huckleberry-logo-a84d6f1ae1de4b33adaa43eaaad47c50.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>Huckleberry</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-24"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="from Huckleberry" data-retailer-type="other" data-tracking-container="true" href="https://huckleberry.com/small-business-insurance/" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Huckleberry offers a suite of essential restaurant insurance and food business insurance coverages that are suitable for brick-and-mortar restaurants, caterers, food trucks, and more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-28"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>BOP policies underwritten by Markel and Chubb</p></li> <li><p>100% online quote and application</p></li> <li><p>Wide range of customization options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Doesn’t offer employee benefits packages</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Huckleberry, which is a broker that works with Chubb and Markel for its BOP policies, offers a restaurant endorsement as an add-on to its business owner’s policy. It’s a bundle of food-specific coverages that includes spoilage coverage, food contamination insurance, and ordinance or law equipment coverage, among others. Plus, you can add workers' comp, commercial auto, and liquor liability coverage to customize your business insurance policy as needed. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> Most policies are underwritten by Markel or Chubb. Both companies have excellent financial strength ratings from AM Best.<span class="ql-inline-citation" data-cite="53"></span><span class="ql-inline-citation" data-cite="54"></span> Like Next Insurance, Huckleberry offers an entirely online quote and application process that allows you to get coverage for your small business quickly. And you can get a certificate of insurance online to share with clients in less than a minute. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> Huckleberry’s BOP includes general liability, commercial property, and business interruption insurance at a reasonable price. For example, a BOP for a food truck starts at $42 per month. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> Founded in 2017 in San Francisco, Huckleberry is now owned by payroll company Paychex, which operates the Paychex Insurance Agency. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-financial-stability-biberk"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Financial Stability</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> biBERK</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-3"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4.2 out of 5 stars" class="comp star-rating" id="star-rating_5-0-3"> <span class="star-rating__label">4.2</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0-3" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="30%" stop-color="#333e8b"></stop> <stop offset="30%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-full star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-3);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-34" style="--imgWidth: 377px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="biBERK" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/xdIJXUgqoSPI9qAvAGy4uJN2aUM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/biberk-f70909243540411181efe1bfd2c187e5.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="biBERK" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/xdIJXUgqoSPI9qAvAGy4uJN2aUM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/biberk-f70909243540411181efe1bfd2c187e5.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>biBERK</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-35"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from SimplyBusiness" data-retailer-type="none" data-tracking-container="true" href="https://www.tkqlhce.com/click-100125493-15530179" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> biBERK has an A++ (Superior) financial strength rating from AM Best, the highest rating available, offers a wide range of industry-specific coverages, and is backed by Berkshire Hathaway.<span class="ql-inline-citation" data-cite="55"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-39"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Backed by Berkshire Hathaway Group</p></li> <li><p>Online quote and application</p></li> <li><p>Excellent customer service reviews</p></li> <li><p>Dozens of endorsements to enhance a BOP</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Doesn’t offer group employee benefits</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> biBERK Business Insurance is part of Berkshire Hathaway Group, which has decades of experience in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-insurance.asp">commercial insurance</a> industry. BiBerk’s underwriters are all rated A++ (Superior) by AM Best, indicating a superior ability to meet financial obligations to policyholders.<span class="ql-inline-citation" data-cite="55"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> What’s more, you can get a quote and apply to receive coverage instantly, entirely online. Policyholders have great things to say about the service and coverage on third-party websites.<span class="ql-inline-citation" data-cite="56"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> biBERK can meet the needs of most small businesses, offering many commercial insurance options, such as business owner’s policies, commercial auto insurance, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-workers-compensation-insurance-5069463">workers' compensation insurance</a>, umbrella insurance, professional liability insurance, and general liability policies. You can add risk-specific endorsements and industry endorsements to your business owner’s policy, such as liquor liability and cyber liability coverage as well. BiBerk BOPs start at about $500 per year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> BiBerk was founded in 2015 and is based in Omaha, Nebraska. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-budget-coverage-thimble"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Budget Coverage</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Thimble</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-4"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4 out of 5 stars" class="comp star-rating" id="star-rating_5-0-4"> <span class="star-rating__label">4.0</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__empty-star star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: #d5d5d5;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-45" style="--imgWidth: 462px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Thimble Insurance" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/txuQWoaAAyo7YaLOff4svuNP9_4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Thimblecopy-55fd97eef23b418eac2b3a179e424268.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Thimble Insurance" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/txuQWoaAAyo7YaLOff4svuNP9_4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Thimblecopy-55fd97eef23b418eac2b3a179e424268.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p>Thimble Insurance</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-46"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Thimble" data-retailer-type="other" data-tracking-container="true" href="https://thimble.sjv.io/c/2104074/953017/12231" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> Thimble offers on-demand policies for general liability insurance starting at $17 per month. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-50"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers monthly and on-demand coverage options</p></li> <li><p>Liability policies start at $17 per month</p></li> <li><p>Offers event insurance</p></li> <li><p>Occurrence-based policies</p></li> <li><p>Excellent reviews on Trustpilot</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Doesn’t offer commercial auto insurance</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> Thimble is a great option for small businesses that need quick, temporary, affordable small business insurance, particularly those looking to purchase coverage for an event or on an on-demand basis. The company’s business owner’s policy includes general liability, commercial property insurance, and business interruption insurance, and you can also add professional liability, workers' compensation, and business equipment protection.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Customers on Trustpilot have great things to say about the ease of the application process. You can get a quote and purchase coverage online or in the app. Several reviews also pointed out that Thimble’s customer service team was communicative and responded quickly.<span class="ql-inline-citation" data-cite="58"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> Thimble works with several different insurance companies, each of which has an AM Best rating of at least A- (Excellent).<span class="ql-inline-citation" data-cite="57"></span> Thimble policies are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/occurrence-policy.asp">occurrence-based</a>, which provides more robust coverage than claims-made policies. You’re covered for incidents that occurred while your business insurance policy was in force, even if you’ve since canceled it. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> Thimble, which has been selling small business insurance coverage since 2018, was bought by Arch Insurance in April 2023.<span class="ql-inline-citation" data-cite="65"></span> Thimble is based in New York City. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-workers-compensation-insurance-the-hartford"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Workers' Compensation Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> The Hartford</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-5"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="3.8 out of 5 stars" class="comp star-rating" id="star-rating_5-0-5"> <span class="star-rating__label">3.8</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0-5" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="70%" stop-color="#333e8b"></stop> <stop offset="70%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-empty star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-5);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__empty-star star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: #d5d5d5;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-56" style="--imgWidth: 657px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="The Hartford" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/VJd0Ysq2JtO67uZpIioR1SdtZBo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/the-hartford-c204b20af29d4340b94ad4449d34d3b0.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="The Hartford" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/VJd0Ysq2JtO67uZpIioR1SdtZBo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/the-hartford-c204b20af29d4340b94ad4449d34d3b0.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p>The Hartford</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-57"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="kw1=${DOC_ID}&amp;kw2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Tivly" data-retailer-type="other" data-tracking-container="true" href="https://tivly.com/redirect/S6PAAWFL1W" id="button_1-0-5" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> The Hartford has been around since 1810 and is one of the largest providers of workers' compensation insurance in the country.<span class="ql-inline-citation" data-cite="60"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-61"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Pay-as-you-go billing options</p></li> <li><p>Access to a network of over 1 million providers</p></li> <li><p>2nd-highest financial strength rating</p></li> <li><p>Start claims online</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Poor J.D. Power ranking</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-63"> The Hartford is a top pick among small business insurance providers for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-workers-compensation-insurance-5069463">best workers' compensation insurance</a>. The company provides a large network of doctors and nurse case managers to help your employees get healthy, and pay-as-you-go billing options. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64"> When you choose to pay as you go, your premiums are based on actual payroll rather than estimates, which prevents overpayment. The Hartford also allows you to easily start a claim online. What's more, the company uses data analytics to provide injured workers with a toolkit to aid in faster recovery.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65"> The insurer has an A+ (Superior) financial strength rating from AM Best; however, the company was ranked below average in the J.D. Power 2023 U.S. Small Commercial Insurance Study.<span class="ql-inline-citation" data-cite="44"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> The Harford is based in Hartford, Connecticut, and was founded in 1810. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-for-larger-small-businesses-chubb"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Larger Small Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Chubb</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0-6"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="3.5 out of 5 stars" class="comp star-rating" id="star-rating_5-0-6"> <span class="star-rating__label">3.5</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0-6" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="50%" stop-color="#333e8b"></stop> <stop offset="50%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__half-full star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-6);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__empty-star star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: #d5d5d5;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-67" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Chubb logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/b99jRkq77H3WBGjev1t-vYwKXmo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chubb-logo-e895144210f941cba476579d39ad0799.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Chubb logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/b99jRkq77H3WBGjev1t-vYwKXmo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chubb-logo-e895144210f941cba476579d39ad0799.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p>Chubb</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-68"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_content=${DOC_ID}&amp;utm_term=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Insureon" data-retailer-type="other" data-tracking-container="true" href="https://dotdash.insureon.com/chubb?utm_source=DDM&amp;utm_medium=Partner" id="button_1-0-6" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> Chubb is ideal for larger small businesses because it supports businesses with revenue up to $30 million and offers a very wide range of coverage options.<span class="ql-inline-citation" data-cite="61"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-72"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Supports businesses with up to $30 million in revenue</p></li> <li><p>Few complaints relative to Chubb’s market share</p></li> <li><p>Highest financial strength rating</p></li> <li><p>Many enhancements to customize a BOP </p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must speak with an insurance agent to start your business insurance policy</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74"> Chubb is one of the largest carriers (by annual premiums) of commercial insurance and has a well-regarded small business owner's policy. The company has relatively high revenue limits for its small commercial business owner's policies and offers a wide array of customized endorsements for a broad range of industries.<span class="ql-inline-citation" data-cite="47"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> You can enhance your business owner’s policy with electronic data liability coverage, professional liability insurance, a variety of property add-ons, crime coverage, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-equipment-breakdown-insurance-5075448">equipment breakdown coverage</a>, earthquake coverage (in certain states), and more. Workers' compensation, umbrella, commercial auto, and cyber risk coverages are also available. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> Chubb can offer an instant quote, and policies are generated instantly, but you will need to speak with an insurance agent to start your coverage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-77"> Chubb has an A++ (Superior) financial strength rating from AM Best and is ranked second for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study.<span class="ql-inline-citation" data-cite="64"></span><span class="ql-inline-citation" data-cite="44"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78"> Chubb Corporation dates its origins back to 1882. Chubb Insurance Group today is based in Warren, New Jersey. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-highest-customer-satisfaction-state-farm"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Highest Customer Satisfaction</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> State Farm</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-79" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="State Farm" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/xyPqNMVw3mDOm9dDAYSBQ9nb5Zo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/State-Farm-f25a84971a3b46a59c45962e3d5e732a.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-7" width="1500"/> <noscript> <img alt="State Farm" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/xyPqNMVw3mDOm9dDAYSBQ9nb5Zo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/State-Farm-f25a84971a3b46a59c45962e3d5e732a.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-7"> <span class="figure-article-caption-owner"><p>State Farm</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-80"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-7"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="from State Farm" data-retailer-type="other" data-tracking-container="true" href="https://www.statefarm.com/small-business-solutions/insurance" id="button_1-0-7" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> State Farm is one of the top-ranked companies for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study and offers coverage for virtually any industry.<span class="ql-inline-citation" data-cite="44"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-84"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Highest financial strength rating</p></li> <li><p>Customizable business owner’s policies with many coverage options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must speak with an insurance agent to start your business insurance policy</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-86"> State Farm has been meeting the needs of small businesses since 1935 and has superior ratings. The company has an B financial strength rating with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/a-m-best.asp">AM Best</a>.<span class="ql-inline-citation" data-cite="62"></span><span class="ql-inline-citation" data-cite="63"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-87"> It's also ranked second in the J.D. Power 2023 U.S. Small Commercial Insurance Study. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nainsurancec.asp">NAIC</a> data reveals that State Farm has had just slightly fewer complaints than expected for its commercial liability policies.<span class="ql-inline-citation" data-cite="45"></span> But, you’ll need to talk to an insurance agent to get coverage. Some business owners may prefer handling the entire transaction online. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-88"> The company’s BOP covers commercial property insurance and general liability insurance, plus loss of income, equipment breakdown, and money and securities protection at no extra charge. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-89"> You can add professional liability to the package as well. In addition, you can get commercial auto coverage, workers' compensation insurance, and many more coverages. You can also work with State Farm to provide benefits for your employees, such as group life, disability, and health insurance. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-90"> State Farm was founded in 1922 in Bloomington, Illinois. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-compare-the-best-small-business-insurance-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Compare the Best Small Business Insurance Providers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-1"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>Company</b> </td> <td><b>Best for</b> </td> <td><b>AM Best Rating</b> </td> <td><b>BOP Revenue Limit</b> </td> <td><b>Buy &amp; Receive Policy Online?</b> </td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://nextinsurance.sjv.io/c/2104074" rel="nofollow">Next</a></td> <td>Business Insurance Overall </td> <td>A-</td> <td>$8 million</td> <td>Yes </td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.kqzyfj.com/click-100173779-13205187" rel="sponsored nofollow">Hiscox</a> </td> <td>Independent Contractors </td> <td>A </td> <td>$5 million</td> <td>Yes</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://huckleberry.com/small-business-insurance/" rel="sponsored nofollow">Huckleberry</a> </td> <td>Restaurants </td> <td>A++, A* </td> <td>None</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.tkqlhce.com/click-100125493-15530179" rel="sponsored nofollow">BiBerk</a> </td> <td>Financial Stability </td> <td>A++ </td> <td>None</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://thimble.sjv.io/c/2104074/953017/12231" rel="sponsored nofollow">Thimble</a> </td> <td>Budget Coverage </td> <td>A- through A+** </td> <td>Not disclosed</td> <td>Yes</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://smallbizquote.thehartford.com/app/index.html#?prcd=76210775&amp;Tcode=AF330002" rel="sponsored nofollow">The Hartford</a> </td> <td>Workers' Comp </td> <td>A+ </td> <td>$50 million</td> <td>No</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_content=${DOC_ID}&amp;utm_term=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.insureon.com/chubb?utm_source=DDM&amp;utm_medium=Partner" rel="sponsored nofollow">Chubb</a> </td> <td>Larger Small Businesses </td> <td>A++ </td> <td>$30 million </td> <td>No </td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.statefarm.com/small-business-solutions/insurance" rel="sponsored nofollow">State Farm</a> </td> <td>Customer Satisfaction</td> <td>B</td> <td>Not disclosed </td> <td>No </td> </tr> </tbody> </table> <figcaption>*Huckleberry's BOP policies are underwritten by Chubb, which has an AM Best financial stability rating of A++, and Markel, whose rating is A. **Thimble policies are underwritten by Benchmark Insurance Company (AM Best rating: A), Employers Insurance Group (A-), Markel Insurance Company (A), National Specialty Insurance Company (A), and Spinnaker Insurance Company (A-). </figcaption> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-our-expert-picks-for-small-business-insurance-in-any-state"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Our Expert Picks for Small Business Insurance in Any State </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wholesale-insurance.asp">size of your small business</a> may dictate the type of business insurance you need and which insurance company is best for you. For a low-cost BOP and quick online coverage, compare quotes from Next, Huckleberry, and BiBerk. Independent contractors and event workers will be best served by Hiscox or Thimble. Consider The Hartford and BiBerk if you’re most concerned with workers' compensation. If you need extensive coverage, including an employee benefits package, you’ll be best served by companies like State Farm and Chubb.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> Keep in mind that you may have specialized coverage needs for your industry that a standard business owner’s policy doesn’t include. Some companies offer more enhancements than others. When narrowing down your options, ensure you choose a provider that protects your business from common risks in your industry.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-what-is-small-business-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> What Is Small Business Insurance? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> Business insurance, sometimes called commercial insurance, covers your business's assets and income in case of unexpected events during normal business operations, such as lawsuits, natural disasters, or accidents. There are many types of business insurance products, including coverage for property damage, legal liability, and employee-related risks, among others. A business owner's policy (BOP) includes general liability coverage, business property coverage, and business interruption coverage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> You may also want to add other kinds of coverage such as for commercial cars, errors and omissions, and key employees.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-what-types-of-small-business-insurance-are-there"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-8"> <span class="mntl-sc-block-heading__text"> What Types of Small Business Insurance Are There? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-9"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>Type</b></td> <td><b>Who Needs It </b></td> <td><b>When It Protects You</b></td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp" rel="noopener noreferrer">General liability</a></b></td> <td>Any business</td> <td>If consumers, vendors, or other people outside your company claim your business harmed them or their property</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercial-property-insurance.asp" rel="noopener noreferrer">Commercial property</a></b></td> <td>Businesses that own or rent a property, or have equipment or records to protect  </td> <td>If a natural disaster harms your property or a thief steals your property </td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-income-coverage-form.asp" rel="noopener noreferrer">Business income</a></b></td> <td>Any business that depends on its property to generate income </td> <td>If your business loses revenue because your property is damaged  </td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/professional-liability-insurance.asp" rel="noopener noreferrer">Professional liability</a></b></td> <td>Lawyers, doctors, accounts, and others who provide services based on specialized expertise</td> <td>If a customer accuses you of negligence, malpractice, mistakes, or misrepresentation</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workers-compensation-coverage-a.asp" rel="noopener noreferrer">Workers' Compensation</a></b></td> <td>Businesses with employees. Most states require it </td> <td>If a worker is injured on the job </td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-employment-practices-liability-coverage-8348723" rel="noopener noreferrer">Employment practices liability</a></b> </td> <td>Businesses with employees  </td> <td>If a worker alleges discrimination, harassment, wrongful termination, or other unfair employment practices </td> </tr> <tr> <td><b>Product liability</b></td> <td>Businesses that sell products</td> <td>If someone claims your defective product caused bodily harm or injuries</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-commercial-car-insurance-5071465" rel="noopener noreferrer">Commercial auto</a></b></td> <td>Businesses that use vehicles for operations or business owners who use their personal car for business</td> <td>If you or an employee are in a car accident while working or using a company car</td> </tr> <tr> <td><b>Commercial umbrella</b></td> <td>Businesses with high liability risks like lots of foot traffic, and those that could be hit with very expensive lawsuits. Often required for government contracts</td> <td>If a big unexpected event happens that causes damages beyond what your other insurance covers</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cyber-insurance-5069694" rel="noopener noreferrer">Cyber liability</a></b></td> <td>Businesses that virtually interact with customers and accept electronic payments</td> <td>If your business is hacked or suffers a data breach</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> To learn more, read our article on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-business-insurance-plans-how-to-decide-which-is-right-for-you-7485484">types of business insurance</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-pros-and-cons-of-small-business-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Small Business Insurance </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_4-0-12"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Protects company assets</p></li> <li><p>Safeguards employees</p></li> <li><p>May fulfill legal or contractual obligations</p></li> <li><p>May boost the company’s reputation</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Cost</p></li> <li><p>Exclusions, limitations, and availability issues</p></li> <li><p>Documentation requirements</p></li> <li><p>Adjustment and payment delays</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-13"> <span class="mntl-sc-block-subheading__text"> Pros of Small Business Insurance, Explained </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-14"> <li><strong>Protects company assets</strong>: Business insurance protects your company’s financial assets from losses resulting from damage to your property or third-party negligence claims. </li><li><strong>Safeguards employees</strong>: Workers’ compensation insurance pays the cost of medical treatment and lost wages for workers injured on the job. </li><li><strong>May fulfill legal or contractual obligations</strong>: State laws may require you to buy workers’ compensation, auto liability, or other types of insurance. Likewise, contracts you sign may require you to buy specific kinds of insurance, such as general liability or auto liability insurance. </li><li><strong>May boost the company’s reputation</strong>: When your business is insured, it’s a sign to customers and business associates that you care about your company and managing its risks.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-15"> <span class="mntl-sc-block-subheading__text"> Cons of Small Business Insurance, Explained </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-16"> <li><strong>Cost:</strong> Business insurance premiums can be a significant expense, especially for a small company.</li><li><strong>Exclusions, limitations, and availability issues</strong>: All insurance policies exclude or restrict coverage for some risks. Insurers may refuse to cover some risks you want to insure or they may limit coverage you feel you need. </li><li><strong>Documentation requirements</strong>: Whether you’re applying for new insurance or filing a claim under an existing policy, you must comply with the insurer’s documentation requirements. Some insurers’ requirements can be cumbersome.</li><li><strong>Adjustment and payment delays</strong>: Once you’ve suffered a loss, you must file a claim and wait for an adjuster to assess the damage before making repairs. If the adjuster is slow to respond, repairs and claims payments may be delayed.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-much-does-small-business-insurance-cost"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-17"> <span class="mntl-sc-block-heading__text"> How Much Does Small Business Insurance Cost? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-18"> Investopedia's research into six insurers found that some insurers offer more affordable coverage than others, so you should gather quotes from at least three companies before you buy small business insurance. In general, a business owner's policy starts at $300 to $500 a year. The lowest premiums for professional liability also ranged from $300 to $500, and premiums for general liability insurance started at $200 to $400. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-19"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Type of Coverage</b></th> <th><b>Lowest Cost (per year)</b> </th> </tr> </thead> <tbody data-check="0"> <tr> <td>Business Owner’s Policy (BOP)</td> <td>$300 to $500</td> </tr> <tr> <td>Professional Liability </td> <td>$300 to $500 </td> </tr> <tr> <td>General Liability </td> <td>$200 to $381 </td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-20"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-insurance-cost-7113408">price of a commercial insurance policy</a> depends on several factors: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-21"> <li><strong>Industry or profession</strong>: The type of business you have impacts your amount of risk. A construction company, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/garage-liability-insurance.asp">garage</a>, or restaurant will have many more liability risks than a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-much-is-retail-insurance-7555239">retail store</a> or office, for instance. Also, your business type may be required by law to have certain types of coverage.</li> <li><strong>Business location</strong>: Businesses in high-crime areas or places prone to natural disasters will likely pay more for commercial property insurance than those in low-risk areas. State regulations and whether you rent or own your space also help determine your costs.</li> <li><strong>Claims history</strong>: If you have a history of claims in the past, insurers may consider you a higher risk and charge you more.</li> <li><strong>Number of employees and customers</strong>: The cost of workers' compensation insurance is based on the number of workers your business employs. Also, if you have a large customer base, that exposes your business to more liability and property risks. </li> <li><strong>Coverage needs</strong>: Choosing higher annual aggregate liability limits will increase your premiums, as will choosing a $0 deductible for your property insurance. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-do-i-know-if-i-need-small-business-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-22"> <span class="mntl-sc-block-heading__text"> How Do I Know If I Need Small Business Insurance?  </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-23"> Whether your business needs insurance depends on the nature and size of your operations and the laws in your state. Most businesses need <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-general-liability-insurance-for-small-business-7151705">general liability insurance</a> to protect themselves from third-party bodily injury or property damage claims. You should consider buying liability coverage if you manufacture or sell products, invite customers to your premises, or provide services at customers’ locations.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-24"> If your business owns buildings or other property that you use in your operations, you should consider buying property insurance. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-commercial-property-insurance-7373760">commercial property policy</a> protects your business against physical damage to property by a fire or other covered peril. It may also cover income you lose as a result of the physical damage.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-25"> Do you use cars or trucks in your business? If so, state law may require you to buy <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-commercial-car-insurance-5105013">auto liability insurance</a>. You’ll need to insure the vehicles under a commercial (not personal) auto policy. If you employ workers, state laws may require you to buy <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-workers-compensation-insurance-5069463">workers’ compensation insurance</a>. And if your business involves offering advice or providing a professional service, you should consider buying <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-professional-liability-insurance-5116279">professional liability insurance</a>. Also called <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/errors-omissions-insurance.asp">errors and omissions insurance</a>, professional liability insurance covers third-party claims against your business for financial losses resulting from malpractice, errors, or mistakes you allegedly made while performing a professional service. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-26"> While the cost of insurance for a small business may seem high, the cost of a big lawsuit could dwarf those expenses. So be sure to weigh those risks when deciding whether you need coverage or not. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-advisorinsight mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-27"> <h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> Expert Insight</h3><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>“If you’ve just started a business and are wondering about insurance, don’t assume your homeowners or renter’s policy will cover your business activities. Check with your insurer. If you employ workers, you’ll probably need to buy workers' compensation insurance. You should also consider general liability insurance, which protects your business from claims involving slip-and-falls and other common workplace accidents. As your business grows and accumulates assets, you may need additional coverages like commercial property and business auto insurance.”</p> <p><em>—<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/marianne-bonner-7483040">Marianne Bonner</a>, Investopedia insurance expert, consultant, and former commercial insurance underwriter</em></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-advisorinsight mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-small-business-insurance-news"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-28"> <span class="mntl-sc-block-heading__text"> Small-Business Insurance News </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-29"> Most small businesses have general liability coverage, but other types of insurance are less popular, according to a survey by Hiscox. The company said results showed that 75% of the respondents were underinsured. The 2023 Hiscox Underinsurance in Small Business Report surveyed 1,000 small businesses and found that: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-30"> <li>65% had general liability coverage</li><li>45% had property insurance</li><li>35% had workers' compensation insurance</li><li>32% had professional liability insurance</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-31"> Among those who had insurance, 68% said they bought it because they worried about the consequences of a claim. Only 20% said they got it because a partner or vendor required it.<span class="ql-inline-citation" data-cite="68"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-choose-a-small-business-insurance-company"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-32"> <span class="mntl-sc-block-heading__text"> How to Choose a Small Business Insurance Company </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-33"> Here’s a step-by-step process for choosing the best insurance company for your small business: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ol class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-34"> <li>Ask trusted colleagues, business associates, or other business owners for recommendations. </li> <li>Check online reviews of business insurers. This list is a good start, but check out reviews from several sources and compare the results. Look for insurers that rate highly in several reviews.</li> <li>Consider <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/sites/default/files/research-actuarial-property-casualty-market-share.pdf">market share rankings</a> from sources like the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nainsurancec.asp">National Association of Insurance Commissioners</a>. While large insurers aren’t necessarily better, most have a long track record and are financially stable.</li> <li>Review <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.jdpower.com/business/press-releases/2023-us-small-commercial-insurance-study">J.D.Power’s customer satisfaction rankings</a> of small business insurers.</li> <li>Consider your preferred method of buying insurance. Do you want to buy a policy directly from an insurer or through an agent? Do you prefer buying insurance online or in person?  </li> <li>Once you have some insurers in mind, evaluate their financial strength by reviewing data from rating agencies such as <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/a-m-best.asp">AM Best</a> and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moodys.asp">Moody’s Investors Services</a>.</li> <li>Get quotes from the insurers you’ve selected (or their representative agents) and compare the results. When deciding between insurers, consider the coverages, limits, deductibles, and other features each offers, not just the price.<br/></li> </ol><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-frequently-asked-questions-faqs"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-35"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions (FAQs) </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-36"> <span class="heading-toc" id="toc-faqs-5909afe7-3604-4407-9944-4600442a6df0"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">Is Business Insurance Required?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Generally, business insurance is optional unless it’s required by state law or the terms of a contract. For example, many states require <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workers-compensation.asp">workers’ compensation</a> insurance or auto liability insurance if your company owns vehicles you use for business. Or a business contract you sign may require certain insurance. Say you own an electrical contracting business. You sign a deal with a general contractor in which you agree to install electrical panels in a building the contractor is constructing. The contract requires you to have general liability, auto liability, and workers' compensation insurance in place before you begin any work.<br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Does Small Business Insurance Cover?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>A business owner’s policy includes general liability insurance, commercial property insurance, and, often, business interruption insurance. General liability insurance covers lawsuits when your business is responsible for harming a third party. Commercial property insurance covers damage to your building. Business interruption insurance helps replace business income after a covered loss.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Does Small Business Insurance Exclude?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Small business insurance excludes anything that you don’t specifically buy coverage for. For example, if you buy a business owner’s policy, but it doesn’t specifically include business personal property coverage, you won’t get coverage for the items inside your office or warehouse after a loss. There are also some disasters that are not typically covered. For example, you’ll need an endorsement to cover earthquakes and flooding. Certain catastrophic events, like war, won’t be covered at all. Commercial policies also won’t cover a loss if it’s covered by another policy.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">Do I Need Small Business Insurance If I Work From Home?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>If you have a home-based business, you still may need business insurance. Your homeowners policy may not be enough to cover your business equipment, inventory, or data, so you may need a separate business property insurance policy. You'll also want a liability policy if you're sued for damages caused by your products, services, or advice. And you may need business interruption insurance to cover losses from a natural disaster, theft, or equipment breakdown. Finally, if you have remote employees, you may need employers' liability insurance to cover you if they get injured, sick, or die because of their work.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">Do I Need Small Business Insurance If I Have an LLC?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>Yes, you need business insurance to protect your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/091014/basics-forming-limited-liability-company-llc.asp">limited liability company (LLC)</a> from lawsuits and property losses. Your personal assets are protected from lawsuits against your LLC, but that protection doesn’t extend to the LLC itself. Suppose a customer is injured at your business premises and sues your LLC for compensation. If your business has no liability insurance, it will have to pay legal fees and any damages or settlements awarded by a court. </p><p>Your LLC may also be subject to property damage losses if it owns buildings, equipment, or other property that is damaged in a fire, say. Your LLC will have to use company assets to pay for repairs. You can protect your LLC from unexpected losses by purchasing general liability and commercial property insurance.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">What Percentage of Small Businesses Do Not Have Insurance?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>According to a Next insurance survey, 29% of small business owners have no insurance. Women are more likely than men to lack coverage. The survey found that 35% of female business owners don't have insurance, compared to 25% of male business owners.<span class="ql-inline-citation" data-cite="69"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">Is Small Business Insurance Tax-Deductible?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>Small business insurance premiums are generally tax-deductible if the insurance is considered "ordinary and necessary" for your business. This includes premiums for liability, commercial property, malpractice, workers' compensation (when required by law), commercial auto, business interruption, and overhead insurance. Life insurance for officers and employees if you aren't a beneficiary is also deductible. And if you're self-employed, you may be able to deduct premiums for health, dental, and qualified long-term care insurance for you, your spouse, and your dependents.<span class="ql-inline-citation" data-cite="66"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-7" tabindex="-1"> <h3 class="accordion__title">Insurance Companies Our Experts Reviewed</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-7"> <div class="faq-accordion__item-answer"> <p>We researched and reviewed 18 companies to find the best eight companies you see above on this list. The companies that didn't make it to our list didn't score as well as competitors on one or more of our criteria, including measures of quality, cost, coverage, and customer experience.</p><p>These are the companies we researched:</p><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://nextinsurance.sjv.io/c/2104074" rel="nofollow">NEXT Insurance</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://dotdash.insureon.com/chubb?utm_source=DDM&amp;utm_medium=Partner" rel="sponsored nofollow">Chubb Ltd.</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.coverwallet.com/" rel="sponsored nofollow">CoverWallet</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://thimble.sjv.io/c/2104074/953017/12231" rel="sponsored nofollow">Thimble</a>, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://www.nationwide.com/business/insurance/" rel="sponsored nofollow">Nationwide</a>, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="externalLink" href="https://www.tkqlhce.com/click-100125493-15530179" rel="sponsored nofollow">biBerk</a>, <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="externalLink" href="https://www.kqzyfj.com/click-100173779-13205187" rel="sponsored nofollow">Hiscox</a>, <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="externalLink" href="https://amtrustfinancial.com/small-business-insurance" rel="sponsored nofollow">AmTrust Financial</a>, <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="externalLink" href="https://huckleberry.com/small-business-insurance/" rel="sponsored nofollow">Huckleberry</a>, <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="externalLink" href="https://www.insureon.com/small-business-insurance" rel="sponsored nofollow">Insureon</a>, <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="externalLink" href="https://smallbizquote.thehartford.com/app/index.html#?prcd=76210775&amp;Tcode=AF330002" rel="sponsored nofollow">The Hartford</a>, <a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="externalLink" href="https://www.farmers.com/business/" rel="sponsored nofollow">Farmers</a>, <a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="externalLink" href="https://www.geico.com/business-insurance/" rel="sponsored nofollow">Geico</a>, <a data-component="link" data-ordinal="14" data-source="inlineLink" data-type="externalLink" href="https://www.travelers.com/small-business-insurance" rel="sponsored nofollow">Travelers</a>, <a data-component="link" data-ordinal="15" data-source="inlineLink" data-type="externalLink" href="https://www.progressivecommercial.com/business-insurance/" rel="sponsored nofollow">Progressive</a>, <a data-component="link" data-ordinal="16" data-source="inlineLink" data-type="externalLink" href="https://www.cna.com/web/guest/cna/solutions/small-business">CNA</a>, <a data-component="link" data-ordinal="17" data-source="inlineLink" data-type="externalLink" href="https://business.libertymutual.com/" rel="sponsored nofollow">Liberty Mutual</a>, <a data-component="link" data-ordinal="18" data-source="inlineLink" data-type="externalLink" href="https://www.statefarm.com/small-business-solutions/insurance" rel="sponsored nofollow">State Farm</a></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-guide-to-small-business-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-37"> <span class="mntl-sc-block-heading__text"> Guide to Small Business Insurance </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-38"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-insurance.asp">What is business insurance?</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/professional-liability-insurance.asp">What is business liability insurance?</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/business-owners-policy.asp">What is a Business Owner's Policy (BOP)?</a></li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-insurance-cost-7113408">How much does small business insurance cost?</a></li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-business-insurance-plans-how-to-decide-which-is-right-for-you-7485484">Types of business insurance</a></li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-general-liability-insurance-for-small-business-7151705">Best General Liability Insurance for Small Businesses</a></li> <li><a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-commercial-business-insurance-5069688">Best Commercial Business Insurance</a></li> <li><a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sole-proprietor-insurance-7561126">Best Sole Proprietor Insurance</a></li> <li><a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-business-owners-policy-insurance-5069985">Best Business Owner’s Policy Insurance</a></li> <li><a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573">Best Health Insurance Companies for Small Businesses</a></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-trust-our-expert-small-business-insurance-reviews"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-39"> <span class="mntl-sc-block-heading__text"> Why Trust Our Expert Small Business Insurance Reviews </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-40"> Investopedia launched in 1999, and has been helping readers find the best small business insurance since 2020. We conduct extensive research to provide unbiased, comprehensive reviews to ensure you make the right decisions for your needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-we-choose-the-best-small-business-insurance-companies"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-41"> <span class="mntl-sc-block-heading__text"> How We Choose the Best Small Business Insurance Companies </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-42"> In order to compile our list of the best commercial insurance companies for small businesses, we developed a comprehensive methodology. To identify which companies and criteria to include in our review, we analyzed business and market insight databases, considered commercial insurance company market share, looked at search data from Google, and reviewed company product pages and agents' guides to assess important product features.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-43"> With those findings in mind, we spent three months digging up information about 53 features on 19 insurance companies, including ratings for financial strength by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/a-m-best.asp">AM Best</a>, customer satisfaction rankings in the J.D. Power 2023 U.S. Small Commercial Insurance Study, and individual customer complaints reported to insurance state commissioners and recorded by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nainsurancec.asp">NAIC (National Association of Insurance Commissioners)</a>. We also considered nationwide availability; whether an online quote and application are available; and policy-specific features, including claim limits, cost, and coverage exclusions. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-44"> The criteria determine how easy it is to procure a small business insurance policy from the company, the quality of that policy relative to its cost, and how likely customers are to be satisfied with the purchase process and their experience as a policyholder. We ranked each company according to the following categories and weights: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-45"> <li>Cost: 25%</li><li>Quote and application experience: 25%</li><li>Plan quality and customer satisfaction: 15%</li><li>Coverage: 15%</li><li>Accessibility: 10%</li><li>Financial stability: 10%</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-46"> Companies that make coverage widely available, have a streamlined quote and application process, offer robust features, and have strong ratings for financial stability and customer satisfaction topped our list. For more information, read our full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-insurance-review-methodology-6979746">small business insurance methodology</a> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nextinsurance.com/industry/miscellaneous-insurance/" rel="nofollow sponsored">Business Insurance for 1300+ businesses</a>."</p></li> <li class="mntl-sources__source" id="citation-48"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://news.ambest.com/newscontent.aspx?refnum=236082&amp;altsrc=23" rel="nofollow sponsored">AM Best Assigns Credit Ratings to Next Insurance US Company</a>."</p></li> <li class="mntl-sources__source" id="citation-67"><p>Crunchbase. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://news.crunchbase.com/venture/next-insurance-raise-ai-all-alv/">Small Biz Insurer Next Insurance Raises $265M</a>."</p></li> <li class="mntl-sources__source" id="citation-50"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ratings.ambest.com/CompanyProfile.aspx?ambnum=3030&amp;AltNum=6523030" rel="nofollow sponsored">Hiscox Insurance Company Inc</a>."</p></li> <li class="mntl-sources__source" id="citation-43"><p>NAIC. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=10200&amp;:refresh">Hiscox Insurance Company, Inc</a>.”</p></li> <li class="mntl-sources__source" id="citation-53"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://news.ambest.com/presscontent.aspx?refnum=32797&amp;altsrc=2" rel="nofollow sponsored">AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries</a>."</p></li> <li class="mntl-sources__source" id="citation-54"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ratings.ambest.com/companyprofile.aspx?ambnum=2699&amp;altnum=23112699" rel="nofollow sponsored">Markel Insurance Company</a>."</p></li> <li class="mntl-sources__source" id="citation-55"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://news.ambest.com/PressContent.aspx?altsrc=2&amp;refnum=31622" rel="nofollow sponsored">AM Best Affirms Credit Ratings of Berkshire Hathaway Homestate Insurance Company and Its Affiliates</a>."</p></li> <li class="mntl-sources__source" id="citation-56"><p>Trustpilot. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trustpilot.com/review/biberk.com">biBerk Business Insurance</a>."</p></li> <li class="mntl-sources__source" id="citation-58"><p>Trustpilot. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trustpilot.com/review/thimble.com">Thimble Reviews</a>."</p></li> <li class="mntl-sources__source" id="citation-57"><p>Thimble. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.thimble.com/ratings" rel="nofollow sponsored">Insurance Ratings</a>."</p></li> <li class="mntl-sources__source" id="citation-65"><p>Arch Insurance. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://insurance.archgroup.com/arch-insurance-acquires-thimble/">Arch Insurance Acquires Thimble</a>."</p></li> <li class="mntl-sources__source" id="citation-60"><p>The Hartford. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.thehartford.com/about-us/insurance-history" rel="nofollow sponsored">Our History</a>."</p></li> <li class="mntl-sources__source" id="citation-44"><p>J.D. Power. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.jdpower.com/business/press-releases/2023-us-small-commercial-insurance-study">2023 U.S. Small Commercial Insurance Study</a>.”</p></li> <li class="mntl-sources__source" id="citation-61"><p>Chubb. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chubb.com/us-en/business-insurance/chubb-bop.html" rel="nofollow sponsored">Business Policy Insurance Policy</a>."</p></li> <li class="mntl-sources__source" id="citation-47"><p>Insurance Information Institute. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.iii.org/fact-statistic/facts-statistics-commercial-lines">Facts and Statistics: Commercial Lines</a>"</p></li> <li class="mntl-sources__source" id="citation-64"><p>AM Best. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://news.ambest.com/PR/PressContent.aspx?refnum=32797&amp;altsrc=2" rel="nofollow sponsored">AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries</a>."</p></li> <li class="mntl-sources__source" id="citation-62"><p>State Farm. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://goodneighborcenter.statefarm.com/our-success/product-growth/index.html" rel="nofollow sponsored">Product Growth</a>."</p></li> <li class="mntl-sources__source" id="citation-63"><p>Businesswire. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.businesswire.com/news/home/20220909005445/en/AM-Best-Affirms-Credit-Ratings-of-State-Farm-Mutual-Automobile-Insurance-Company-and-Its-Subsidiaries">AM Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries</a>."</p></li> <li class="mntl-sources__source" id="citation-45"><p>NAIC. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=25143&amp;:refresh">State Farm Fire &amp; Cas Co National Complaint Index Report</a>.”</p></li> <li class="mntl-sources__source" id="citation-68"><p>Hiscox. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/publications/p535#en_US_2020_publink100078332">Publication 535 (2022), Business Expenses</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="6891657" data-ordinal="1" data-tax-levels="" 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Small business insurance protects you from damages and lost income when the unexpected happens—whether it's a lawsuit, a natural disaster, or an accident. A good policy could save you thousands of dollars or more if you ever face such unhappy circumstances. After extensive research, our experts found that Next is the best business insurance company overall because it offers a wide range of policy types and an easy online application process that lets you sign up in about 10 minutes. To choose the best commercial insurance companies for small businesses, we evaluated 19 national and regional insurers on 53 criteria in the following categories: cost, quote and application experience, customer satisfaction, coverage, accessibility, and financial stability. Our Top Pick ![]()   ## Best Small Business Insurance Companies for May 2024 * **Best Overall:** [Next](https://nextinsurance.sjv.io/c/2104074/1418806/14516) * **Best for Independent Contractors:** [Hiscox](https://www.kqzyfj.com/click-100173779-13205187) * **Best Restaurant Insurance:** [Huckleberry](https://huckleberry.com/small-business-insurance/) * **Best for Financial Stability:** [biBERK](https://www.tkqlhce.com/click-100125493-15530179) * **Best Budget Coverage:** [Thimble](https://thimble.sjv.io/c/2104074/953017/12231) * **Best Workers' Compensation Insurance:** [The Hartford](https://tivly.com/redirect/S6PAAWFL1W) * **Best for Larger Small Businesses:** [Chubb](https://dotdash.insureon.com/chubb?utm_source=DDM&utm_medium=Partner) * **Highest Customer Satisfaction:** [State Farm](https://www.statefarm.com/small-business-solutions/insurance) Use an insurance marketplace like [Insureon](https://dotdash.insureon.com/?utm_source=Partnership&utm_campaign=Dot_Dash_Article) to get matched to the best provider for your business. Best Small Business Insurance Companies for May 2024 Expand Best Small Business Insurance Companies for May 2024 * [Our Top Picks](#summary-list) * [Next](#toc-best-overall-next) * [Hiscox](#toc-best-for-independent-contractors-hiscox) * [Huckleberry](#toc-best-restaurant-insurance-huckleberry) * [biBERK](#toc-best-for-financial-stability-biberk) * [Thimble](#toc-best-budget-coverage-thimble) * [The Hartford](#toc-best-workers-compensation-insurance-the-hartford) * [Chubb](#toc-best-for-larger-small-businesses-chubb) * [State Farm](#toc-highest-customer-satisfaction-state-farm) * See More (5) * [Compare Providers](#toc-compare-the-best-small-business-insurance-providers) * [Our Expert Picks for Small Business Insurance in Any State](#toc-our-expert-picks-for-small-business-insurance-in-any-state) * [What Is Small Business Insurance?](#toc-what-is-small-business-insurance) * [Types of Small Business Insurance](#toc-what-types-of-small-business-insurance-are-there) * [Pros and Cons](#toc-pros-and-cons-of-small-business-insurance) * [How Much Is Small Business Insurance?](#toc-how-much-does-small-business-insurance-cost) * [How to Choose](#toc-how-to-choose-a-small-business-insurance-company) * [Frequently Asked Questions (FAQs)](#toc-frequently-asked-questions-faqs) * [Methodology](#toc-how-we-choose-the-best-small-business-insurance-companies) ### Best Overall : Next Investopedia's Rating 4.8 --- ![Next Insurance]() :fill(white):max_bytes(150000):strip_icc()/Next-34195cff976d449e81e137dfa8ba25b1.jpg) Next Insurance [Get a Quote](https://nextinsurance.sjv.io/c/2104074/1418806/14516) Why We Chose It Next provides a way to get a wide range of affordable business insurance coverages entirely online in about 10 minutes. But you also have the option of speaking with a U.S.-based advisor in your area. Pros & Cons Pros * Offers a live certificate of insurance for easy sharing * Allows you to customize your business insurance policy with a variety of coverages * 100% online quote and application with assistance available Cons * Fewer specialized coverages than some other companies Overview Next offers a wide array of commercial insurance coverage types, which can be purchased online for same-day coverage. Next offers a [business owner’s policy](https://www.investopedia.com/terms/business-owners-policy.asp) (general liability insurance and commercial property insurance), commercial auto insurance, workers' compensation coverage, professional liability insurance, tools & equipment insurance, and more. The company also offers a variety of digital policy management tools, including the ability to share a live [certificate of insurance](https://www.investopedia.com/terms/c/certificate_of_insurance.asp) and quickly add an additional insured, free of charge. Monthly payments are available, and eligible customers can save up to 25% with discounts. Next Insurance has an A- (Excellent) financial strength rating with AM Best. However, other companies offer more enhancements and specialized coverages. Based in Palo Alto, California, Next was founded in 2016 and uses artificial intelligence and machine learning to streamline the insurance buying process. In November 2023, it raised $265 million in funding from Allstate and Allianz X—one of the largest rounds of funding raised in the insuretech industry that year, according to Crunchbase. The deals include a strategic partnership with Allstate to develop new commercial auto insurance products. ### Best for Independent Contractors : Hiscox Investopedia's Rating 4.7 --- ![Hiscox]() :fill(white):max_bytes(150000):strip_icc()/hiscox-cd5132a542e5459ca37b9d8baa589e61.png) Hiscox [Get a Quote](https://www.kqzyfj.com/click-100173779-13205187) Why We Chose It Hiscox offers several solutions for freelancers that make the company our top pick for the [best independent contractor insurance](https://www.investopedia.com/best-independent-contractor-insurance-4845558) among small commercial insurance providers. Pros & Cons Pros * Customization options for independent contractors * Monthly payments with no fees * Offers short-term liability insurance for business * 100% online quote and application with assistance available Cons * Higher than expected number of complaints with the NAIC Overview Hiscox offers a straightforward business owner’s policy (BOP) that can be customized with business interruption insurance, electronic data loss insurance, professional liability insurance, and more. You can also choose standalone policies for professional liability and general liability insurance, and you can get either coverage on demand for short-term projects. Plus, Hiscox allows you to pay for your business insurance policy in monthly payments, which can help freelancers better manage their cash flow.  Hiscox has an A (Excellent) rating with AM Best, indicating excellent financial strength; however, the company received somewhat more complaints than expected over the last three years given its size. This indicates that Hiscox may have issues with customer satisfaction, although the company did receive fewer complaints each year, indicating improvement. BOPs start at around $500 per year. You can get a business insurance quote online or speak with an agent by phone. You can also file claims online or by phone. Claims services can be accessed online 24/7. With roots dating back to 1901, Hiscox USA is based in Atlanta. It is part of the Hiscox Group, an international company with more than 3.000 employees. ### Best Restaurant Insurance : Huckleberry Investopedia's Rating 4.6 --- ![Huckleberry Insurance logo]() :fill(white):max_bytes(150000):strip_icc()/Huckleberry-logo-a84d6f1ae1de4b33adaa43eaaad47c50.jpg) Huckleberry [Get a Quote](https://huckleberry.com/small-business-insurance/) Why We Chose It Huckleberry offers a suite of essential restaurant insurance and food business insurance coverages that are suitable for brick-and-mortar restaurants, caterers, food trucks, and more. Pros & Cons Pros * BOP policies underwritten by Markel and Chubb * 100% online quote and application * Wide range of customization options Cons * Doesn’t offer employee benefits packages Overview Huckleberry, which is a broker that works with Chubb and Markel for its BOP policies, offers a restaurant endorsement as an add-on to its business owner’s policy. It’s a bundle of food-specific coverages that includes spoilage coverage, food contamination insurance, and ordinance or law equipment coverage, among others. Plus, you can add workers' comp, commercial auto, and liquor liability coverage to customize your business insurance policy as needed. Most policies are underwritten by Markel or Chubb. Both companies have excellent financial strength ratings from AM Best. Like Next Insurance, Huckleberry offers an entirely online quote and application process that allows you to get coverage for your small business quickly. And you can get a certificate of insurance online to share with clients in less than a minute. Huckleberry’s BOP includes general liability, commercial property, and business interruption insurance at a reasonable price. For example, a BOP for a food truck starts at $42 per month. Founded in 2017 in San Francisco, Huckleberry is now owned by payroll company Paychex, which operates the Paychex Insurance Agency. ### Best for Financial Stability : biBERK Investopedia's Rating 4.2 --- ![biBERK]() :fill(white):max_bytes(150000):strip_icc()/biberk-f70909243540411181efe1bfd2c187e5.jpg) biBERK [Get a Quote](https://www.tkqlhce.com/click-100125493-15530179) Why We Chose It biBERK has an A++ (Superior) financial strength rating from AM Best, the highest rating available, offers a wide range of industry-specific coverages, and is backed by Berkshire Hathaway. Pros & Cons Pros * Backed by Berkshire Hathaway Group * Online quote and application * Excellent customer service reviews * Dozens of endorsements to enhance a BOP Cons * Doesn’t offer group employee benefits Overview biBERK Business Insurance is part of Berkshire Hathaway Group, which has decades of experience in the [commercial insurance](https://www.investopedia.com/terms/b/business-insurance.asp) industry. BiBerk’s underwriters are all rated A++ (Superior) by AM Best, indicating a superior ability to meet financial obligations to policyholders. What’s more, you can get a quote and apply to receive coverage instantly, entirely online. Policyholders have great things to say about the service and coverage on third-party websites. biBERK can meet the needs of most small businesses, offering many commercial insurance options, such as business owner’s policies, commercial auto insurance, [workers' compensation insurance](https://www.investopedia.com/best-workers-compensation-insurance-5069463), umbrella insurance, professional liability insurance, and general liability policies. You can add risk-specific endorsements and industry endorsements to your business owner’s policy, such as liquor liability and cyber liability coverage as well. BiBerk BOPs start at about $500 per year. BiBerk was founded in 2015 and is based in Omaha, Nebraska. ### Best Budget Coverage : Thimble Investopedia's Rating 4.0 --- ![Thimble Insurance]() :fill(white):max_bytes(150000):strip_icc()/Thimblecopy-55fd97eef23b418eac2b3a179e424268.jpg) Thimble Insurance [Get a Quote](https://thimble.sjv.io/c/2104074/953017/12231) Why We Chose It Thimble offers on-demand policies for general liability insurance starting at $17 per month. Pros & Cons Pros * Offers monthly and on-demand coverage options * Liability policies start at $17 per month * Offers event insurance * Occurrence-based policies * Excellent reviews on Trustpilot Cons * Doesn’t offer commercial auto insurance Overview Thimble is a great option for small businesses that need quick, temporary, affordable small business insurance, particularly those looking to purchase coverage for an event or on an on-demand basis. The company’s business owner’s policy includes general liability, commercial property insurance, and business interruption insurance, and you can also add professional liability, workers' compensation, and business equipment protection.  Customers on Trustpilot have great things to say about the ease of the application process. You can get a quote and purchase coverage online or in the app. Several reviews also pointed out that Thimble’s customer service team was communicative and responded quickly. Thimble works with several different insurance companies, each of which has an AM Best rating of at least A- (Excellent). Thimble policies are [occurrence-based](https://www.investopedia.com/terms/o/occurrence-policy.asp), which provides more robust coverage than claims-made policies. You’re covered for incidents that occurred while your business insurance policy was in force, even if you’ve since canceled it. Thimble, which has been selling small business insurance coverage since 2018, was bought by Arch Insurance in April 2023. Thimble is based in New York City. ### Best Workers' Compensation Insurance : The Hartford Investopedia's Rating 3.8 --- ![The Hartford]() :fill(white):max_bytes(150000):strip_icc()/the-hartford-c204b20af29d4340b94ad4449d34d3b0.png) The Hartford [Get a Quote](https://tivly.com/redirect/S6PAAWFL1W) Why We Chose It The Hartford has been around since 1810 and is one of the largest providers of workers' compensation insurance in the country. Pros & Cons Pros * Pay-as-you-go billing options * Access to a network of over 1 million providers * 2nd-highest financial strength rating * Start claims online Cons * Poor J.D. Power ranking Overview The Hartford is a top pick among small business insurance providers for the [best workers' compensation insurance](https://www.investopedia.com/best-workers-compensation-insurance-5069463). The company provides a large network of doctors and nurse case managers to help your employees get healthy, and pay-as-you-go billing options. When you choose to pay as you go, your premiums are based on actual payroll rather than estimates, which prevents overpayment. The Hartford also allows you to easily start a claim online. What's more, the company uses data analytics to provide injured workers with a toolkit to aid in faster recovery.  The insurer has an A+ (Superior) financial strength rating from AM Best; however, the company was ranked below average in the J.D. Power 2023 U.S. Small Commercial Insurance Study. The Harford is based in Hartford, Connecticut, and was founded in 1810. ### Best for Larger Small Businesses : Chubb Investopedia's Rating 3.5 --- ![Chubb logo]() :fill(white):max_bytes(150000):strip_icc()/Chubb-logo-e895144210f941cba476579d39ad0799.jpg) Chubb [Get a Quote](https://dotdash.insureon.com/chubb?utm_source=DDM&utm_medium=Partner) Why We Chose It Chubb is ideal for larger small businesses because it supports businesses with revenue up to $30 million and offers a very wide range of coverage options. Pros & Cons Pros * Supports businesses with up to $30 million in revenue * Few complaints relative to Chubb’s market share * Highest financial strength rating * Many enhancements to customize a BOP Cons * Must speak with an insurance agent to start your business insurance policy Overview Chubb is one of the largest carriers (by annual premiums) of commercial insurance and has a well-regarded small business owner's policy. The company has relatively high revenue limits for its small commercial business owner's policies and offers a wide array of customized endorsements for a broad range of industries. You can enhance your business owner’s policy with electronic data liability coverage, professional liability insurance, a variety of property add-ons, crime coverage, [equipment breakdown coverage](https://www.investopedia.com/best-equipment-breakdown-insurance-5075448), earthquake coverage (in certain states), and more. Workers' compensation, umbrella, commercial auto, and cyber risk coverages are also available. Chubb can offer an instant quote, and policies are generated instantly, but you will need to speak with an insurance agent to start your coverage. Chubb has an A++ (Superior) financial strength rating from AM Best and is ranked second for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study. Chubb Corporation dates its origins back to 1882. Chubb Insurance Group today is based in Warren, New Jersey. ### Highest Customer Satisfaction : State Farm --- ![State Farm]() :fill(white):max_bytes(150000):strip_icc()/State-Farm-f25a84971a3b46a59c45962e3d5e732a.png) State Farm [Get a Quote](https://www.statefarm.com/small-business-solutions/insurance) Why We Chose It State Farm is one of the top-ranked companies for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study and offers coverage for virtually any industry. Pros & Cons Pros * Highest financial strength rating * Customizable business owner’s policies with many coverage options Cons * Must speak with an insurance agent to start your business insurance policy Overview State Farm has been meeting the needs of small businesses since 1935 and has superior ratings. The company has an B financial strength rating with [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp). It's also ranked second in the J.D. Power 2023 U.S. Small Commercial Insurance Study. [NAIC](https://www.investopedia.com/terms/n/nainsurancec.asp) data reveals that State Farm has had just slightly fewer complaints than expected for its commercial liability policies. But, you’ll need to talk to an insurance agent to get coverage. Some business owners may prefer handling the entire transaction online. The company’s BOP covers commercial property insurance and general liability insurance, plus loss of income, equipment breakdown, and money and securities protection at no extra charge. You can add professional liability to the package as well. In addition, you can get commercial auto coverage, workers' compensation insurance, and many more coverages. You can also work with State Farm to provide benefits for your employees, such as group life, disability, and health insurance. State Farm was founded in 1922 in Bloomington, Illinois. ## Compare the Best Small Business Insurance Providers | **Company** | **Best for** | **AM Best Rating** | **BOP Revenue Limit** | **Buy & Receive Policy Online?** | | --- | --- | --- | --- | --- | | [Next](https://nextinsurance.sjv.io/c/2104074) | Business Insurance Overall | A- | $8 million | Yes | | [Hiscox](https://www.kqzyfj.com/click-100173779-13205187) | Independent Contractors | A | $5 million | Yes | | [Huckleberry](https://huckleberry.com/small-business-insurance/) | Restaurants | A++, A\* | None | Yes | | [BiBerk](https://www.tkqlhce.com/click-100125493-15530179) | Financial Stability | A++ | None | Yes | | [Thimble](https://thimble.sjv.io/c/2104074/953017/12231) | Budget Coverage | A- through A+\*\* | Not disclosed | Yes | | [The Hartford](https://smallbizquote.thehartford.com/app/index.html#?prcd=76210775&Tcode=AF330002) | Workers' Comp | A+ | $50 million | No | | [Chubb](https://dotdash.insureon.com/chubb?utm_source=DDM&utm_medium=Partner) | Larger Small Businesses | A++ | $30 million | No | | [State Farm](https://www.statefarm.com/small-business-solutions/insurance) | Customer Satisfaction | B | Not disclosed | No | \*Huckleberry's BOP policies are underwritten by Chubb, which has an AM Best financial stability rating of A++, and Markel, whose rating is A. \*\*Thimble policies are underwritten by Benchmark Insurance Company (AM Best rating: A), Employers Insurance Group (A-), Markel Insurance Company (A), National Specialty Insurance Company (A), and Spinnaker Insurance Company (A-). ## Our Expert Picks for Small Business Insurance in Any State The [size of your small business](https://www.investopedia.com/terms/w/wholesale-insurance.asp) may dictate the type of business insurance you need and which insurance company is best for you. For a low-cost BOP and quick online coverage, compare quotes from Next, Huckleberry, and BiBerk. Independent contractors and event workers will be best served by Hiscox or Thimble. Consider The Hartford and BiBerk if you’re most concerned with workers' compensation. If you need extensive coverage, including an employee benefits package, you’ll be best served by companies like State Farm and Chubb.  Keep in mind that you may have specialized coverage needs for your industry that a standard business owner’s policy doesn’t include. Some companies offer more enhancements than others. When narrowing down your options, ensure you choose a provider that protects your business from common risks in your industry.  ## What Is Small Business Insurance? Business insurance, sometimes called commercial insurance, covers your business's assets and income in case of unexpected events during normal business operations, such as lawsuits, natural disasters, or accidents. There are many types of business insurance products, including coverage for property damage, legal liability, and employee-related risks, among others. A business owner's policy (BOP) includes general liability coverage, business property coverage, and business interruption coverage. You may also want to add other kinds of coverage such as for commercial cars, errors and omissions, and key employees. ## What Types of Small Business Insurance Are There? | **Type** | **Who Needs It** | **When It Protects You** | | --- | --- | --- | | **[General liability](https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp)** | Any business | If consumers, vendors, or other people outside your company claim your business harmed them or their property | | **[Commercial property](https://www.investopedia.com/terms/c/commercial-property-insurance.asp)** | Businesses that own or rent a property, or have equipment or records to protect | If a natural disaster harms your property or a thief steals your property | | **[Business income](https://www.investopedia.com/terms/b/business-income-coverage-form.asp)** | Any business that depends on its property to generate income | If your business loses revenue because your property is damaged | | **[Professional liability](https://www.investopedia.com/terms/p/professional-liability-insurance.asp)** | Lawyers, doctors, accounts, and others who provide services based on specialized expertise | If a customer accuses you of negligence, malpractice, mistakes, or misrepresentation | | **[Workers' Compensation](https://www.investopedia.com/terms/w/workers-compensation-coverage-a.asp)** | Businesses with employees. Most states require it | If a worker is injured on the job | | **[Employment practices liability](https://www.investopedia.com/what-is-employment-practices-liability-coverage-8348723)** | Businesses with employees | If a worker alleges discrimination, harassment, wrongful termination, or other unfair employment practices | | **Product liability** | Businesses that sell products | If someone claims your defective product caused bodily harm or injuries | | **[Commercial auto](https://www.investopedia.com/what-is-commercial-car-insurance-5071465)** | Businesses that use vehicles for operations or business owners who use their personal car for business | If you or an employee are in a car accident while working or using a company car | | **Commercial umbrella** | Businesses with high liability risks like lots of foot traffic, and those that could be hit with very expensive lawsuits. Often required for government contracts | If a big unexpected event happens that causes damages beyond what your other insurance covers | | **[Cyber liability](https://www.investopedia.com/best-cyber-insurance-5069694)** | Businesses that virtually interact with customers and accept electronic payments | If your business is hacked or suffers a data breach | To learn more, read our article on [types of business insurance](https://www.investopedia.com/types-of-business-insurance-plans-how-to-decide-which-is-right-for-you-7485484). ## Pros and Cons of Small Business Insurance Pros * Protects company assets * Safeguards employees * May fulfill legal or contractual obligations * May boost the company’s reputation Cons * Cost * Exclusions, limitations, and availability issues * Documentation requirements * Adjustment and payment delays ### Pros of Small Business Insurance, Explained * **Protects company assets**: Business insurance protects your company’s financial assets from losses resulting from damage to your property or third-party negligence claims. * **Safeguards employees**: Workers’ compensation insurance pays the cost of medical treatment and lost wages for workers injured on the job. * **May fulfill legal or contractual obligations**: State laws may require you to buy workers’ compensation, auto liability, or other types of insurance. Likewise, contracts you sign may require you to buy specific kinds of insurance, such as general liability or auto liability insurance. * **May boost the company’s reputation**: When your business is insured, it’s a sign to customers and business associates that you care about your company and managing its risks. ### Cons of Small Business Insurance, Explained * **Cost:** Business insurance premiums can be a significant expense, especially for a small company. * **Exclusions, limitations, and availability issues**: All insurance policies exclude or restrict coverage for some risks. Insurers may refuse to cover some risks you want to insure or they may limit coverage you feel you need. * **Documentation requirements**: Whether you’re applying for new insurance or filing a claim under an existing policy, you must comply with the insurer’s documentation requirements. Some insurers’ requirements can be cumbersome. * **Adjustment and payment delays**: Once you’ve suffered a loss, you must file a claim and wait for an adjuster to assess the damage before making repairs. If the adjuster is slow to respond, repairs and claims payments may be delayed. ## How Much Does Small Business Insurance Cost? Investopedia's research into six insurers found that some insurers offer more affordable coverage than others, so you should gather quotes from at least three companies before you buy small business insurance. In general, a business owner's policy starts at $300 to $500 a year. The lowest premiums for professional liability also ranged from $300 to $500, and premiums for general liability insurance started at $200 to $400. | **Type of Coverage** | **Lowest Cost (per year)** | | --- | --- | | Business Owner’s Policy (BOP) | $300 to $500 | | Professional Liability | $300 to $500 | | General Liability | $200 to $381 | The [price of a commercial insurance policy](https://www.investopedia.com/small-business-insurance-cost-7113408) depends on several factors: * **Industry or profession**: The type of business you have impacts your amount of risk. A construction company, [garage](https://www.investopedia.com/terms/g/garage-liability-insurance.asp), or restaurant will have many more liability risks than a [retail store](https://www.investopedia.com/how-much-is-retail-insurance-7555239) or office, for instance. Also, your business type may be required by law to have certain types of coverage. * **Business location**: Businesses in high-crime areas or places prone to natural disasters will likely pay more for commercial property insurance than those in low-risk areas. State regulations and whether you rent or own your space also help determine your costs. * **Claims history**: If you have a history of claims in the past, insurers may consider you a higher risk and charge you more. * **Number of employees and customers**: The cost of workers' compensation insurance is based on the number of workers your business employs. Also, if you have a large customer base, that exposes your business to more liability and property risks. * **Coverage needs**: Choosing higher annual aggregate liability limits will increase your premiums, as will choosing a $0 deductible for your property insurance. ## How Do I Know If I Need Small Business Insurance? Whether your business needs insurance depends on the nature and size of your operations and the laws in your state. Most businesses need [general liability insurance](https://www.investopedia.com/best-general-liability-insurance-for-small-business-7151705) to protect themselves from third-party bodily injury or property damage claims. You should consider buying liability coverage if you manufacture or sell products, invite customers to your premises, or provide services at customers’ locations.  If your business owns buildings or other property that you use in your operations, you should consider buying property insurance. A [commercial property policy](https://www.investopedia.com/best-commercial-property-insurance-7373760) protects your business against physical damage to property by a fire or other covered peril. It may also cover income you lose as a result of the physical damage.  Do you use cars or trucks in your business? If so, state law may require you to buy [auto liability insurance](https://www.investopedia.com/best-commercial-car-insurance-5105013). You’ll need to insure the vehicles under a commercial (not personal) auto policy. If you employ workers, state laws may require you to buy [workers’ compensation insurance](https://www.investopedia.com/best-workers-compensation-insurance-5069463). And if your business involves offering advice or providing a professional service, you should consider buying [professional liability insurance](https://www.investopedia.com/best-professional-liability-insurance-5116279). Also called [errors and omissions insurance](https://www.investopedia.com/terms/e/errors-omissions-insurance.asp), professional liability insurance covers third-party claims against your business for financial losses resulting from malpractice, errors, or mistakes you allegedly made while performing a professional service. While the cost of insurance for a small business may seem high, the cost of a big lawsuit could dwarf those expenses. So be sure to weigh those risks when deciding whether you need coverage or not. ### Expert Insight “If you’ve just started a business and are wondering about insurance, don’t assume your homeowners or renter’s policy will cover your business activities. Check with your insurer. If you employ workers, you’ll probably need to buy workers' compensation insurance. You should also consider general liability insurance, which protects your business from claims involving slip-and-falls and other common workplace accidents. As your business grows and accumulates assets, you may need additional coverages like commercial property and business auto insurance.” *—[Marianne Bonner](https://www.investopedia.com/marianne-bonner-7483040), Investopedia insurance expert, consultant, and former commercial insurance underwriter* ## Small-Business Insurance News Most small businesses have general liability coverage, but other types of insurance are less popular, according to a survey by Hiscox. The company said results showed that 75% of the respondents were underinsured. The 2023 Hiscox Underinsurance in Small Business Report surveyed 1,000 small businesses and found that: * 65% had general liability coverage * 45% had property insurance * 35% had workers' compensation insurance * 32% had professional liability insurance Among those who had insurance, 68% said they bought it because they worried about the consequences of a claim. Only 20% said they got it because a partner or vendor required it. ## How to Choose a Small Business Insurance Company Here’s a step-by-step process for choosing the best insurance company for your small business: 1. Ask trusted colleagues, business associates, or other business owners for recommendations. 2. Check online reviews of business insurers. This list is a good start, but check out reviews from several sources and compare the results. Look for insurers that rate highly in several reviews. 3. Consider [market share rankings](https://content.naic.org/sites/default/files/research-actuarial-property-casualty-market-share.pdf) from sources like the [National Association of Insurance Commissioners](https://www.investopedia.com/terms/n/nainsurancec.asp). While large insurers aren’t necessarily better, most have a long track record and are financially stable. 4. Review [J.D.Power’s customer satisfaction rankings](https://www.jdpower.com/business/press-releases/2023-us-small-commercial-insurance-study) of small business insurers. 5. Consider your preferred method of buying insurance. Do you want to buy a policy directly from an insurer or through an agent? Do you prefer buying insurance online or in person? 6. Once you have some insurers in mind, evaluate their financial strength by reviewing data from rating agencies such as [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp) and [Moody’s Investors Services](https://www.investopedia.com/terms/m/moodys.asp). 7. Get quotes from the insurers you’ve selected (or their representative agents) and compare the results. When deciding between insurers, consider the coverages, limits, deductibles, and other features each offers, not just the price. ## Frequently Asked Questions (FAQs) ## Frequently Asked Questions * ### Is Business Insurance Required? Generally, business insurance is optional unless it’s required by state law or the terms of a contract. For example, many states require [workers’ compensation](https://www.investopedia.com/terms/w/workers-compensation.asp) insurance or auto liability insurance if your company owns vehicles you use for business. Or a business contract you sign may require certain insurance. Say you own an electrical contracting business. You sign a deal with a general contractor in which you agree to install electrical panels in a building the contractor is constructing. The contract requires you to have general liability, auto liability, and workers' compensation insurance in place before you begin any work. * ### What Does Small Business Insurance Cover? A business owner’s policy includes general liability insurance, commercial property insurance, and, often, business interruption insurance. General liability insurance covers lawsuits when your business is responsible for harming a third party. Commercial property insurance covers damage to your building. Business interruption insurance helps replace business income after a covered loss. * ### What Does Small Business Insurance Exclude? Small business insurance excludes anything that you don’t specifically buy coverage for. For example, if you buy a business owner’s policy, but it doesn’t specifically include business personal property coverage, you won’t get coverage for the items inside your office or warehouse after a loss. There are also some disasters that are not typically covered. For example, you’ll need an endorsement to cover earthquakes and flooding. Certain catastrophic events, like war, won’t be covered at all. Commercial policies also won’t cover a loss if it’s covered by another policy. * ### Do I Need Small Business Insurance If I Work From Home? If you have a home-based business, you still may need business insurance. Your homeowners policy may not be enough to cover your business equipment, inventory, or data, so you may need a separate business property insurance policy. You'll also want a liability policy if you're sued for damages caused by your products, services, or advice. And you may need business interruption insurance to cover losses from a natural disaster, theft, or equipment breakdown. Finally, if you have remote employees, you may need employers' liability insurance to cover you if they get injured, sick, or die because of their work. * ### Do I Need Small Business Insurance If I Have an LLC? Yes, you need business insurance to protect your [limited liability company (LLC)](https://www.investopedia.com/articles/investing/091014/basics-forming-limited-liability-company-llc.asp) from lawsuits and property losses. Your personal assets are protected from lawsuits against your LLC, but that protection doesn’t extend to the LLC itself. Suppose a customer is injured at your business premises and sues your LLC for compensation. If your business has no liability insurance, it will have to pay legal fees and any damages or settlements awarded by a court.  Your LLC may also be subject to property damage losses if it owns buildings, equipment, or other property that is damaged in a fire, say. Your LLC will have to use company assets to pay for repairs. You can protect your LLC from unexpected losses by purchasing general liability and commercial property insurance. * ### What Percentage of Small Businesses Do Not Have Insurance? According to a Next insurance survey, 29% of small business owners have no insurance. Women are more likely than men to lack coverage. The survey found that 35% of female business owners don't have insurance, compared to 25% of male business owners. * ### Is Small Business Insurance Tax-Deductible? Small business insurance premiums are generally tax-deductible if the insurance is considered "ordinary and necessary" for your business. This includes premiums for liability, commercial property, malpractice, workers' compensation (when required by law), commercial auto, business interruption, and overhead insurance. Life insurance for officers and employees if you aren't a beneficiary is also deductible. And if you're self-employed, you may be able to deduct premiums for health, dental, and qualified long-term care insurance for you, your spouse, and your dependents. * ### Insurance Companies Our Experts Reviewed We researched and reviewed 18 companies to find the best eight companies you see above on this list. The companies that didn't make it to our list didn't score as well as competitors on one or more of our criteria, including measures of quality, cost, coverage, and customer experience. These are the companies we researched: [NEXT Insurance](https://nextinsurance.sjv.io/c/2104074), [Chubb Ltd.](https://dotdash.insureon.com/chubb?utm_source=DDM&utm_medium=Partner), [CoverWallet](https://www.coverwallet.com/), [Thimble](https://thimble.sjv.io/c/2104074/953017/12231), [Nationwide](https://www.nationwide.com/business/insurance/), [biBerk](https://www.tkqlhce.com/click-100125493-15530179), [Hiscox](https://www.kqzyfj.com/click-100173779-13205187), [AmTrust Financial](https://amtrustfinancial.com/small-business-insurance), [Huckleberry](https://huckleberry.com/small-business-insurance/), [Insureon](https://www.insureon.com/small-business-insurance), [The Hartford](https://smallbizquote.thehartford.com/app/index.html#?prcd=76210775&Tcode=AF330002), [Farmers](https://www.farmers.com/business/), [Geico](https://www.geico.com/business-insurance/), [Travelers](https://www.travelers.com/small-business-insurance), [Progressive](https://www.progressivecommercial.com/business-insurance/), [CNA](https://www.cna.com/web/guest/cna/solutions/small-business), [Liberty Mutual](https://business.libertymutual.com/), [State Farm](https://www.statefarm.com/small-business-solutions/insurance) ## Guide to Small Business Insurance * [What is business insurance?](https://www.investopedia.com/terms/b/business-insurance.asp) * [What is business liability insurance?](https://www.investopedia.com/terms/p/professional-liability-insurance.asp) * [What is a Business Owner's Policy (BOP)?](https://www.investopedia.com/terms/business-owners-policy.asp) * [How much does small business insurance cost?](https://www.investopedia.com/small-business-insurance-cost-7113408) * [Types of business insurance](https://www.investopedia.com/types-of-business-insurance-plans-how-to-decide-which-is-right-for-you-7485484) * [Best General Liability Insurance for Small Businesses](https://www.investopedia.com/best-general-liability-insurance-for-small-business-7151705) * [Best Commercial Business Insurance](https://www.investopedia.com/best-commercial-business-insurance-5069688) * [Best Sole Proprietor Insurance](https://www.investopedia.com/best-sole-proprietor-insurance-7561126) * [Best Business Owner’s Policy Insurance](https://www.investopedia.com/best-business-owners-policy-insurance-5069985) * [Best Health Insurance Companies for Small Businesses](https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573) ## Why Trust Our Expert Small Business Insurance Reviews Investopedia launched in 1999, and has been helping readers find the best small business insurance since 2020. We conduct extensive research to provide unbiased, comprehensive reviews to ensure you make the right decisions for your needs. ## How We Choose the Best Small Business Insurance Companies In order to compile our list of the best commercial insurance companies for small businesses, we developed a comprehensive methodology. To identify which companies and criteria to include in our review, we analyzed business and market insight databases, considered commercial insurance company market share, looked at search data from Google, and reviewed company product pages and agents' guides to assess important product features.   With those findings in mind, we spent three months digging up information about 53 features on 19 insurance companies, including ratings for financial strength by [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp), customer satisfaction rankings in the J.D. Power 2023 U.S. Small Commercial Insurance Study, and individual customer complaints reported to insurance state commissioners and recorded by the [NAIC (National Association of Insurance Commissioners)](https://www.investopedia.com/terms/n/nainsurancec.asp). We also considered nationwide availability; whether an online quote and application are available; and policy-specific features, including claim limits, cost, and coverage exclusions. The criteria determine how easy it is to procure a small business insurance policy from the company, the quality of that policy relative to its cost, and how likely customers are to be satisfied with the purchase process and their experience as a policyholder. We ranked each company according to the following categories and weights: * Cost: 25% * Quote and application experience: 25% * Plan quality and customer satisfaction: 15% * Coverage: 15% * Accessibility: 10% * Financial stability: 10% Companies that make coverage widely available, have a streamlined quote and application process, offer robust features, and have strong ratings for financial stability and customer satisfaction topped our list. For more information, read our full [small business insurance methodology](https://www.investopedia.com/small-business-insurance-review-methodology-6979746) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Next Insurance. "[Business Insurance for 1300+ businesses](https://www.nextinsurance.com/industry/miscellaneous-insurance/)." 2. AM Best. "[AM Best Assigns Credit Ratings to Next Insurance US Company](https://news.ambest.com/newscontent.aspx?refnum=236082&altsrc=23)." 3. Crunchbase. "[Small Biz Insurer Next Insurance Raises $265M](https://news.crunchbase.com/venture/next-insurance-raise-ai-all-alv/)." 4. AM Best. "[Hiscox Insurance Company Inc](https://ratings.ambest.com/CompanyProfile.aspx?ambnum=3030&AltNum=6523030)." 5. NAIC. “[Hiscox Insurance Company, Inc](https://content.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=10200&:refresh).” 6. AM Best. "[AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries](https://news.ambest.com/presscontent.aspx?refnum=32797&altsrc=2)." 7. AM Best. "[Markel Insurance Company](https://ratings.ambest.com/companyprofile.aspx?ambnum=2699&altnum=23112699)." 8. AM Best. "[AM Best Affirms Credit Ratings of Berkshire Hathaway Homestate Insurance Company and Its Affiliates](https://news.ambest.com/PressContent.aspx?altsrc=2&refnum=31622)." 9. Trustpilot. "[biBerk Business Insurance](https://www.trustpilot.com/review/biberk.com)." 10. Trustpilot. "[Thimble Reviews](https://www.trustpilot.com/review/thimble.com)." 11. Thimble. "[Insurance Ratings](https://www.thimble.com/ratings)." 12. Arch Insurance. "[Arch Insurance Acquires Thimble](https://insurance.archgroup.com/arch-insurance-acquires-thimble/)." 13. The Hartford. "[Our History](https://www.thehartford.com/about-us/insurance-history)." 14. J.D. Power. “[2023 U.S. Small Commercial Insurance Study](https://www.jdpower.com/business/press-releases/2023-us-small-commercial-insurance-study).” 15. Chubb. "[Business Policy Insurance Policy](https://www.chubb.com/us-en/business-insurance/chubb-bop.html)." 16. Insurance Information Institute. "[Facts and Statistics: Commercial Lines](https://www.iii.org/fact-statistic/facts-statistics-commercial-lines)" 17. AM Best. "[AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries](https://news.ambest.com/PR/PressContent.aspx?refnum=32797&altsrc=2)." 18. State Farm. "[Product Growth](https://goodneighborcenter.statefarm.com/our-success/product-growth/index.html)." 19. Businesswire. "[AM Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries](https://www.businesswire.com/news/home/20220909005445/en/AM-Best-Affirms-Credit-Ratings-of-State-Farm-Mutual-Automobile-Insurance-Company-and-Its-Subsidiaries)." 20. NAIC. “[State Farm Fire & Cas Co National Complaint Index Report](https://content.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=25143&:refresh).” 21. Hiscox. "[2023 Hiscox Underinsurance Report](https://www.hiscox.com/documents/2023-hiscox-us-underinsurance-report.pdf)." Pages 3-4. 22. Next. "[90% of Small Business Owners Aren’t Confident That They Are Adequately Insured, According to Survey](https://www.nextinsurance.com/blog/survey-small-businesses-lack-confidence-adequate-insurance/)." 23. IRS. "[Publication 535 (2022), Business Expenses](https://www.irs.gov/publications/p535#en_US_2020_publink100078332)." 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[more](https://www.investopedia.com/terms/b/business-insurance.asp) [Commercial Lines Insurance: Definition, Types, vs. Personal Lines](https://www.investopedia.com/terms/c/commercial-insurance-lines.asp) Commercial lines insurance protects businesses from potential losses they can't afford to cover. [more](https://www.investopedia.com/terms/c/commercial-insurance-lines.asp) [Business Liability Insurance: Meaning, Overview, Types](https://www.investopedia.com/terms/b/business-liability-insurance.asp) Business liability insurance protects a company and/or business owner in the event of a formal lawsuit or any third-party claim. [more](https://www.investopedia.com/terms/b/business-liability-insurance.asp) [Business Owner's Policy (BOP): Definition, Coverage, Exclusions](https://www.investopedia.com/terms/business-owners-policy.asp) A business owner's policy (BOP) combines protection from all major property and liability risks into one package. They typically contain business interruption insurance, property insurance, and liability protection. [more](https://www.investopedia.com/terms/business-owners-policy.asp) [Garage Liability Insurance: What it is, How it Works](https://www.investopedia.com/terms/g/garage-liability-insurance.asp) Garage liability insurance is purchased by automobile dealerships and repair shops to cover property damage and bodily injury resulting from operations. [more](https://www.investopedia.com/terms/g/garage-liability-insurance.asp) [Casualty Insurance: Definition, Types, and Examples](https://www.investopedia.com/terms/c/casualtyinsurance.asp) Casualty insurance is a broad category of coverage against loss of property, damage, or other liabilities. This includes workers' compensation. [more](https://www.investopedia.com/terms/c/casualtyinsurance.asp)

Small business insurance protects you from damages and lost income when the unexpected happens—whether it's a lawsuit, a natural disaster, or an accident. A good policy could save you thousands of dollars or more if you ever face such unhappy circumstances. After extensive research, our experts found that Next is the best business insurance company overall because it offers a wide range of policy types and an easy online application process that lets you sign up in about 10 minutes. To choose the best commercial insurance companies for small businesses, we evaluated 19 national and regional insurers on 53 criteria in the following categories: cost, quote and application experience, customer satisfaction, coverage, accessibility, and financial stability. Our Top Pick Best Small Business Insurance Companies for May 2024 Best Overall: Next Best for Independent Contractors: Hiscox Best Restaurant Insurance: Huckleberry Best for Financial Stability: biBERK Best Budget Coverage: Thimble Best Workers' Compensation Insurance: The Hartford Best for Larger Small Businesses: Chubb Highest Customer Satisfaction: State Farm Use an insurance marketplace like Insureon to get matched to the best provider for your business. Best Small Business Insurance Companies for May 2024 Expand Best Small Business Insurance Companies for May 2024 Our Top Picks Next Hiscox Huckleberry biBERK Thimble The Hartford Chubb State Farm See More (5) Compare Providers Our Expert Picks for Small Business Insurance in Any State What Is Small Business Insurance? Types of Small Business Insurance Pros and Cons How Much Is Small Business Insurance? How to Choose Frequently Asked Questions (FAQs) Methodology Best Overall : Next Investopedia's Rating 4.8 Next Insurance Get a Quote Why We Chose It Next provides a way to get a wide range of affordable business insurance coverages entirely online in about 10 minutes. But you also have the option of speaking with a U.S.-based advisor in your area. Pros & Cons Pros Offers a live certificate of insurance for easy sharing Allows you to customize your business insurance policy with a variety of coverages 100% online quote and application with assistance available Cons Fewer specialized coverages than some other companies Overview Next offers a wide array of commercial insurance coverage types, which can be purchased online for same-day coverage. Next offers a business owner’s policy (general liability insurance and commercial property insurance), commercial auto insurance, workers' compensation coverage, professional liability insurance, tools & equipment insurance, and more. The company also offers a variety of digital policy management tools, including the ability to share a live certificate of insurance and quickly add an additional insured, free of charge. Monthly payments are available, and eligible customers can save up to 25% with discounts. Next Insurance has an A- (Excellent) financial strength rating with AM Best. However, other companies offer more enhancements and specialized coverages. Based in Palo Alto, California, Next was founded in 2016 and uses artificial intelligence and machine learning to streamline the insurance buying process. In November 2023, it raised $265 million in funding from Allstate and Allianz X—one of the largest rounds of funding raised in the insuretech industry that year, according to Crunchbase. The deals include a strategic partnership with Allstate to develop new commercial auto insurance products. Best for Independent Contractors : Hiscox Investopedia's Rating 4.7 Hiscox Get a Quote Why We Chose It Hiscox offers several solutions for freelancers that make the company our top pick for the best independent contractor insurance among small commercial insurance providers. Pros & Cons Pros Customization options for independent contractors Monthly payments with no fees Offers short-term liability insurance for business 100% online quote and application with assistance available Cons Higher than expected number of complaints with the NAIC Overview Hiscox offers a straightforward business owner’s policy (BOP) that can be customized with business interruption insurance, electronic data loss insurance, professional liability insurance, and more. You can also choose standalone policies for professional liability and general liability insurance, and you can get either coverage on demand for short-term projects. Plus, Hiscox allows you to pay for your business insurance policy in monthly payments, which can help freelancers better manage their cash flow.  Hiscox has an A (Excellent) rating with AM Best, indicating excellent financial strength; however, the company received somewhat more complaints than expected over the last three years given its size. This indicates that Hiscox may have issues with customer satisfaction, although the company did receive fewer complaints each year, indicating improvement. BOPs start at around $500 per year. You can get a business insurance quote online or speak with an agent by phone. You can also file claims online or by phone. Claims services can be accessed online 24/7. With roots dating back to 1901, Hiscox USA is based in Atlanta. It is part of the Hiscox Group, an international company with more than 3.000 employees. Best Restaurant Insurance : Huckleberry Investopedia's Rating 4.6 Huckleberry Get a Quote Why We Chose It Huckleberry offers a suite of essential restaurant insurance and food business insurance coverages that are suitable for brick-and-mortar restaurants, caterers, food trucks, and more. Pros & Cons Pros BOP policies underwritten by Markel and Chubb 100% online quote and application Wide range of customization options Cons Doesn’t offer employee benefits packages Overview Huckleberry, which is a broker that works with Chubb and Markel for its BOP policies, offers a restaurant endorsement as an add-on to its business owner’s policy. It’s a bundle of food-specific coverages that includes spoilage coverage, food contamination insurance, and ordinance or law equipment coverage, among others. Plus, you can add workers' comp, commercial auto, and liquor liability coverage to customize your business insurance policy as needed. Most policies are underwritten by Markel or Chubb. Both companies have excellent financial strength ratings from AM Best. Like Next Insurance, Huckleberry offers an entirely online quote and application process that allows you to get coverage for your small business quickly. And you can get a certificate of insurance online to share with clients in less than a minute. Huckleberry’s BOP includes general liability, commercial property, and business interruption insurance at a reasonable price. For example, a BOP for a food truck starts at $42 per month. Founded in 2017 in San Francisco, Huckleberry is now owned by payroll company Paychex, which operates the Paychex Insurance Agency. Best for Financial Stability : biBERK Investopedia's Rating 4.2 biBERK Get a Quote Why We Chose It biBERK has an A++ (Superior) financial strength rating from AM Best, the highest rating available, offers a wide range of industry-specific coverages, and is backed by Berkshire Hathaway. Pros & Cons Pros Backed by Berkshire Hathaway Group Online quote and application Excellent customer service reviews Dozens of endorsements to enhance a BOP Cons Doesn’t offer group employee benefits Overview biBERK Business Insurance is part of Berkshire Hathaway Group, which has decades of experience in the commercial insurance industry. BiBerk’s underwriters are all rated A++ (Superior) by AM Best, indicating a superior ability to meet financial obligations to policyholders. What’s more, you can get a quote and apply to receive coverage instantly, entirely online. Policyholders have great things to say about the service and coverage on third-party websites. biBERK can meet the needs of most small businesses, offering many commercial insurance options, such as business owner’s policies, commercial auto insurance, workers' compensation insurance, umbrella insurance, professional liability insurance, and general liability policies. You can add risk-specific endorsements and industry endorsements to your business owner’s policy, such as liquor liability and cyber liability coverage as well. BiBerk BOPs start at about $500 per year. BiBerk was founded in 2015 and is based in Omaha, Nebraska. Best Budget Coverage : Thimble Investopedia's Rating 4.0 Thimble Insurance Get a Quote Why We Chose It Thimble offers on-demand policies for general liability insurance starting at $17 per month. Pros & Cons Pros Offers monthly and on-demand coverage options Liability policies start at $17 per month Offers event insurance Occurrence-based policies Excellent reviews on Trustpilot Cons Doesn’t offer commercial auto insurance Overview Thimble is a great option for small businesses that need quick, temporary, affordable small business insurance, particularly those looking to purchase coverage for an event or on an on-demand basis. The company’s business owner’s policy includes general liability, commercial property insurance, and business interruption insurance, and you can also add professional liability, workers' compensation, and business equipment protection.  Customers on Trustpilot have great things to say about the ease of the application process. You can get a quote and purchase coverage online or in the app. Several reviews also pointed out that Thimble’s customer service team was communicative and responded quickly. Thimble works with several different insurance companies, each of which has an AM Best rating of at least A- (Excellent). Thimble policies are occurrence-based, which provides more robust coverage than claims-made policies. You’re covered for incidents that occurred while your business insurance policy was in force, even if you’ve since canceled it. Thimble, which has been selling small business insurance coverage since 2018, was bought by Arch Insurance in April 2023. Thimble is based in New York City. Best Workers' Compensation Insurance : The Hartford Investopedia's Rating 3.8 The Hartford Get a Quote Why We Chose It The Hartford has been around since 1810 and is one of the largest providers of workers' compensation insurance in the country. Pros & Cons Pros Pay-as-you-go billing options Access to a network of over 1 million providers 2nd-highest financial strength rating Start claims online Cons Poor J.D. Power ranking Overview The Hartford is a top pick among small business insurance providers for the best workers' compensation insurance. The company provides a large network of doctors and nurse case managers to help your employees get healthy, and pay-as-you-go billing options. When you choose to pay as you go, your premiums are based on actual payroll rather than estimates, which prevents overpayment. The Hartford also allows you to easily start a claim online. What's more, the company uses data analytics to provide injured workers with a toolkit to aid in faster recovery.  The insurer has an A+ (Superior) financial strength rating from AM Best; however, the company was ranked below average in the J.D. Power 2023 U.S. Small Commercial Insurance Study. The Harford is based in Hartford, Connecticut, and was founded in 1810. Best for Larger Small Businesses : Chubb Investopedia's Rating 3.5 Chubb Get a Quote Why We Chose It Chubb is ideal for larger small businesses because it supports businesses with revenue up to $30 million and offers a very wide range of coverage options. Pros & Cons Pros Supports businesses with up to $30 million in revenue Few complaints relative to Chubb’s market share Highest financial strength rating Many enhancements to customize a BOP  Cons Must speak with an insurance agent to start your business insurance policy Overview Chubb is one of the largest carriers (by annual premiums) of commercial insurance and has a well-regarded small business owner's policy. The company has relatively high revenue limits for its small commercial business owner's policies and offers a wide array of customized endorsements for a broad range of industries. You can enhance your business owner’s policy with electronic data liability coverage, professional liability insurance, a variety of property add-ons, crime coverage, equipment breakdown coverage, earthquake coverage (in certain states), and more. Workers' compensation, umbrella, commercial auto, and cyber risk coverages are also available. Chubb can offer an instant quote, and policies are generated instantly, but you will need to speak with an insurance agent to start your coverage. Chubb has an A++ (Superior) financial strength rating from AM Best and is ranked second for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study. Chubb Corporation dates its origins back to 1882. Chubb Insurance Group today is based in Warren, New Jersey. Highest Customer Satisfaction : State Farm State Farm Get a Quote Why We Chose It State Farm is one of the top-ranked companies for customer satisfaction in the J.D. Power 2023 U.S. Small Commercial Insurance Study and offers coverage for virtually any industry. Pros & Cons Pros Highest financial strength rating Customizable business owner’s policies with many coverage options Cons Must speak with an insurance agent to start your business insurance policy Overview State Farm has been meeting the needs of small businesses since 1935 and has superior ratings. The company has an B financial strength rating with AM Best. It's also ranked second in the J.D. Power 2023 U.S. Small Commercial Insurance Study. NAIC data reveals that State Farm has had just slightly fewer complaints than expected for its commercial liability policies. But, you’ll need to talk to an insurance agent to get coverage. Some business owners may prefer handling the entire transaction online. The company’s BOP covers commercial property insurance and general liability insurance, plus loss of income, equipment breakdown, and money and securities protection at no extra charge. You can add professional liability to the package as well. In addition, you can get commercial auto coverage, workers' compensation insurance, and many more coverages. You can also work with State Farm to provide benefits for your employees, such as group life, disability, and health insurance. State Farm was founded in 1922 in Bloomington, Illinois. Compare the Best Small Business Insurance Providers Company  Best for  AM Best Rating  BOP Revenue Limit  Buy & Receive Policy Online?  Next Business Insurance Overall  A- $8 million Yes  Hiscox  Independent Contractors  A  $5 million Yes Huckleberry  Restaurants  A++, A*  None Yes BiBerk  Financial Stability  A++  None Yes Thimble  Budget Coverage  A- through A+**  Not disclosed Yes The Hartford  Workers' Comp  A+  $50 million No Chubb  Larger Small Businesses  A++  $30 million  No  State Farm  Customer Satisfaction B Not disclosed  No  *Huckleberry's BOP policies are underwritten by Chubb, which has an AM Best financial stability rating of A++, and Markel, whose rating is A. **Thimble policies are underwritten by Benchmark Insurance Company (AM Best rating: A), Employers Insurance Group (A-), Markel Insurance Company (A), National Specialty Insurance Company (A), and Spinnaker Insurance Company (A-). Our Expert Picks for Small Business Insurance in Any State The size of your small business may dictate the type of business insurance you need and which insurance company is best for you. For a low-cost BOP and quick online coverage, compare quotes from Next, Huckleberry, and BiBerk. Independent contractors and event workers will be best served by Hiscox or Thimble. Consider The Hartford and BiBerk if you’re most concerned with workers' compensation. If you need extensive coverage, including an employee benefits package, you’ll be best served by companies like State Farm and Chubb.  Keep in mind that you may have specialized coverage needs for your industry that a standard business owner’s policy doesn’t include. Some companies offer more enhancements than others. When narrowing down your options, ensure you choose a provider that protects your business from common risks in your industry.  What Is Small Business Insurance? Business insurance, sometimes called commercial insurance, covers your business's assets and income in case of unexpected events during normal business operations, such as lawsuits, natural disasters, or accidents. There are many types of business insurance products, including coverage for property damage, legal liability, and employee-related risks, among others. A business owner's policy (BOP) includes general liability coverage, business property coverage, and business interruption coverage. You may also want to add other kinds of coverage such as for commercial cars, errors and omissions, and key employees. What Types of Small Business Insurance Are There? Type Who Needs It  When It Protects You General liability Any business If consumers, vendors, or other people outside your company claim your business harmed them or their property Commercial property Businesses that own or rent a property, or have equipment or records to protect   If a natural disaster harms your property or a thief steals your property  Business income Any business that depends on its property to generate income  If your business loses revenue because your property is damaged   Professional liability Lawyers, doctors, accounts, and others who provide services based on specialized expertise If a customer accuses you of negligence, malpractice, mistakes, or misrepresentation Workers' Compensation Businesses with employees. Most states require it  If a worker is injured on the job  Employment practices liability  Businesses with employees   If a worker alleges discrimination, harassment, wrongful termination, or other unfair employment practices  Product liability Businesses that sell products If someone claims your defective product caused bodily harm or injuries Commercial auto Businesses that use vehicles for operations or business owners who use their personal car for business If you or an employee are in a car accident while working or using a company car Commercial umbrella Businesses with high liability risks like lots of foot traffic, and those that could be hit with very expensive lawsuits. Often required for government contracts If a big unexpected event happens that causes damages beyond what your other insurance covers Cyber liability Businesses that virtually interact with customers and accept electronic payments If your business is hacked or suffers a data breach To learn more, read our article on types of business insurance. Pros and Cons of Small Business Insurance Pros Protects company assets Safeguards employees May fulfill legal or contractual obligations May boost the company’s reputation Cons Cost Exclusions, limitations, and availability issues Documentation requirements Adjustment and payment delays Pros of Small Business Insurance, Explained Protects company assets: Business insurance protects your company’s financial assets from losses resulting from damage to your property or third-party negligence claims. Safeguards employees: Workers’ compensation insurance pays the cost of medical treatment and lost wages for workers injured on the job. May fulfill legal or contractual obligations: State laws may require you to buy workers’ compensation, auto liability, or other types of insurance. Likewise, contracts you sign may require you to buy specific kinds of insurance, such as general liability or auto liability insurance. May boost the company’s reputation: When your business is insured, it’s a sign to customers and business associates that you care about your company and managing its risks. Cons of Small Business Insurance, Explained Cost: Business insurance premiums can be a significant expense, especially for a small company.Exclusions, limitations, and availability issues: All insurance policies exclude or restrict coverage for some risks. Insurers may refuse to cover some risks you want to insure or they may limit coverage you feel you need. Documentation requirements: Whether you’re applying for new insurance or filing a claim under an existing policy, you must comply with the insurer’s documentation requirements. Some insurers’ requirements can be cumbersome.Adjustment and payment delays: Once you’ve suffered a loss, you must file a claim and wait for an adjuster to assess the damage before making repairs. If the adjuster is slow to respond, repairs and claims payments may be delayed. How Much Does Small Business Insurance Cost? Investopedia's research into six insurers found that some insurers offer more affordable coverage than others, so you should gather quotes from at least three companies before you buy small business insurance. In general, a business owner's policy starts at $300 to $500 a year. The lowest premiums for professional liability also ranged from $300 to $500, and premiums for general liability insurance started at $200 to $400. Type of Coverage Lowest Cost (per year)  Business Owner’s Policy (BOP) $300 to $500 Professional Liability  $300 to $500  General Liability  $200 to $381  The price of a commercial insurance policy depends on several factors: Industry or profession: The type of business you have impacts your amount of risk. A construction company, garage, or restaurant will have many more liability risks than a retail store or office, for instance. Also, your business type may be required by law to have certain types of coverage. Business location: Businesses in high-crime areas or places prone to natural disasters will likely pay more for commercial property insurance than those in low-risk areas. State regulations and whether you rent or own your space also help determine your costs. Claims history: If you have a history of claims in the past, insurers may consider you a higher risk and charge you more. Number of employees and customers: The cost of workers' compensation insurance is based on the number of workers your business employs. Also, if you have a large customer base, that exposes your business to more liability and property risks.  Coverage needs: Choosing higher annual aggregate liability limits will increase your premiums, as will choosing a $0 deductible for your property insurance.  How Do I Know If I Need Small Business Insurance?  Whether your business needs insurance depends on the nature and size of your operations and the laws in your state. Most businesses need general liability insurance to protect themselves from third-party bodily injury or property damage claims. You should consider buying liability coverage if you manufacture or sell products, invite customers to your premises, or provide services at customers’ locations.  If your business owns buildings or other property that you use in your operations, you should consider buying property insurance. A commercial property policy protects your business against physical damage to property by a fire or other covered peril. It may also cover income you lose as a result of the physical damage.  Do you use cars or trucks in your business? If so, state law may require you to buy auto liability insurance. You’ll need to insure the vehicles under a commercial (not personal) auto policy. If you employ workers, state laws may require you to buy workers’ compensation insurance. And if your business involves offering advice or providing a professional service, you should consider buying professional liability insurance. Also called errors and omissions insurance, professional liability insurance covers third-party claims against your business for financial losses resulting from malpractice, errors, or mistakes you allegedly made while performing a professional service. While the cost of insurance for a small business may seem high, the cost of a big lawsuit could dwarf those expenses. So be sure to weigh those risks when deciding whether you need coverage or not. Expert Insight “If you’ve just started a business and are wondering about insurance, don’t assume your homeowners or renter’s policy will cover your business activities. Check with your insurer. If you employ workers, you’ll probably need to buy workers' compensation insurance. You should also consider general liability insurance, which protects your business from claims involving slip-and-falls and other common workplace accidents. As your business grows and accumulates assets, you may need additional coverages like commercial property and business auto insurance.” —Marianne Bonner, Investopedia insurance expert, consultant, and former commercial insurance underwriter Small-Business Insurance News Most small businesses have general liability coverage, but other types of insurance are less popular, according to a survey by Hiscox. The company said results showed that 75% of the respondents were underinsured. The 2023 Hiscox Underinsurance in Small Business Report surveyed 1,000 small businesses and found that: 65% had general liability coverage45% had property insurance35% had workers' compensation insurance32% had professional liability insurance Among those who had insurance, 68% said they bought it because they worried about the consequences of a claim. Only 20% said they got it because a partner or vendor required it. How to Choose a Small Business Insurance Company Here’s a step-by-step process for choosing the best insurance company for your small business: Ask trusted colleagues, business associates, or other business owners for recommendations.  Check online reviews of business insurers. This list is a good start, but check out reviews from several sources and compare the results. Look for insurers that rate highly in several reviews. Consider market share rankings from sources like the National Association of Insurance Commissioners. While large insurers aren’t necessarily better, most have a long track record and are financially stable. Review J.D.Power’s customer satisfaction rankings of small business insurers. Consider your preferred method of buying insurance. Do you want to buy a policy directly from an insurer or through an agent? Do you prefer buying insurance online or in person?   Once you have some insurers in mind, evaluate their financial strength by reviewing data from rating agencies such as AM Best and Moody’s Investors Services. Get quotes from the insurers you’ve selected (or their representative agents) and compare the results. When deciding between insurers, consider the coverages, limits, deductibles, and other features each offers, not just the price. Frequently Asked Questions (FAQs) Frequently Asked Questions Is Business Insurance Required? Generally, business insurance is optional unless it’s required by state law or the terms of a contract. For example, many states require workers’ compensation insurance or auto liability insurance if your company owns vehicles you use for business. Or a business contract you sign may require certain insurance. Say you own an electrical contracting business. You sign a deal with a general contractor in which you agree to install electrical panels in a building the contractor is constructing. The contract requires you to have general liability, auto liability, and workers' compensation insurance in place before you begin any work. What Does Small Business Insurance Cover? A business owner’s policy includes general liability insurance, commercial property insurance, and, often, business interruption insurance. General liability insurance covers lawsuits when your business is responsible for harming a third party. Commercial property insurance covers damage to your building. Business interruption insurance helps replace business income after a covered loss. What Does Small Business Insurance Exclude? Small business insurance excludes anything that you don’t specifically buy coverage for. For example, if you buy a business owner’s policy, but it doesn’t specifically include business personal property coverage, you won’t get coverage for the items inside your office or warehouse after a loss. There are also some disasters that are not typically covered. For example, you’ll need an endorsement to cover earthquakes and flooding. Certain catastrophic events, like war, won’t be covered at all. Commercial policies also won’t cover a loss if it’s covered by another policy. Do I Need Small Business Insurance If I Work From Home? If you have a home-based business, you still may need business insurance. Your homeowners policy may not be enough to cover your business equipment, inventory, or data, so you may need a separate business property insurance policy. You'll also want a liability policy if you're sued for damages caused by your products, services, or advice. And you may need business interruption insurance to cover losses from a natural disaster, theft, or equipment breakdown. Finally, if you have remote employees, you may need employers' liability insurance to cover you if they get injured, sick, or die because of their work. Do I Need Small Business Insurance If I Have an LLC? Yes, you need business insurance to protect your limited liability company (LLC) from lawsuits and property losses. Your personal assets are protected from lawsuits against your LLC, but that protection doesn’t extend to the LLC itself. Suppose a customer is injured at your business premises and sues your LLC for compensation. If your business has no liability insurance, it will have to pay legal fees and any damages or settlements awarded by a court. Your LLC may also be subject to property damage losses if it owns buildings, equipment, or other property that is damaged in a fire, say. Your LLC will have to use company assets to pay for repairs. You can protect your LLC from unexpected losses by purchasing general liability and commercial property insurance. What Percentage of Small Businesses Do Not Have Insurance? According to a Next insurance survey, 29% of small business owners have no insurance. Women are more likely than men to lack coverage. The survey found that 35% of female business owners don't have insurance, compared to 25% of male business owners. Is Small Business Insurance Tax-Deductible? Small business insurance premiums are generally tax-deductible if the insurance is considered "ordinary and necessary" for your business. This includes premiums for liability, commercial property, malpractice, workers' compensation (when required by law), commercial auto, business interruption, and overhead insurance. Life insurance for officers and employees if you aren't a beneficiary is also deductible. And if you're self-employed, you may be able to deduct premiums for health, dental, and qualified long-term care insurance for you, your spouse, and your dependents. Insurance Companies Our Experts Reviewed We researched and reviewed 18 companies to find the best eight companies you see above on this list. The companies that didn't make it to our list didn't score as well as competitors on one or more of our criteria, including measures of quality, cost, coverage, and customer experience.These are the companies we researched:NEXT Insurance, Chubb Ltd., CoverWallet, Thimble, Nationwide, biBerk, Hiscox, AmTrust Financial, Huckleberry, Insureon, The Hartford, Farmers, Geico, Travelers, Progressive, CNA, Liberty Mutual, State Farm Guide to Small Business Insurance What is business insurance? What is business liability insurance? What is a Business Owner's Policy (BOP)? How much does small business insurance cost? Types of business insurance Best General Liability Insurance for Small Businesses Best Commercial Business Insurance Best Sole Proprietor Insurance Best Business Owner’s Policy Insurance Best Health Insurance Companies for Small Businesses Why Trust Our Expert Small Business Insurance Reviews Investopedia launched in 1999, and has been helping readers find the best small business insurance since 2020. We conduct extensive research to provide unbiased, comprehensive reviews to ensure you make the right decisions for your needs. How We Choose the Best Small Business Insurance Companies In order to compile our list of the best commercial insurance companies for small businesses, we developed a comprehensive methodology. To identify which companies and criteria to include in our review, we analyzed business and market insight databases, considered commercial insurance company market share, looked at search data from Google, and reviewed company product pages and agents' guides to assess important product features.   With those findings in mind, we spent three months digging up information about 53 features on 19 insurance companies, including ratings for financial strength by AM Best, customer satisfaction rankings in the J.D. Power 2023 U.S. Small Commercial Insurance Study, and individual customer complaints reported to insurance state commissioners and recorded by the NAIC (National Association of Insurance Commissioners). We also considered nationwide availability; whether an online quote and application are available; and policy-specific features, including claim limits, cost, and coverage exclusions. The criteria determine how easy it is to procure a small business insurance policy from the company, the quality of that policy relative to its cost, and how likely customers are to be satisfied with the purchase process and their experience as a policyholder. We ranked each company according to the following categories and weights: Cost: 25%Quote and application experience: 25%Plan quality and customer satisfaction: 15%Coverage: 15%Accessibility: 10%Financial stability: 10% Companies that make coverage widely available, have a streamlined quote and application process, offer robust features, and have strong ratings for financial stability and customer satisfaction topped our list. For more information, read our full small business insurance methodology Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Next Insurance. "Business Insurance for 1300+ businesses." AM Best. "AM Best Assigns Credit Ratings to Next Insurance US Company." Crunchbase. "Small Biz Insurer Next Insurance Raises $265M." AM Best. "Hiscox Insurance Company Inc." NAIC. “Hiscox Insurance Company, Inc.” AM Best. "AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries." AM Best. "Markel Insurance Company." AM Best. "AM Best Affirms Credit Ratings of Berkshire Hathaway Homestate Insurance Company and Its Affiliates." Trustpilot. "biBerk Business Insurance." Trustpilot. "Thimble Reviews." Thimble. "Insurance Ratings." Arch Insurance. "Arch Insurance Acquires Thimble." The Hartford. "Our History." J.D. Power. “2023 U.S. Small Commercial Insurance Study.” Chubb. "Business Policy Insurance Policy." Insurance Information Institute. "Facts and Statistics: Commercial Lines" AM Best. "AM Best Affirms Credit Ratings of Chubb Limited and Its Subsidiaries." State Farm. "Product Growth." Businesswire. "AM Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries." NAIC. “State Farm Fire & Cas Co National Complaint Index Report.” Hiscox. "2023 Hiscox Underinsurance Report." Pages 3-4. Next. "90% of Small Business Owners Aren’t Confident That They Are Adequately Insured, According to Survey." IRS. "Publication 535 (2022), Business Expenses." Related Articles Best Food Truck Insurance Companies of 2024 Best Independent Contractor Insurance Companies of 2024 Best General Liability Insurance for Small Business of 2024 5 Best Contractor Liability Insurance Companies Best Commercial Business Insurance Companies Best Food Liability Insurance of 2024 Related Terms What Is Commercial Insurance? Commercial insurance, or business insurance, is coverage purchased by businesses to protect them from the costs of unexpected events during normal operations. more Commercial Lines Insurance: Definition, Types, vs. Personal Lines Commercial lines insurance protects businesses from potential losses they can't afford to cover. more Business Liability Insurance: Meaning, Overview, Types Business liability insurance protects a company and/or business owner in the event of a formal lawsuit or any third-party claim. more Business Owner's Policy (BOP): Definition, Coverage, Exclusions A business owner's policy (BOP) combines protection from all major property and liability risks into one package. They typically contain business interruption insurance, property insurance, and liability protection. more Garage Liability Insurance: What it is, How it Works Garage liability insurance is purchased by automobile dealerships and repair shops to cover property damage and bodily injury resulting from operations. more Casualty Insurance: Definition, Types, and Examples Casualty insurance is a broad category of coverage against loss of property, damage, or other liabilities. This includes workers' compensation. more

https://www.investopedia.com/terms/p/product_recall.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-product-recall"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Product Recall? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A product recall is the process of retrieving defective and/or potentially unsafe goods from consumers while providing those consumers with compensation. Recalls often occur as a result of safety concerns over a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/manufacturing.asp" rel="noopener noreferrer">manufacturing</a> defect in a product that may harm its user. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> A product recall may be voluntary or mandated by a regulatory body such as the Consumer Product Safety Commission (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumer-product-safety-commission.asp" rel="noopener noreferrer">CPSC</a>) in the U.S. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Product recalls occur as a result of safety or quality concerns related to a manufacturing or design defect in a product that may harm its users.</li><li>Recalls may negatively affect a company's stock as they are expensive and can damage a firm's reputation, leading to declining sales.</li><li>Recalls may be done voluntarily if the company believes it will be more cost-effective rather than wait for lawsuits or mandated recalls.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-product-recall-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How a Product Recall Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> While the process behind a recall can vary depending on local laws, there are some general steps that occur. For example, if a pet food manufacturer releases a batch of product that contains an ingredient that may accidentally poison animals, the company will publicly announce the dangers of the food and request that its customers return the product to the firm, or simply discard it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Customers will usually be given a full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/refund.asp" rel="noopener noreferrer">refund</a> or replacement. A <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/public-relations-pr.asp" rel="noopener noreferrer">public relations</a> campaign is often created to handle the publicity surrounding the event. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Recalls may negatively affect a company's stock price. If concerns grow over a company's status or reputation when a dangerous product is released customers may turn away from purchasing its goods in the future, leading to lower revenues and profits. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Some recalls may result in the outright ban of an item, while others may simply ask consumers to self-return a defective item for replacement or repair. In certain examples, such as an automobile recall, a seller may provide a new part or perform a diagnostic that reduces the danger of using the product at no cost to the consumer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Note that manufacturers are often able to purchase <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/product-recall-insurance.asp" rel="noopener noreferrer">product recall insurance</a> policies to cover the expenses and financial losses related to a recall if it were to arise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-examples-of-product-recalls"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Examples of Product Recalls </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Recalls can occur in any industry and for several different reasons. Below are just three examples of product recalls. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Airbags </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Tens of millions of vehicles have been recalled in recent years over concerns that the airbags they have, made by the Takata company, are defective. The National Highway Traffic Safety Administration (NHTSA) reported that long-term exposure to high heat and humidity can cause these airbags to explode and injure passengers when deployed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> This particular recall included the phasing and prioritizing of repairs, as all of the replacement parts could not be made available right away and certain vehicles were at much higher risk of a dangerous airbag explosion than others. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Peanut Butter </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> In 2009, a major salmonella outbreak from peanut butter products processed by Peanut Corp. of America reportedly killed a number of people and sickened hundreds more. Thousands of products containing potentially-tainted peanut butter sold by a large number of different companies were associated with the massive recall. Peanut Corp. went out of business shortly afterward, and the industry took a major hit as a result. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Toys </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Several toy makers, including Mattel and Fisher-Price, were forced to recall millions of their children's toys in the mid-2000s due to excessive amounts of lead in the paint of the products. These unsafe toys had been primarily manufactured in Chinese factories at low cost. </p></div>

## What Is a Product Recall? A product recall is the process of retrieving defective and/or potentially unsafe goods from consumers while providing those consumers with compensation. Recalls often occur as a result of safety concerns over a [manufacturing](https://www.investopedia.com/terms/m/manufacturing.asp) defect in a product that may harm its user. A product recall may be voluntary or mandated by a regulatory body such as the Consumer Product Safety Commission ([CPSC](https://www.investopedia.com/terms/c/consumer-product-safety-commission.asp)) in the U.S. ### Key Takeaways * Product recalls occur as a result of safety or quality concerns related to a manufacturing or design defect in a product that may harm its users. * Recalls may negatively affect a company's stock as they are expensive and can damage a firm's reputation, leading to declining sales. * Recalls may be done voluntarily if the company believes it will be more cost-effective rather than wait for lawsuits or mandated recalls. ## How a Product Recall Works While the process behind a recall can vary depending on local laws, there are some general steps that occur. For example, if a pet food manufacturer releases a batch of product that contains an ingredient that may accidentally poison animals, the company will publicly announce the dangers of the food and request that its customers return the product to the firm, or simply discard it. Customers will usually be given a full [refund](https://www.investopedia.com/terms/r/refund.asp) or replacement. A [public relations](https://www.investopedia.com/terms/p/public-relations-pr.asp) campaign is often created to handle the publicity surrounding the event. Recalls may negatively affect a company's stock price. If concerns grow over a company's status or reputation when a dangerous product is released customers may turn away from purchasing its goods in the future, leading to lower revenues and profits. Some recalls may result in the outright ban of an item, while others may simply ask consumers to self-return a defective item for replacement or repair. In certain examples, such as an automobile recall, a seller may provide a new part or perform a diagnostic that reduces the danger of using the product at no cost to the consumer. Note that manufacturers are often able to purchase [product recall insurance](https://www.investopedia.com/terms/p/product-recall-insurance.asp) policies to cover the expenses and financial losses related to a recall if it were to arise. ## Examples of Product Recalls Recalls can occur in any industry and for several different reasons. Below are just three examples of product recalls. ### Airbags Tens of millions of vehicles have been recalled in recent years over concerns that the airbags they have, made by the Takata company, are defective. The National Highway Traffic Safety Administration (NHTSA) reported that long-term exposure to high heat and humidity can cause these airbags to explode and injure passengers when deployed. This particular recall included the phasing and prioritizing of repairs, as all of the replacement parts could not be made available right away and certain vehicles were at much higher risk of a dangerous airbag explosion than others. ### Peanut Butter In 2009, a major salmonella outbreak from peanut butter products processed by Peanut Corp. of America reportedly killed a number of people and sickened hundreds more. Thousands of products containing potentially-tainted peanut butter sold by a large number of different companies were associated with the massive recall. Peanut Corp. went out of business shortly afterward, and the industry took a major hit as a result. ### Toys Several toy makers, including Mattel and Fisher-Price, were forced to recall millions of their children's toys in the mid-2000s due to excessive amounts of lead in the paint of the products. These unsafe toys had been primarily manufactured in Chinese factories at low cost.

What Is a Product Recall? A product recall is the process of retrieving defective and/or potentially unsafe goods from consumers while providing those consumers with compensation. Recalls often occur as a result of safety concerns over a manufacturing defect in a product that may harm its user. A product recall may be voluntary or mandated by a regulatory body such as the Consumer Product Safety Commission (CPSC) in the U.S. Key Takeaways Product recalls occur as a result of safety or quality concerns related to a manufacturing or design defect in a product that may harm its users.Recalls may negatively affect a company's stock as they are expensive and can damage a firm's reputation, leading to declining sales.Recalls may be done voluntarily if the company believes it will be more cost-effective rather than wait for lawsuits or mandated recalls. How a Product Recall Works While the process behind a recall can vary depending on local laws, there are some general steps that occur. For example, if a pet food manufacturer releases a batch of product that contains an ingredient that may accidentally poison animals, the company will publicly announce the dangers of the food and request that its customers return the product to the firm, or simply discard it. Customers will usually be given a full refund or replacement. A public relations campaign is often created to handle the publicity surrounding the event. Recalls may negatively affect a company's stock price. If concerns grow over a company's status or reputation when a dangerous product is released customers may turn away from purchasing its goods in the future, leading to lower revenues and profits. Some recalls may result in the outright ban of an item, while others may simply ask consumers to self-return a defective item for replacement or repair. In certain examples, such as an automobile recall, a seller may provide a new part or perform a diagnostic that reduces the danger of using the product at no cost to the consumer. Note that manufacturers are often able to purchase product recall insurance policies to cover the expenses and financial losses related to a recall if it were to arise. Examples of Product Recalls Recalls can occur in any industry and for several different reasons. Below are just three examples of product recalls. Airbags Tens of millions of vehicles have been recalled in recent years over concerns that the airbags they have, made by the Takata company, are defective. The National Highway Traffic Safety Administration (NHTSA) reported that long-term exposure to high heat and humidity can cause these airbags to explode and injure passengers when deployed. This particular recall included the phasing and prioritizing of repairs, as all of the replacement parts could not be made available right away and certain vehicles were at much higher risk of a dangerous airbag explosion than others. Peanut Butter In 2009, a major salmonella outbreak from peanut butter products processed by Peanut Corp. of America reportedly killed a number of people and sickened hundreds more. Thousands of products containing potentially-tainted peanut butter sold by a large number of different companies were associated with the massive recall. Peanut Corp. went out of business shortly afterward, and the industry took a major hit as a result. Toys Several toy makers, including Mattel and Fisher-Price, were forced to recall millions of their children's toys in the mid-2000s due to excessive amounts of lead in the paint of the products. These unsafe toys had been primarily manufactured in Chinese factories at low cost.

https://www.investopedia.com/best-pos-system-for-restaurants-5081264

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Fifty-two percent of restaurant owners cite high operating and food costs as challenges to their bottom line, according to Toast's Restaurant Success report.<span class="ql-inline-citation" data-cite="1"></span> In response, restaurateurs use point of sale (POS) systems to track inventory, process payments, and analyze sales. Moreover, with robust software, restaurant owners can efficiently manage employees, accept online orders, and otherwise try to squeeze every bit of profit from each operating dollar.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> To uncover the best of the best, we researched more than two dozen top POS systems for restaurants. To narrow down our decision, we compared plans, features, and hardware options. Plus, we looked for solutions with extra services and plenty of customer support. Here are our top picks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The 7 Best POS System for Restaurants of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://appwiki.nl/link/brand/GjEXJ0o4pzqIIXpYK58Jmeem5Z0cWjVw" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> TouchBistro</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Free Option:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://square.sjv.io/c/2104074/1653711/9398" rel="nofollow noskim noopener nocaes" target="_blank"> Square</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Dine-In Restaurants:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-upserve?cid=632db61ea182c" rel="nofollow noskim noopener nocaes" target="_blank"> Upserve</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Carry-Out:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=62&amp;aff_id=1028" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Lightspeed</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Food Trucks:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-clover?cid=632db61ea182c" rel="nofollow noskim noopener nocaes" target="_blank"> Clover</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Bars:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-revel?cid=632db61ea182c" rel="nofollow noskim noopener nocaes" target="_blank"> Revel</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Loyalty Features:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://appwiki.nl/link/brand/v9nalYwrhFHj7UqJPPXlNxN6PGVebvg4" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Toast</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best POS System for Restaurants</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best POS System for Restaurants" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best POS System for Restaurants</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-TouchBistro" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-TouchBistro" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-touchbistro" rel="nocaes"> <span class="link__wrapper">TouchBistro</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Square" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Square" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-free-option-square" rel="nocaes"> <span class="link__wrapper">Square</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Upserve" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Upserve" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-dine-in-restaurants-upserve" rel="nocaes"> <span class="link__wrapper">Upserve</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Lightspeed" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Lightspeed" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-carry-out-lightspeed" rel="nocaes"> <span class="link__wrapper">Lightspeed</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Clover" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Clover" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-food-trucks-clover" rel="nocaes"> <span class="link__wrapper">Clover</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Revel" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Revel" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-bars-revel" rel="nocaes"> <span class="link__wrapper">Revel</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Toast" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Toast" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-loyalty-features-toast" rel="nocaes"> <span class="link__wrapper">Toast</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (4)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How Does a POS System Help Restaurant Owners?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-does-a-pos-system-help-restaurant-owners" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">How Does a POS System Help Restaurant Owners?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Does a POS System Include?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-does-a-pos-system-include" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">What Does a POS System Include?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Are the Types of POS?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-are-the-types-of-pos" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">What Are the Types of POS?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Are the Expected Costs of a POS System for Restaurants?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-are-the-expected-costs-of-a-pos-system-for-restaurants" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">What Are the Expected Costs of a POS System for Restaurants?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-pos-systems-for-restaurants" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-touchbistro"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> TouchBistro</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="TouchBistro" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/AI_eJiwpFWmQ3NqfWq_m96aT5vk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Touch_bistro-4a02edbda1cc404d9e2395c44c369757.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="TouchBistro" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/AI_eJiwpFWmQ3NqfWq_m96aT5vk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Touch_bistro-4a02edbda1cc404d9e2395c44c369757.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> TouchBistro</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with TouchBistro" data-retailer-type="other" data-tracking-container="true" href="https://appwiki.nl/link/brand/GjEXJ0o4pzqIIXpYK58Jmeem5Z0cWjVw" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> As an industry leader, TouchBistro provides customizable options with tons of capability. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Only need an iPad to start</p></li> <li><p>Software includes inventory management</p></li> <li><p>Comprehensive customer support center</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Credit card processing fees aren’t listed on site</p></li> <li><p>Online ordering is an extra fee</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Founded in 2010, TouchBistro supports unlimited users and provides free 24/7 support. It's created specifically for restaurants and is our top choice for best overall POS software for restaurants. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> POS software licenses start at $69 a month and include:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> <li>Menu and table management</li> <li>Integrated payment processing</li> <li>Cloud-based reporting and analytics</li> <li>Restaurant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inventory-management.asp">inventory management</a> </li> <li>Unlimited logins and users for restaurant management and staff</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> To get started, you'll only need an iPad. But, you can choose from all types of hardware to fully equip your restaurant. TouchBistro uses POS hardware partners to supply add-ons such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> <li>Self-serve kiosks</li><li>Kitchen display systems</li><li>Customer-facing displays</li><li>Digital menu boards</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> You'll pay extra fees for payment processing, but you can choose from many companies that partner with TouchBistro to find the best rates for your restaurant. You can also select add-on features like reservations, online ordering, and gift cards. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> TouchBistro integrates with many popular programs, including QuickBooks, Sage, and 7Shifts. The company offers a comprehensive customer service lineup, from videos and self-diagnostic tools to 24/7 phone support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-free-option-square"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Free Option</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Square</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-11" style="--imgWidth: 191px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Square" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/RQGS1YiFwECS4o-z5RoUwZgo1Mg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Square-12d58e554d3d4c2da7e3af83d540f964.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Square" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/RQGS1YiFwECS4o-z5RoUwZgo1Mg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Square-12d58e554d3d4c2da7e3af83d540f964.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p> Square</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-12"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Square" data-retailer-type="other" data-tracking-container="true" href="https://square.sjv.io/c/2104074/1653711/9398" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> A free solution (only pay payment processing) to oversee your eatery and make ordering easy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-14"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free for unlimited devices and users - Only pay for payment processing.</p></li> <li><p>Payment processing included with POS</p></li> <li><p>Easy to get started</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free plan doesn’t offer 24/7 support</p></li> <li><p>Limited sales analytics</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <div class="comp theme-offer mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-15"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p><a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://square.sjv.io/c/2104074/1653711/9398" rel="nofollow">Get 20% off</a> your first Square POS hardware device with code <strong>DDSquare</strong>. Valid 4/3/23-6/30/23.</p> <p><br/></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-offer mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> Since 2009, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/tech/021017/square.asp">Square</a> has provided free and paid POS options to merchants of all stripes. Its free POS system offers integrated payment processing and can be used on unlimited devices, making it a clear winner for the best free POS software.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> The free plan provides table and menu management, an order manager, and an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/service-charge.asp">auto gratuity</a> feature, though you won't get tools like live reporting with the free version. To get advanced services, you can sign up for their $60 a month plan or even the premium plan which does not disclose its price. Some add-on services like payroll and loyalty are an extra charge no matter your tier. Square services integrate with many programs, including:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> <li>7Shifts</li><li>QuickBooks</li><li>Xero</li><li>Chowly</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> To get started, you'll need your own iPad or iPhone plus the free magstripe reader. You can buy a Square terminal or a contactless and chip reader too. The company offers financing options to make paying for equipment easier. Use its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://squareup.com/us/en/point-of-sale/restaurants/calculator" rel="sponsored nofollow">online equipment calculator</a> to see the prices and various configurations of dozens of devices and other hardware like:   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> <li>Restaurant stations</li><li>Printers</li><li>Printer-driven cash drawers</li><li>Terminals</li><li>WiFi systems</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Square doubles as a credit card processor, so you'll pay 2.6% plus $0.10 per credit card transaction. With the free plan, you'll get access to customer service during select business hours. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-dine-in-restaurants-upserve"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Dine-In Restaurants</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Upserve</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-22" style="--imgWidth: 41px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Upserve" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/pITvc4cPNEBJ8wrOIHYlfqALLUc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Upserve-70d2e887a82c4db9b095642c477d414a.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Upserve" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/pITvc4cPNEBJ8wrOIHYlfqALLUc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Upserve-70d2e887a82c4db9b095642c477d414a.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Upserve</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-23"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Expert Market" data-retailer-type="other" data-tracking-container="true" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-upserve?cid=632db61ea182c" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> Optimize your dine-in menu, oversee your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing-plan.asp" rel="noopener noreferrer">marketing</a>, and train employees all from one POS system. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-25"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Live mobile app</p></li> <li><p>Built-in marketing program</p></li> <li><p>Tons of reporting features</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Expensive when adding terminals</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Upserve got its start in 2009 and stands out as a flexible, restaurant-ready POS software with feature-rich options, including a training mode. Upserve places first in our best for dine-in restaurants category.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> The company offers three plans that come with various features. All programs offer tools such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> <li>Training mode</li><li>Built-in credit card processing</li><li>Sales, labor, and product analytics</li><li>Upserve marketing program</li><li>Reputation management </li><li>Live mobile app</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Upserve categorizes its plans as the starter version called the Core plan, the most popular Pro plan, and the Pro Plus enterprise program. All include integrated credit card processing through Upserve Payments. Although the processing fees vary, you will be told upfront what your fee per transaction will be. The costs per plan are: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> <li><strong>Core plan: </strong>$59 per month subscription plus $60 per terminal. Includes all features listed above</li><li><strong>Pro plan: </strong>$199 per month plus $50 per terminal. Adds tons of features like menu optimization, server performance, and a loyalty program</li><li><strong>Pro Plus plan:</strong> $359 per month plus $40 per terminal. Adds features such as enterprise management and API data for custom integrations</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> Upserve offers financing options for its systems and equipment. You can choose from hardware such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> <li>Tableside units</li> <li>POS terminals</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emv.asp">EMV</a> readers</li> <li>Printers</li> <li>Kitchen display systems</li> <li>Wireless networking</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> Along with offering extra services for loyalty, inventory, and advanced reporting features, this POS software integrates with many programs such as:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> <li>Chowly</li><li>Hot Schedules</li><li>Resy</li><li>OpenTable</li><li>Grubhub </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> You'll get access to 24/7 customer support and a dedicated support channel. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-carry-out-lightspeed"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Carry-Out</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Lightspeed</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-36" style="--imgWidth: 105px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="LightSpeed" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/-XrG-f3W_jChe368iwScer20V9I=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Lightspeed-80e9dad9085e4195bccfcacdb8ad3667.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="LightSpeed" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/-XrG-f3W_jChe368iwScer20V9I=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Lightspeed-80e9dad9085e4195bccfcacdb8ad3667.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> LightSpeed</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-37"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Lightspeed" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=62&amp;aff_id=1028" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> Lightspeed offers order flexibility and low-priced add-ons for delivery and loyalty programs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-39"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Robust 24/7 customer support</p></li> <li><p>Quick Service Mode</p></li> <li><p>Good for carryout</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Payment processing is a separate service</p></li> <li><p>Extra fees for delivery integration</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> Founded in 2005, Lightspeed is the oldest POS system on the list and provides versatile carry-out features, which is why it tops our list for best POS systems for carry-out.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> You'll pay $69 per month to get all the standard features, with an extra register costing $34 per month. The highlights for carry-out orders include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> <li>Manage your own delivery and carry out orders to avoid third party fees.</li><li>Seamlessly send orders to your POS.</li><li>Let customers order ahead. </li><li>Allow mobile ordering. </li><li>Quick Service Mode suits a pay-at-order workflow.</li><li>And much more.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> The necessary hardware you'll need is a receipt printer, cash drawer, payment terminal, kitchen printer, Lightspeed server, iPad, and stand. However, you'll have tons of options for hardware, from Lightspeed's iPad hardware kit to software and hardware add-ons that start at $12 per month like: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> <li>Customer-facing displays</li><li>Kitchen display systems</li><li>Advanced reporting features</li><li>Self-order table menus</li><li>A restaurant website </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> Lightspeed provides plenty of integrations for software commonly used by restaurant owners such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> <li>7Shift</li><li>BevSpot</li><li>Chowly</li><li>RapidBar</li><li>Zenchef</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> You can choose your own credit card processing service or add on Lightspeed Payments. For tapped, inserted, or swiped cards you’ll pay 2.6% plus $0.10. If you manually key-in a card you’ll pay 2.6% plus $0.30. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> Its robust support options give restaurateurs the support they need with a full lineup of customer service including 24/7 phone or email support, webinars, demos, and videos. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-food-trucks-clover"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Food Trucks</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Clover</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-49" style="--imgWidth: 177px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Clover" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/mu3KB8mQdHA9d4vBt7SVvj-gL00=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Clover-fd99c2c2a6d2474a82c7f77317ea3e02.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Clover" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/mu3KB8mQdHA9d4vBt7SVvj-gL00=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Clover-fd99c2c2a6d2474a82c7f77317ea3e02.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Clover</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Expert Market" data-retailer-type="other" data-tracking-container="true" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-clover?cid=632db61ea182c" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51"> Clover delivers space-saving POS equipment perfect for restaurants on the go. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-52"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Hand-held POS system</p></li> <li><p>Low monthly price</p></li> <li><p>Built-in credit card processing</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Integrations must go through the Clover app market</p></li> <li><p>Not all hardware works with Clover Flex</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Since 2010, Clover has provided standalone payment and POS systems while partnering with many outlets, including Sam's Club, to sell hardware. Clover's Flex system puts a POS in the palm of your hand, making it the best choice for food trucks.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> With the Clover Flex all-in-one system, you'll pay $599 for the hardware. With the flex, you can accept all payment types including tracking payments, all your data is stored in the cloud, you can run a loyalty program, and much, much more. It comes with an all-day battery, and Clover offers a convenient three-month payment plan if you cannot afford to pay the $599 all at once. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> You'll have two options to choose from for the Clover software and payment processing: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> <li><strong>Register Lite:</strong> $9.95 per month plus credit card processing of 2.7% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactions</li><li><strong>Register:</strong> $39.95 per month plus credit card processing of 2.3% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactions</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Both the Register Lite and Register monthly plans include features like: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> <li>Employee and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/payroll.asp">payroll</a> management </li> <li>Sales, tax, and payroll reports</li> <li>Remote monitoring of activity, sales, and refunds</li> <li>Credit card processing</li> <li>Item-level analytics</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> If you decide to open a full-service restaurant or need additional equipment, Clover offers a full line of hardware and equipment options, from printers to full-size POS systems. However, not all devices integrate with the Flex system. The company also provides a Clover App Market, where you can find more than 200 apps and integrations. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> To get help with your Clover products, the company offers 24/7 phone support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-bars-revel"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Bars</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Revel</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-61" style="--imgWidth: 708px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Revel" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/KWmOCnS9TJ_MLQynHTASWpHVdS4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Revel-cadb26fdf8814df98fde641b7b65c012.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Revel" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/KWmOCnS9TJ_MLQynHTASWpHVdS4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Revel-cadb26fdf8814df98fde641b7b65c012.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Revel</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-62"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Expert Market" data-retailer-type="other" data-tracking-container="true" href="https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-revel?cid=632db61ea182c" id="button_1-0-5" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-63"> An intuitive POS system that integrates with popular bar software. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-64"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Integrates with bar and management software</p></li> <li><p>Offers an age prompt feature</p></li> <li><p>24/7 customer support</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Credit card processing is an extra service</p></li> <li><p>Three-year contract required for best price</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65"> Revel's been a top choice for restaurant and <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/011216/economics-owning-bar.asp">bar owners</a> since 2010. The software provides bar-specific features, making Revel the best POS system for bars.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> You'll pay $99 per month per terminal when billed annually with a three-year Revel Advantage contract. You'll get great tools for bars like age prompts and pre-authorized payments. Other POS features include:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> <li>Inventory management</li><li>Employee management</li><li>Customer relationship management</li><li>Reporting and analytics</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> The cloud-based POS system offers tons of equipment options on their website like:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> <li>iPads and stands</li><li>Self-service kiosks</li><li>Payment devices</li><li>Printers</li><li>Barcode scanners</li><li>Internet networking equipment</li><li>Cash drawers</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> You can add integrated payment processing for a fee per transaction, using Revel Advantage. The fees are not posted online. You must request a quote. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> With Revel, you'll also benefit from bar-based and business integrations such as:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> <li>Digital Pour</li><li>Vines OS</li><li>Gratuity Solutions</li><li>7Shifts</li><li>Hot Schedules</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> And with 24/7 phone and online support, including help with setup, you can quickly add a Revel POS system to your bar. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-for-loyalty-features-toast"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Loyalty Features</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Toast</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-74" style="--imgWidth: 240px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Toast" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/d5P_nlCzIRiotYsEdmOaPWTVEEI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Toast-2b5f4ec84dfb49d7b7ad3910ce8ce979.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Toast" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/d5P_nlCzIRiotYsEdmOaPWTVEEI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Toast-2b5f4ec84dfb49d7b7ad3910ce8ce979.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p> Toast</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-75"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Toast" data-retailer-type="other" data-tracking-container="true" href="https://appwiki.nl/link/brand/v9nalYwrhFHj7UqJPPXlNxN6PGVebvg4" id="button_1-0-6" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> A capable POS system with an available feature-rich loyalty program. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-77"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Guest feedback management program</p></li> <li><p>Built-in credit card processing</p></li> <li><p>Intuitive, easy-to-use, loyalty program</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No fees listed for optional services</p></li> <li><p>Only Growth plan comes standard with its loyalty program</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78"> Founded in 2011, Toast is a well-known name in the industry. Along with POS services, Toast offers a robust <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loyalty-program.asp">loyalty program</a>, making it the best POS software for loyalty features. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79"> Select the Growth plan (from $340 a month) to get the loyalty program as part of your package. If you opt for the Starter plan (from $0 a month) or Essentials plan (from $165 a month), you’ll pay an extra fee per month to add the loyalty program. All three programs provide:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-80"> <li>Order, table, and menu management</li><li>Reporting and analytics</li><li>Guest feedback</li><li>Payment processing services</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-81"> The Essential plan adds online delivery and ordering and a Toast takeout app. You'll get gift card, marketing, and loyalty programs integrated into the Growth plan. The customizable, point-based loyalty program offers easy check-out opt-in, and accounts are linked to restaurant guests' credit cards.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> When it comes to payment processing, Toast doesn't post pricing online. They will work with your business to find a rate that works for your situation. Toast promises clear pricing with no hidden fees. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-83"> For hardware, Toast has a variety of products and bundles to fit your needs. One starter bundle comes with a Toast Flex system, POS and credit processing software, Toast Tap, and a router. They ask that you schedule a demo before seeing the price. You can also buy extra equipment like: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84"> <li>Guest-facing displays</li><li>Toast Go handheld</li><li>Toast Flex for kitchens</li><li>Kiosks</li><li>Printers</li><li>Cash drawers</li><li>EMV card readers</li><li>Barcode scanners</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-85"> Toast also integrates with most restaurant software, including 7Shifts, Chowly, and BevSpot. And for service, you can reach out for help via phone, email, chat, or submit a ticket on their site. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0"> <span class="heading-toc" id="toc-how-does-a-pos-system-help-restaurant-owners"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does a POS System Help Restaurant Owners?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>On a basic level, a POS system captures transaction data to maintain inventory and revenue numbers in real-time. But, excellent POS systems deliver this information to your smartphone or home devices, so you can track action even if you're not at work. </p><p>You can use your POS to simplify restaurant processes, from order entry to payment, while reducing errors. And with impressive reporting features, restaurant owners use the data to make informed decisions about staffing, inventory, and menu changes. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-1"> <span class="heading-toc" id="toc-what-does-a-pos-system-include"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does a POS System Include?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can turn an iPad into a POS with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cloud-computing.asp">cloud software</a>. However, most restaurants use a complete system that connects your POS to one or more kitchen and bar printers. Along with the software, you'll want a device for your office, like a desktop, printers at each server station or cash register, and printer units in the kitchen. For credit card processing, you'll add an EMV card reader near registers, as well. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-2"> <span class="heading-toc" id="toc-what-are-the-types-of-pos"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Types of POS?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Your POS software works on many devices, making it easy to customize your hardware to what your store needs. For example, food trucks appreciate handheld options, while quick-service restaurants may want self-service kiosks. </p><p>However, for the majority of POS systems, you can simply hook up your iPad and create a POS anywhere. A typical restaurant may use a POS with a register for carry-out and delivery orders while providing servers with a standalone POS system or iPad-connected system for inputting orders. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-3"> <span class="heading-toc" id="toc-what-are-the-expected-costs-of-a-pos-system-for-restaurants"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Expected Costs of a POS System for Restaurants?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Whether you're using an iPad or a POS terminal, the initial equipment costs can get pricey. Since most restaurants also need multiple printers for the back of house and front of house services, you'll need to figure in the prices for these as well. Fortunately, most POS providers offer financing or payment plans to manage your initial costs. Monthly costs and fees ranges include: </p><ul><li><strong>Monthly POS software costs:</strong> Free to $359+ per month</li><li><strong>Credit card processing expenses: </strong>2.49% to 3.89%<strong> </strong>plus $0 to $0.15 per transaction</li><li><strong>Extra services:</strong> $12 and up per extra service, like payment processing or payroll, per month</li></ul></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-how-we-chose-the-best-pos-systems-for-restaurants"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> How We Chose the Best POS Systems for Restaurants </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> After looking over more than two dozen POS systems, these seven made our list as the best POS systems for restaurants. We reviewed individual plans, features, and hardware to assess overall costs. Then we figured in various add-on services and integrations specific to certain categories such as loyalty or bar features. Of course, customer support is vital for restaurant owners, so we ensured that each of our top picks provided top-notch support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="POS System for Restaurants" class="primary-image__image mntl-primary-image--blurry" height="3648" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/y5YwpEKsD62ydE_JqJgF78cOqLE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg" srcset="https://www.investopedia.com/thmb/Svohqrlhc2Mjn3Tn5qrCuPM8wuY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="5472"/> <noscript> <img alt="POS System for Restaurants" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="3648" sizes="750px" src="https://www.investopedia.com/thmb/y5YwpEKsD62ydE_JqJgF78cOqLE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg" srcset="https://www.investopedia.com/thmb/Svohqrlhc2Mjn3Tn5qrCuPM8wuY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg 750w" width="5472"/> </noscript> </div> </div> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://pos.toasttab.com/resources/restaurant-success-industry-report">Restaurant Success Industry Report</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5080522" data-ordinal="1" data-tax-levels="" 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Fifty-two percent of restaurant owners cite high operating and food costs as challenges to their bottom line, according to Toast's Restaurant Success report. In response, restaurateurs use point of sale (POS) systems to track inventory, process payments, and analyze sales. Moreover, with robust software, restaurant owners can efficiently manage employees, accept online orders, and otherwise try to squeeze every bit of profit from each operating dollar.  To uncover the best of the best, we researched more than two dozen top POS systems for restaurants. To narrow down our decision, we compared plans, features, and hardware options. Plus, we looked for solutions with extra services and plenty of customer support. Here are our top picks. ## The 7 Best POS System for Restaurants of 2024 * **Best Overall:** [TouchBistro](https://appwiki.nl/link/brand/GjEXJ0o4pzqIIXpYK58Jmeem5Z0cWjVw) * **Best Free Option:** [Square](https://square.sjv.io/c/2104074/1653711/9398) * **Best for Dine-In Restaurants:** [Upserve](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-upserve?cid=632db61ea182c) * **Best for Carry-Out:** [Lightspeed](http://businesscom.go2cloud.org/aff_c?offer_id=62&aff_id=1028) * **Best for Food Trucks:** [Clover](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-clover?cid=632db61ea182c) * **Best for Bars:** [Revel](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-revel?cid=632db61ea182c) * **Best for Loyalty Features:** [Toast](https://appwiki.nl/link/brand/v9nalYwrhFHj7UqJPPXlNxN6PGVebvg4) Best POS System for Restaurants Expand Best POS System for Restaurants * [Our Top Picks](#summary-list) * [TouchBistro](#toc-best-overall-touchbistro) * [Square](#toc-best-free-option-square) * [Upserve](#toc-best-for-dine-in-restaurants-upserve) * [Lightspeed](#toc-best-for-carry-out-lightspeed) * [Clover](#toc-best-for-food-trucks-clover) * [Revel](#toc-best-for-bars-revel) * [Toast](#toc-best-for-loyalty-features-toast) * See More (4) * [How Does a POS System Help Restaurant Owners?](#toc-how-does-a-pos-system-help-restaurant-owners) * [What Does a POS System Include?](#toc-what-does-a-pos-system-include) * [What Are the Types of POS?](#toc-what-are-the-types-of-pos) * [What Are the Expected Costs of a POS System for Restaurants?](#toc-what-are-the-expected-costs-of-a-pos-system-for-restaurants) * [Methodology](#toc-how-we-chose-the-best-pos-systems-for-restaurants) ### Best Overall : TouchBistro --- ![TouchBistro]() :fill(white):max_bytes(150000):strip_icc()/Touch_bistro-4a02edbda1cc404d9e2395c44c369757.jpg)  TouchBistro [Sign Up Now](https://appwiki.nl/link/brand/GjEXJ0o4pzqIIXpYK58Jmeem5Z0cWjVw) As an industry leader, TouchBistro provides customizable options with tons of capability. Pros * Only need an iPad to start * Software includes inventory management * Comprehensive customer support center Cons * Credit card processing fees aren’t listed on site * Online ordering is an extra fee Founded in 2010, TouchBistro supports unlimited users and provides free 24/7 support. It's created specifically for restaurants and is our top choice for best overall POS software for restaurants. POS software licenses start at $69 a month and include:  * Menu and table management * Integrated payment processing * Cloud-based reporting and analytics * Restaurant [inventory management](https://www.investopedia.com/terms/i/inventory-management.asp) * Unlimited logins and users for restaurant management and staff To get started, you'll only need an iPad. But, you can choose from all types of hardware to fully equip your restaurant. TouchBistro uses POS hardware partners to supply add-ons such as: * Self-serve kiosks * Kitchen display systems * Customer-facing displays * Digital menu boards You'll pay extra fees for payment processing, but you can choose from many companies that partner with TouchBistro to find the best rates for your restaurant. You can also select add-on features like reservations, online ordering, and gift cards. TouchBistro integrates with many popular programs, including QuickBooks, Sage, and 7Shifts. The company offers a comprehensive customer service lineup, from videos and self-diagnostic tools to 24/7 phone support. ### Best Free Option : Square --- ![Square]() :fill(white):max_bytes(150000):strip_icc()/Square-12d58e554d3d4c2da7e3af83d540f964.jpg)  Square [Sign Up Now](https://square.sjv.io/c/2104074/1653711/9398) A free solution (only pay payment processing) to oversee your eatery and make ordering easy. Pros * Free for unlimited devices and users - Only pay for payment processing. * Payment processing included with POS * Easy to get started Cons * Free plan doesn’t offer 24/7 support * Limited sales analytics [Get 20% off](https://square.sjv.io/c/2104074/1653711/9398) your first Square POS hardware device with code **DDSquare**. Valid 4/3/23-6/30/23. Since 2009, [Square](https://www.investopedia.com/articles/tech/021017/square.asp) has provided free and paid POS options to merchants of all stripes. Its free POS system offers integrated payment processing and can be used on unlimited devices, making it a clear winner for the best free POS software.  The free plan provides table and menu management, an order manager, and an [auto gratuity](https://www.investopedia.com/terms/s/service-charge.asp) feature, though you won't get tools like live reporting with the free version. To get advanced services, you can sign up for their $60 a month plan or even the premium plan which does not disclose its price. Some add-on services like payroll and loyalty are an extra charge no matter your tier. Square services integrate with many programs, including:  * 7Shifts * QuickBooks * Xero * Chowly To get started, you'll need your own iPad or iPhone plus the free magstripe reader. You can buy a Square terminal or a contactless and chip reader too. The company offers financing options to make paying for equipment easier. Use its [online equipment calculator](https://squareup.com/us/en/point-of-sale/restaurants/calculator) to see the prices and various configurations of dozens of devices and other hardware like:   * Restaurant stations * Printers * Printer-driven cash drawers * Terminals * WiFi systems Square doubles as a credit card processor, so you'll pay 2.6% plus $0.10 per credit card transaction. With the free plan, you'll get access to customer service during select business hours. ### Best for Dine-In Restaurants : Upserve --- ![Upserve]() :fill(white):max_bytes(150000):strip_icc()/Upserve-70d2e887a82c4db9b095642c477d414a.jpg)  Upserve [Sign Up Now](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-upserve?cid=632db61ea182c) Optimize your dine-in menu, oversee your [marketing](https://www.investopedia.com/terms/m/marketing-plan.asp), and train employees all from one POS system. Pros * Live mobile app * Built-in marketing program * Tons of reporting features Cons * Expensive when adding terminals Upserve got its start in 2009 and stands out as a flexible, restaurant-ready POS software with feature-rich options, including a training mode. Upserve places first in our best for dine-in restaurants category.  The company offers three plans that come with various features. All programs offer tools such as: * Training mode * Built-in credit card processing * Sales, labor, and product analytics * Upserve marketing program * Reputation management * Live mobile app Upserve categorizes its plans as the starter version called the Core plan, the most popular Pro plan, and the Pro Plus enterprise program. All include integrated credit card processing through Upserve Payments. Although the processing fees vary, you will be told upfront what your fee per transaction will be. The costs per plan are: * **Core plan:** $59 per month subscription plus $60 per terminal. Includes all features listed above * **Pro plan:** $199 per month plus $50 per terminal. Adds tons of features like menu optimization, server performance, and a loyalty program * **Pro Plus plan:** $359 per month plus $40 per terminal. Adds features such as enterprise management and API data for custom integrations Upserve offers financing options for its systems and equipment. You can choose from hardware such as: * Tableside units * POS terminals * [EMV](https://www.investopedia.com/terms/e/emv.asp) readers * Printers * Kitchen display systems * Wireless networking Along with offering extra services for loyalty, inventory, and advanced reporting features, this POS software integrates with many programs such as:  * Chowly * Hot Schedules * Resy * OpenTable * Grubhub You'll get access to 24/7 customer support and a dedicated support channel. ### Best for Carry-Out : Lightspeed --- ![LightSpeed]() :fill(white):max_bytes(150000):strip_icc()/Lightspeed-80e9dad9085e4195bccfcacdb8ad3667.jpg)  LightSpeed [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=62&aff_id=1028) Lightspeed offers order flexibility and low-priced add-ons for delivery and loyalty programs. Pros * Robust 24/7 customer support * Quick Service Mode * Good for carryout Cons * Payment processing is a separate service * Extra fees for delivery integration Founded in 2005, Lightspeed is the oldest POS system on the list and provides versatile carry-out features, which is why it tops our list for best POS systems for carry-out.  You'll pay $69 per month to get all the standard features, with an extra register costing $34 per month. The highlights for carry-out orders include: * Manage your own delivery and carry out orders to avoid third party fees. * Seamlessly send orders to your POS. * Let customers order ahead. * Allow mobile ordering. * Quick Service Mode suits a pay-at-order workflow. * And much more. The necessary hardware you'll need is a receipt printer, cash drawer, payment terminal, kitchen printer, Lightspeed server, iPad, and stand. However, you'll have tons of options for hardware, from Lightspeed's iPad hardware kit to software and hardware add-ons that start at $12 per month like: * Customer-facing displays * Kitchen display systems * Advanced reporting features * Self-order table menus * A restaurant website Lightspeed provides plenty of integrations for software commonly used by restaurant owners such as: * 7Shift * BevSpot * Chowly * RapidBar * Zenchef You can choose your own credit card processing service or add on Lightspeed Payments. For tapped, inserted, or swiped cards you’ll pay 2.6% plus $0.10. If you manually key-in a card you’ll pay 2.6% plus $0.30. Its robust support options give restaurateurs the support they need with a full lineup of customer service including 24/7 phone or email support, webinars, demos, and videos. ### Best for Food Trucks : Clover --- ![Clover]() :fill(white):max_bytes(150000):strip_icc()/Clover-fd99c2c2a6d2474a82c7f77317ea3e02.jpg)  Clover [Sign Up Now](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-clover?cid=632db61ea182c) Clover delivers space-saving POS equipment perfect for restaurants on the go. Pros * Hand-held POS system * Low monthly price * Built-in credit card processing Cons * Integrations must go through the Clover app market * Not all hardware works with Clover Flex Since 2010, Clover has provided standalone payment and POS systems while partnering with many outlets, including Sam's Club, to sell hardware. Clover's Flex system puts a POS in the palm of your hand, making it the best choice for food trucks.  With the Clover Flex all-in-one system, you'll pay $599 for the hardware. With the flex, you can accept all payment types including tracking payments, all your data is stored in the cloud, you can run a loyalty program, and much, much more. It comes with an all-day battery, and Clover offers a convenient three-month payment plan if you cannot afford to pay the $599 all at once. You'll have two options to choose from for the Clover software and payment processing: * **Register Lite:** $9.95 per month plus credit card processing of 2.7% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactions * **Register:** $39.95 per month plus credit card processing of 2.3% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactions Both the Register Lite and Register monthly plans include features like: * Employee and [payroll](https://www.investopedia.com/terms/p/payroll.asp) management * Sales, tax, and payroll reports * Remote monitoring of activity, sales, and refunds * Credit card processing * Item-level analytics If you decide to open a full-service restaurant or need additional equipment, Clover offers a full line of hardware and equipment options, from printers to full-size POS systems. However, not all devices integrate with the Flex system. The company also provides a Clover App Market, where you can find more than 200 apps and integrations. To get help with your Clover products, the company offers 24/7 phone support. ### Best for Bars : Revel --- ![Revel]() :fill(white):max_bytes(150000):strip_icc()/Revel-cadb26fdf8814df98fde641b7b65c012.jpg)  Revel [Sign Up Now](https://compare.expertmarket.com/partnerships/pos-software/dynamic/brand-revel?cid=632db61ea182c) An intuitive POS system that integrates with popular bar software. Pros * Integrates with bar and management software * Offers an age prompt feature * 24/7 customer support Cons * Credit card processing is an extra service * Three-year contract required for best price Revel's been a top choice for restaurant and [bar owners](https://www.investopedia.com/articles/personal-finance/011216/economics-owning-bar.asp) since 2010. The software provides bar-specific features, making Revel the best POS system for bars.  You'll pay $99 per month per terminal when billed annually with a three-year Revel Advantage contract. You'll get great tools for bars like age prompts and pre-authorized payments. Other POS features include:  * Inventory management * Employee management * Customer relationship management * Reporting and analytics The cloud-based POS system offers tons of equipment options on their website like:  * iPads and stands * Self-service kiosks * Payment devices * Printers * Barcode scanners * Internet networking equipment * Cash drawers You can add integrated payment processing for a fee per transaction, using Revel Advantage. The fees are not posted online. You must request a quote. With Revel, you'll also benefit from bar-based and business integrations such as:  * Digital Pour * Vines OS * Gratuity Solutions * 7Shifts * Hot Schedules And with 24/7 phone and online support, including help with setup, you can quickly add a Revel POS system to your bar. ### Best for Loyalty Features : Toast --- ![Toast]() :fill(white):max_bytes(150000):strip_icc()/Toast-2b5f4ec84dfb49d7b7ad3910ce8ce979.jpg)  Toast [Sign Up Now](https://appwiki.nl/link/brand/v9nalYwrhFHj7UqJPPXlNxN6PGVebvg4) A capable POS system with an available feature-rich loyalty program. Pros * Guest feedback management program * Built-in credit card processing * Intuitive, easy-to-use, loyalty program Cons * No fees listed for optional services * Only Growth plan comes standard with its loyalty program Founded in 2011, Toast is a well-known name in the industry. Along with POS services, Toast offers a robust [loyalty program](https://www.investopedia.com/terms/l/loyalty-program.asp), making it the best POS software for loyalty features. Select the Growth plan (from $340 a month) to get the loyalty program as part of your package. If you opt for the Starter plan (from $0 a month) or Essentials plan (from $165 a month), you’ll pay an extra fee per month to add the loyalty program. All three programs provide:  * Order, table, and menu management * Reporting and analytics * Guest feedback * Payment processing services The Essential plan adds online delivery and ordering and a Toast takeout app. You'll get gift card, marketing, and loyalty programs integrated into the Growth plan. The customizable, point-based loyalty program offers easy check-out opt-in, and accounts are linked to restaurant guests' credit cards.  When it comes to payment processing, Toast doesn't post pricing online. They will work with your business to find a rate that works for your situation. Toast promises clear pricing with no hidden fees. For hardware, Toast has a variety of products and bundles to fit your needs. One starter bundle comes with a Toast Flex system, POS and credit processing software, Toast Tap, and a router. They ask that you schedule a demo before seeing the price. You can also buy extra equipment like: * Guest-facing displays * Toast Go handheld * Toast Flex for kitchens * Kiosks * Printers * Cash drawers * EMV card readers * Barcode scanners Toast also integrates with most restaurant software, including 7Shifts, Chowly, and BevSpot. And for service, you can reach out for help via phone, email, chat, or submit a ticket on their site. ## How Does a POS System Help Restaurant Owners? On a basic level, a POS system captures transaction data to maintain inventory and revenue numbers in real-time. But, excellent POS systems deliver this information to your smartphone or home devices, so you can track action even if you're not at work.  You can use your POS to simplify restaurant processes, from order entry to payment, while reducing errors. And with impressive reporting features, restaurant owners use the data to make informed decisions about staffing, inventory, and menu changes.  ## What Does a POS System Include? You can turn an iPad into a POS with [cloud software](https://www.investopedia.com/terms/c/cloud-computing.asp). However, most restaurants use a complete system that connects your POS to one or more kitchen and bar printers. Along with the software, you'll want a device for your office, like a desktop, printers at each server station or cash register, and printer units in the kitchen. For credit card processing, you'll add an EMV card reader near registers, as well.  ## What Are the Types of POS? Your POS software works on many devices, making it easy to customize your hardware to what your store needs. For example, food trucks appreciate handheld options, while quick-service restaurants may want self-service kiosks.  However, for the majority of POS systems, you can simply hook up your iPad and create a POS anywhere. A typical restaurant may use a POS with a register for carry-out and delivery orders while providing servers with a standalone POS system or iPad-connected system for inputting orders.  ## What Are the Expected Costs of a POS System for Restaurants? Whether you're using an iPad or a POS terminal, the initial equipment costs can get pricey. Since most restaurants also need multiple printers for the back of house and front of house services, you'll need to figure in the prices for these as well. Fortunately, most POS providers offer financing or payment plans to manage your initial costs. Monthly costs and fees ranges include:  * **Monthly POS software costs:** Free to $359+ per month * **Credit card processing expenses:** 2.49% to 3.89%plus $0 to $0.15 per transaction * **Extra services:** $12 and up per extra service, like payment processing or payroll, per month ## How We Chose the Best POS Systems for Restaurants After looking over more than two dozen POS systems, these seven made our list as the best POS systems for restaurants. We reviewed individual plans, features, and hardware to assess overall costs. Then we figured in various add-on services and integrations specific to certain categories such as loyalty or bar features. Of course, customer support is vital for restaurant owners, so we ensured that each of our top picks provided top-notch support. :max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg) :max_bytes(150000):strip_icc()/GettyImages-948005450-450163497efb462ca96690e3c26d2236.jpg) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Toast. "[Restaurant Success Industry Report](https://pos.toasttab.com/resources/restaurant-success-industry-report)." 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Fifty-two percent of restaurant owners cite high operating and food costs as challenges to their bottom line, according to Toast's Restaurant Success report. In response, restaurateurs use point of sale (POS) systems to track inventory, process payments, and analyze sales. Moreover, with robust software, restaurant owners can efficiently manage employees, accept online orders, and otherwise try to squeeze every bit of profit from each operating dollar.  To uncover the best of the best, we researched more than two dozen top POS systems for restaurants. To narrow down our decision, we compared plans, features, and hardware options. Plus, we looked for solutions with extra services and plenty of customer support. Here are our top picks. The 7 Best POS System for Restaurants of 2024 Best Overall: TouchBistro Best Free Option: Square Best for Dine-In Restaurants: Upserve Best for Carry-Out: Lightspeed Best for Food Trucks: Clover Best for Bars: Revel Best for Loyalty Features: Toast Best POS System for Restaurants Expand Best POS System for Restaurants Our Top Picks TouchBistro Square Upserve Lightspeed Clover Revel Toast See More (4) How Does a POS System Help Restaurant Owners? What Does a POS System Include? What Are the Types of POS? What Are the Expected Costs of a POS System for Restaurants? Methodology Best Overall : TouchBistro  TouchBistro Sign Up Now As an industry leader, TouchBistro provides customizable options with tons of capability. Pros Only need an iPad to start Software includes inventory management Comprehensive customer support center Cons Credit card processing fees aren’t listed on site Online ordering is an extra fee Founded in 2010, TouchBistro supports unlimited users and provides free 24/7 support. It's created specifically for restaurants and is our top choice for best overall POS software for restaurants. POS software licenses start at $69 a month and include:  Menu and table management Integrated payment processing Cloud-based reporting and analytics Restaurant inventory management  Unlimited logins and users for restaurant management and staff To get started, you'll only need an iPad. But, you can choose from all types of hardware to fully equip your restaurant. TouchBistro uses POS hardware partners to supply add-ons such as: Self-serve kiosksKitchen display systemsCustomer-facing displaysDigital menu boards You'll pay extra fees for payment processing, but you can choose from many companies that partner with TouchBistro to find the best rates for your restaurant. You can also select add-on features like reservations, online ordering, and gift cards. TouchBistro integrates with many popular programs, including QuickBooks, Sage, and 7Shifts. The company offers a comprehensive customer service lineup, from videos and self-diagnostic tools to 24/7 phone support. Best Free Option : Square  Square Sign Up Now A free solution (only pay payment processing) to oversee your eatery and make ordering easy. Pros Free for unlimited devices and users - Only pay for payment processing. Payment processing included with POS Easy to get started Cons Free plan doesn’t offer 24/7 support Limited sales analytics Get 20% off your first Square POS hardware device with code DDSquare. Valid 4/3/23-6/30/23. Since 2009, Square has provided free and paid POS options to merchants of all stripes. Its free POS system offers integrated payment processing and can be used on unlimited devices, making it a clear winner for the best free POS software.  The free plan provides table and menu management, an order manager, and an auto gratuity feature, though you won't get tools like live reporting with the free version. To get advanced services, you can sign up for their $60 a month plan or even the premium plan which does not disclose its price. Some add-on services like payroll and loyalty are an extra charge no matter your tier. Square services integrate with many programs, including:  7ShiftsQuickBooksXeroChowly To get started, you'll need your own iPad or iPhone plus the free magstripe reader. You can buy a Square terminal or a contactless and chip reader too. The company offers financing options to make paying for equipment easier. Use its online equipment calculator to see the prices and various configurations of dozens of devices and other hardware like:   Restaurant stationsPrintersPrinter-driven cash drawersTerminalsWiFi systems Square doubles as a credit card processor, so you'll pay 2.6% plus $0.10 per credit card transaction. With the free plan, you'll get access to customer service during select business hours. Best for Dine-In Restaurants : Upserve  Upserve Sign Up Now Optimize your dine-in menu, oversee your marketing, and train employees all from one POS system. Pros Live mobile app Built-in marketing program Tons of reporting features Cons Expensive when adding terminals Upserve got its start in 2009 and stands out as a flexible, restaurant-ready POS software with feature-rich options, including a training mode. Upserve places first in our best for dine-in restaurants category.  The company offers three plans that come with various features. All programs offer tools such as: Training modeBuilt-in credit card processingSales, labor, and product analyticsUpserve marketing programReputation management Live mobile app Upserve categorizes its plans as the starter version called the Core plan, the most popular Pro plan, and the Pro Plus enterprise program. All include integrated credit card processing through Upserve Payments. Although the processing fees vary, you will be told upfront what your fee per transaction will be. The costs per plan are: Core plan: $59 per month subscription plus $60 per terminal. Includes all features listed abovePro plan: $199 per month plus $50 per terminal. Adds tons of features like menu optimization, server performance, and a loyalty programPro Plus plan: $359 per month plus $40 per terminal. Adds features such as enterprise management and API data for custom integrations Upserve offers financing options for its systems and equipment. You can choose from hardware such as: Tableside units POS terminals EMV readers Printers Kitchen display systems Wireless networking Along with offering extra services for loyalty, inventory, and advanced reporting features, this POS software integrates with many programs such as:  ChowlyHot SchedulesResyOpenTableGrubhub  You'll get access to 24/7 customer support and a dedicated support channel. Best for Carry-Out : Lightspeed  LightSpeed Sign Up Now Lightspeed offers order flexibility and low-priced add-ons for delivery and loyalty programs. Pros Robust 24/7 customer support Quick Service Mode Good for carryout Cons Payment processing is a separate service Extra fees for delivery integration Founded in 2005, Lightspeed is the oldest POS system on the list and provides versatile carry-out features, which is why it tops our list for best POS systems for carry-out.  You'll pay $69 per month to get all the standard features, with an extra register costing $34 per month. The highlights for carry-out orders include: Manage your own delivery and carry out orders to avoid third party fees.Seamlessly send orders to your POS.Let customers order ahead. Allow mobile ordering. Quick Service Mode suits a pay-at-order workflow.And much more. The necessary hardware you'll need is a receipt printer, cash drawer, payment terminal, kitchen printer, Lightspeed server, iPad, and stand. However, you'll have tons of options for hardware, from Lightspeed's iPad hardware kit to software and hardware add-ons that start at $12 per month like: Customer-facing displaysKitchen display systemsAdvanced reporting featuresSelf-order table menusA restaurant website  Lightspeed provides plenty of integrations for software commonly used by restaurant owners such as: 7ShiftBevSpotChowlyRapidBarZenchef You can choose your own credit card processing service or add on Lightspeed Payments. For tapped, inserted, or swiped cards you’ll pay 2.6% plus $0.10. If you manually key-in a card you’ll pay 2.6% plus $0.30. Its robust support options give restaurateurs the support they need with a full lineup of customer service including 24/7 phone or email support, webinars, demos, and videos. Best for Food Trucks : Clover  Clover Sign Up Now Clover delivers space-saving POS equipment perfect for restaurants on the go. Pros Hand-held POS system Low monthly price Built-in credit card processing Cons Integrations must go through the Clover app market Not all hardware works with Clover Flex Since 2010, Clover has provided standalone payment and POS systems while partnering with many outlets, including Sam's Club, to sell hardware. Clover's Flex system puts a POS in the palm of your hand, making it the best choice for food trucks.  With the Clover Flex all-in-one system, you'll pay $599 for the hardware. With the flex, you can accept all payment types including tracking payments, all your data is stored in the cloud, you can run a loyalty program, and much, much more. It comes with an all-day battery, and Clover offers a convenient three-month payment plan if you cannot afford to pay the $599 all at once. You'll have two options to choose from for the Clover software and payment processing: Register Lite: $9.95 per month plus credit card processing of 2.7% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactionsRegister: $39.95 per month plus credit card processing of 2.3% plus $0.10 for in-person transactions and 3.5% plus $0.10 for keyed-in transactions Both the Register Lite and Register monthly plans include features like: Employee and payroll management  Sales, tax, and payroll reports Remote monitoring of activity, sales, and refunds Credit card processing Item-level analytics If you decide to open a full-service restaurant or need additional equipment, Clover offers a full line of hardware and equipment options, from printers to full-size POS systems. However, not all devices integrate with the Flex system. The company also provides a Clover App Market, where you can find more than 200 apps and integrations. To get help with your Clover products, the company offers 24/7 phone support. Best for Bars : Revel  Revel Sign Up Now An intuitive POS system that integrates with popular bar software. Pros Integrates with bar and management software Offers an age prompt feature 24/7 customer support Cons Credit card processing is an extra service Three-year contract required for best price Revel's been a top choice for restaurant and bar owners since 2010. The software provides bar-specific features, making Revel the best POS system for bars.  You'll pay $99 per month per terminal when billed annually with a three-year Revel Advantage contract. You'll get great tools for bars like age prompts and pre-authorized payments. Other POS features include:  Inventory managementEmployee managementCustomer relationship managementReporting and analytics The cloud-based POS system offers tons of equipment options on their website like:  iPads and standsSelf-service kiosksPayment devicesPrintersBarcode scannersInternet networking equipmentCash drawers You can add integrated payment processing for a fee per transaction, using Revel Advantage. The fees are not posted online. You must request a quote. With Revel, you'll also benefit from bar-based and business integrations such as:  Digital PourVines OSGratuity Solutions7ShiftsHot Schedules And with 24/7 phone and online support, including help with setup, you can quickly add a Revel POS system to your bar. Best for Loyalty Features : Toast  Toast Sign Up Now A capable POS system with an available feature-rich loyalty program. Pros Guest feedback management program Built-in credit card processing Intuitive, easy-to-use, loyalty program Cons No fees listed for optional services Only Growth plan comes standard with its loyalty program Founded in 2011, Toast is a well-known name in the industry. Along with POS services, Toast offers a robust loyalty program, making it the best POS software for loyalty features. Select the Growth plan (from $340 a month) to get the loyalty program as part of your package. If you opt for the Starter plan (from $0 a month) or Essentials plan (from $165 a month), you’ll pay an extra fee per month to add the loyalty program. All three programs provide:  Order, table, and menu managementReporting and analyticsGuest feedbackPayment processing services The Essential plan adds online delivery and ordering and a Toast takeout app. You'll get gift card, marketing, and loyalty programs integrated into the Growth plan. The customizable, point-based loyalty program offers easy check-out opt-in, and accounts are linked to restaurant guests' credit cards.  When it comes to payment processing, Toast doesn't post pricing online. They will work with your business to find a rate that works for your situation. Toast promises clear pricing with no hidden fees. For hardware, Toast has a variety of products and bundles to fit your needs. One starter bundle comes with a Toast Flex system, POS and credit processing software, Toast Tap, and a router. They ask that you schedule a demo before seeing the price. You can also buy extra equipment like: Guest-facing displaysToast Go handheldToast Flex for kitchensKiosksPrintersCash drawersEMV card readersBarcode scanners Toast also integrates with most restaurant software, including 7Shifts, Chowly, and BevSpot. And for service, you can reach out for help via phone, email, chat, or submit a ticket on their site. How Does a POS System Help Restaurant Owners? On a basic level, a POS system captures transaction data to maintain inventory and revenue numbers in real-time. But, excellent POS systems deliver this information to your smartphone or home devices, so you can track action even if you're not at work. You can use your POS to simplify restaurant processes, from order entry to payment, while reducing errors. And with impressive reporting features, restaurant owners use the data to make informed decisions about staffing, inventory, and menu changes.  What Does a POS System Include? You can turn an iPad into a POS with cloud software. However, most restaurants use a complete system that connects your POS to one or more kitchen and bar printers. Along with the software, you'll want a device for your office, like a desktop, printers at each server station or cash register, and printer units in the kitchen. For credit card processing, you'll add an EMV card reader near registers, as well.  What Are the Types of POS? Your POS software works on many devices, making it easy to customize your hardware to what your store needs. For example, food trucks appreciate handheld options, while quick-service restaurants may want self-service kiosks. However, for the majority of POS systems, you can simply hook up your iPad and create a POS anywhere. A typical restaurant may use a POS with a register for carry-out and delivery orders while providing servers with a standalone POS system or iPad-connected system for inputting orders.  What Are the Expected Costs of a POS System for Restaurants? Whether you're using an iPad or a POS terminal, the initial equipment costs can get pricey. Since most restaurants also need multiple printers for the back of house and front of house services, you'll need to figure in the prices for these as well. Fortunately, most POS providers offer financing or payment plans to manage your initial costs. Monthly costs and fees ranges include: Monthly POS software costs: Free to $359+ per monthCredit card processing expenses: 2.49% to 3.89% plus $0 to $0.15 per transactionExtra services: $12 and up per extra service, like payment processing or payroll, per month How We Chose the Best POS Systems for Restaurants After looking over more than two dozen POS systems, these seven made our list as the best POS systems for restaurants. We reviewed individual plans, features, and hardware to assess overall costs. Then we figured in various add-on services and integrations specific to certain categories such as loyalty or bar features. Of course, customer support is vital for restaurant owners, so we ensured that each of our top picks provided top-notch support. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Toast. "Restaurant Success Industry Report." Related Articles Best Credit Card Processing Companies Merchant Services: Their Role in Business, How They Work, and Benefits Best POS Systems for Small Businesses Best Accounting Software for Small Businesses for May 2024 Best Asset Management Software Best Accounting Software for Restaurants Related Terms Merchant Services: Their Role in Business, How They Work, and Benefits Merchant services help businesses accept and process electronic payments from customers. They can include point-of-sale systems, credit card readers, payment gateways, and online transaction processing. more What Is a POS System, and How Does It Work? A POS or point of sale is a device in a retail store that facilitates payments by customers. more Point of Purchase (POP): Definition, How It Works, and Example Marketers and retailers use point of purchase (POP) displays to attract customers. This strategy is popular among companies looking to stay competitive. more Point-of-Sale Terminal: What it is and How It Works A point-of-sale (POS) terminal is a hardware system for processing card payments at retail locations. more Crowdsourcing: Definition, How It Works, Types, and Examples Crowdsourcing involves obtaining work, information, or opinions from a large group of people via the Internet, social media, and smartphone apps. more What Is a Bloomberg Terminal? Functions, Costs, and Alternatives A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. more

https://www.investopedia.com/hubzone-4842566

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> In seeking potentially lucrative government contracts, smaller companies are often at a disadvantage compared with larger competitors with greater sales resources and cost efficiencies. However, a program offered by the U.S. Small Business Administration can <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">put those modestly sized businesses on a more competitive footing</a>. The Historically Underserved Business Zones (HUBZone) Program is offered to certain entities that meet the SBA criteria for business size and are headquartered in less affluent urban and rural communities.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The HUBZone program helps small businesses in underutilized areas achieve a competitive edge in procuring government contracts.</li><li>In order to qualify for the program, entities have to meet the definition of a “small business” and have their headquarters in a “historically underutilized business zone.”</li><li>The federal government has a goal of awarding 3% of contracts to HUBZone-certified businesses, although it has never reached that objective.</li></ul></div></div></div> <span class="heading-toc" id="toc-potential-benefits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Potential Benefits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> The objective of the federal HUBZone program is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business/protect-small-business-getting-sued/">to support small businesses</a> in underserved parts of the country. By funneling a portion of government purchases to such entities, the program aims to incentivize entrepreneurship and increase employment in places where jobs are harder to find.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The stated goal of the program is to award 3% of federal prime and subcontracts to small businesses that are HUBZone-certified, although it has regularly fallen short of that goal. The Small Business Administration’s audit of 2018 prime contracts showed that 2.05% were given to HUBZone participants, up from 1.7% a year earlier.<span class="ql-inline-citation" data-cite="5"></span> <span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> According to the SBA, companies that participate in the program benefit from “competitive and sole-source contracting.” In concrete terms, government agencies are incentivized to consider bids from HUBZone businesses, even in cases where the price they offer is slightly higher than that of other firms. The government offers a 10% “price evaluation preference” to certified entities for both full contracting and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subcontracting.asp">subcontracting</a> competitions.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> While the intent of the program is to diversify federal purchasing and assist businesses in frequently overlooked parts of the country, critics charge that it has sometimes fallen short of those goals. For instance, a 2019 review by the Washington Post found that over two decades, 70% of HUBZone contracts in the nation’s capital went to just 11 companies. And because some of the city’s once-neglected areas underwent revitalization, the Post found that much of that money went to firms located in wealthier neighborhoods within Washington, D.C.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> “The program can encourage investment, but it does not have a precision that could be associated with public contributions serving a specific geographic area,” Bill Shear, director of financial markets and community investment at the U.S. Government Accountability Office, told the newspaper.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-whos-eligible"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Who’s Eligible? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The U.S. Small Business Administration determines whether companies are eligible to obtain contracts through the HUBZone program and keeps a record of those businesses on file, so that federal agencies can find potential suppliers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> To achieve certification as a HUBZone business, the entity must: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <li>Meet the definition of a “small business” based on SBA guidelines. The SBA’s interactive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/document/support-table-size-standards">Size Standards Tool</a> can help business owners figure out whether that’s the case.</li> <li>Have controlling ownership (at least a 51% stake) by U.S. citizens, a community development corporation, an agricultural cooperative, or a Native American tribe.</li> <li>Have a main office located within a “historically underutilized business zone.” This includes military facilities that have been shuttered by the Base Realignment and Closure Act, as well as land designated as “Indian Country.” The SBA offers an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://maps.certify.sba.gov/hubzone/map#center=39.828200,-98.579500&amp;zoom=5">interactive map</a> that shows whether a given property is within one of these zones.</li> <li>Have at least 35% of its employees live in the HUBZone. If a business falls below that threshold after receiving its certification, it would have to once again meet that residency requirement prior to its annual recertification.<span class="ql-inline-citation" data-cite="1"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Business operators can obtain an initial assessment of whether they meet this list of conditions at the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://certify.sba.gov/am-i-eligible">SBA’s certify website</a>.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Once a business joins the HUBZone program, it typically has to recertify every year in order to retain that designation.</p></div></div></div> <span class="heading-toc" id="toc-attaining-certification"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Attaining Certification </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Businesses that are interested in receiving the HUBZone certification can create an account on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://eweb.sba.gov/gls/dsp_addcustomer.cfm?imappsystypnm=SBG">SBA General Login System</a>. After logging in, you’ll need to click on “Access” and then select “HUBZone.”<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Before registering, however, interested parties must first have an active profile from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dandb.asp">Dun &amp; Bradstreet</a>, as well as an accompanying <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dunsnumber.asp">Data Universal Numbering System (DUNS) number</a>. Dun &amp; Bradstreet provides one of these unique nine-digit numbers for every physical location operated by a business, and they’re offered free to businesses seeking to obtain orders from the federal government.<span class="ql-inline-citation" data-cite="4"></span> <span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> In addition, companies seeking HUBZone designation must have an active U.S. government <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sam.gov/SAM/">System for Award Management (SAM)</a> account. If you already have one, you can update your company’s profile after receiving certification to indicate you run a HUBZone business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> As of Dec. 26, 2019, businesses that achieve certification in the program have to recertify once a year in order to maintain their HUBZone status. What's more, businesses that merge with other organizations must recertify before the one-year window closes.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The HUBZone program can help small businesses compete for important federal procurement opportunities by making them eligible for sole-source contracts and giving them pricing preferences compared with bigger competitors. While the program has thus far fallen short in awarding 3% of public contracts to HUBZone members, it may nonetheless prove a worthwhile designation for businesses seeking to bring in government revenue. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> In order to participate, businesses must meet a list of criteria as outlined by the U.S. Small Business Administration. That includes having majority ownership by U.S. citizens or other eligible groups and maintaining a headquarters within a “historically underutilized business zone.” </p></div>

In seeking potentially lucrative government contracts, smaller companies are often at a disadvantage compared with larger competitors with greater sales resources and cost efficiencies. However, a program offered by the U.S. Small Business Administration can [put those modestly sized businesses on a more competitive footing](https://www.investopedia.com/small-business-4427743). The Historically Underserved Business Zones (HUBZone) Program is offered to certain entities that meet the SBA criteria for business size and are headquartered in less affluent urban and rural communities. ### Key Takeaways * The HUBZone program helps small businesses in underutilized areas achieve a competitive edge in procuring government contracts. * In order to qualify for the program, entities have to meet the definition of a “small business” and have their headquarters in a “historically underutilized business zone.” * The federal government has a goal of awarding 3% of contracts to HUBZone-certified businesses, although it has never reached that objective. ## Potential Benefits The objective of the federal HUBZone program is [to support small businesses](https://www.investopedia.com/small-business/protect-small-business-getting-sued/) in underserved parts of the country. By funneling a portion of government purchases to such entities, the program aims to incentivize entrepreneurship and increase employment in places where jobs are harder to find. The stated goal of the program is to award 3% of federal prime and subcontracts to small businesses that are HUBZone-certified, although it has regularly fallen short of that goal. The Small Business Administration’s audit of 2018 prime contracts showed that 2.05% were given to HUBZone participants, up from 1.7% a year earlier.  According to the SBA, companies that participate in the program benefit from “competitive and sole-source contracting.” In concrete terms, government agencies are incentivized to consider bids from HUBZone businesses, even in cases where the price they offer is slightly higher than that of other firms. The government offers a 10% “price evaluation preference” to certified entities for both full contracting and [subcontracting](https://www.investopedia.com/terms/s/subcontracting.asp) competitions. While the intent of the program is to diversify federal purchasing and assist businesses in frequently overlooked parts of the country, critics charge that it has sometimes fallen short of those goals. For instance, a 2019 review by the Washington Post found that over two decades, 70% of HUBZone contracts in the nation’s capital went to just 11 companies. And because some of the city’s once-neglected areas underwent revitalization, the Post found that much of that money went to firms located in wealthier neighborhoods within Washington, D.C. “The program can encourage investment, but it does not have a precision that could be associated with public contributions serving a specific geographic area,” Bill Shear, director of financial markets and community investment at the U.S. Government Accountability Office, told the newspaper. ## Who’s Eligible? The U.S. Small Business Administration determines whether companies are eligible to obtain contracts through the HUBZone program and keeps a record of those businesses on file, so that federal agencies can find potential suppliers. To achieve certification as a HUBZone business, the entity must: * Meet the definition of a “small business” based on SBA guidelines. The SBA’s interactive [Size Standards Tool](https://www.sba.gov/document/support-table-size-standards) can help business owners figure out whether that’s the case. * Have controlling ownership (at least a 51% stake) by U.S. citizens, a community development corporation, an agricultural cooperative, or a Native American tribe. * Have a main office located within a “historically underutilized business zone.” This includes military facilities that have been shuttered by the Base Realignment and Closure Act, as well as land designated as “Indian Country.” The SBA offers an [interactive map](https://maps.certify.sba.gov/hubzone/map#center=39.828200,-98.579500&zoom=5) that shows whether a given property is within one of these zones. * Have at least 35% of its employees live in the HUBZone. If a business falls below that threshold after receiving its certification, it would have to once again meet that residency requirement prior to its annual recertification. Business operators can obtain an initial assessment of whether they meet this list of conditions at the [SBA’s certify website](https://certify.sba.gov/am-i-eligible). ### Once a business joins the HUBZone program, it typically has to recertify every year in order to retain that designation. ## Attaining Certification Businesses that are interested in receiving the HUBZone certification can create an account on the [SBA General Login System](https://eweb.sba.gov/gls/dsp_addcustomer.cfm?imappsystypnm=SBG). After logging in, you’ll need to click on “Access” and then select “HUBZone.” Before registering, however, interested parties must first have an active profile from [Dun & Bradstreet](https://www.investopedia.com/terms/d/dandb.asp), as well as an accompanying [Data Universal Numbering System (DUNS) number](https://www.investopedia.com/terms/d/dunsnumber.asp). Dun & Bradstreet provides one of these unique nine-digit numbers for every physical location operated by a business, and they’re offered free to businesses seeking to obtain orders from the federal government.  In addition, companies seeking HUBZone designation must have an active U.S. government [System for Award Management (SAM)](https://www.sam.gov/SAM/) account. If you already have one, you can update your company’s profile after receiving certification to indicate you run a HUBZone business. As of Dec. 26, 2019, businesses that achieve certification in the program have to recertify once a year in order to maintain their HUBZone status. What's more, businesses that merge with other organizations must recertify before the one-year window closes. ## The Bottom Line The HUBZone program can help small businesses compete for important federal procurement opportunities by making them eligible for sole-source contracts and giving them pricing preferences compared with bigger competitors. While the program has thus far fallen short in awarding 3% of public contracts to HUBZone members, it may nonetheless prove a worthwhile designation for businesses seeking to bring in government revenue. In order to participate, businesses must meet a list of criteria as outlined by the U.S. Small Business Administration. That includes having majority ownership by U.S. citizens or other eligible groups and maintaining a headquarters within a “historically underutilized business zone.”

In seeking potentially lucrative government contracts, smaller companies are often at a disadvantage compared with larger competitors with greater sales resources and cost efficiencies. However, a program offered by the U.S. Small Business Administration can put those modestly sized businesses on a more competitive footing. The Historically Underserved Business Zones (HUBZone) Program is offered to certain entities that meet the SBA criteria for business size and are headquartered in less affluent urban and rural communities. Key Takeaways The HUBZone program helps small businesses in underutilized areas achieve a competitive edge in procuring government contracts.In order to qualify for the program, entities have to meet the definition of a “small business” and have their headquarters in a “historically underutilized business zone.”The federal government has a goal of awarding 3% of contracts to HUBZone-certified businesses, although it has never reached that objective. Potential Benefits The objective of the federal HUBZone program is to support small businesses in underserved parts of the country. By funneling a portion of government purchases to such entities, the program aims to incentivize entrepreneurship and increase employment in places where jobs are harder to find. The stated goal of the program is to award 3% of federal prime and subcontracts to small businesses that are HUBZone-certified, although it has regularly fallen short of that goal. The Small Business Administration’s audit of 2018 prime contracts showed that 2.05% were given to HUBZone participants, up from 1.7% a year earlier.  According to the SBA, companies that participate in the program benefit from “competitive and sole-source contracting.” In concrete terms, government agencies are incentivized to consider bids from HUBZone businesses, even in cases where the price they offer is slightly higher than that of other firms. The government offers a 10% “price evaluation preference” to certified entities for both full contracting and subcontracting competitions. While the intent of the program is to diversify federal purchasing and assist businesses in frequently overlooked parts of the country, critics charge that it has sometimes fallen short of those goals. For instance, a 2019 review by the Washington Post found that over two decades, 70% of HUBZone contracts in the nation’s capital went to just 11 companies. And because some of the city’s once-neglected areas underwent revitalization, the Post found that much of that money went to firms located in wealthier neighborhoods within Washington, D.C. “The program can encourage investment, but it does not have a precision that could be associated with public contributions serving a specific geographic area,” Bill Shear, director of financial markets and community investment at the U.S. Government Accountability Office, told the newspaper. Who’s Eligible? The U.S. Small Business Administration determines whether companies are eligible to obtain contracts through the HUBZone program and keeps a record of those businesses on file, so that federal agencies can find potential suppliers. To achieve certification as a HUBZone business, the entity must: Meet the definition of a “small business” based on SBA guidelines. The SBA’s interactive Size Standards Tool can help business owners figure out whether that’s the case. Have controlling ownership (at least a 51% stake) by U.S. citizens, a community development corporation, an agricultural cooperative, or a Native American tribe. Have a main office located within a “historically underutilized business zone.” This includes military facilities that have been shuttered by the Base Realignment and Closure Act, as well as land designated as “Indian Country.” The SBA offers an interactive map that shows whether a given property is within one of these zones. Have at least 35% of its employees live in the HUBZone. If a business falls below that threshold after receiving its certification, it would have to once again meet that residency requirement prior to its annual recertification. Business operators can obtain an initial assessment of whether they meet this list of conditions at the SBA’s certify website. Once a business joins the HUBZone program, it typically has to recertify every year in order to retain that designation. Attaining Certification Businesses that are interested in receiving the HUBZone certification can create an account on the SBA General Login System. After logging in, you’ll need to click on “Access” and then select “HUBZone.” Before registering, however, interested parties must first have an active profile from Dun & Bradstreet, as well as an accompanying Data Universal Numbering System (DUNS) number. Dun & Bradstreet provides one of these unique nine-digit numbers for every physical location operated by a business, and they’re offered free to businesses seeking to obtain orders from the federal government.  In addition, companies seeking HUBZone designation must have an active U.S. government System for Award Management (SAM) account. If you already have one, you can update your company’s profile after receiving certification to indicate you run a HUBZone business. As of Dec. 26, 2019, businesses that achieve certification in the program have to recertify once a year in order to maintain their HUBZone status. What's more, businesses that merge with other organizations must recertify before the one-year window closes. The Bottom Line The HUBZone program can help small businesses compete for important federal procurement opportunities by making them eligible for sole-source contracts and giving them pricing preferences compared with bigger competitors. While the program has thus far fallen short in awarding 3% of public contracts to HUBZone members, it may nonetheless prove a worthwhile designation for businesses seeking to bring in government revenue. In order to participate, businesses must meet a list of criteria as outlined by the U.S. Small Business Administration. That includes having majority ownership by U.S. citizens or other eligible groups and maintaining a headquarters within a “historically underutilized business zone.”

https://www.investopedia.com/best-sba-lenders-5091699

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> While there is no shortage of lenders offering private commercial loans, perhaps the most coveted form of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">business financing</a> is the family of loans backed by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">U.S. Small Business Administration</a>, or SBA. That’s because SBA loans offer better rates, lower fees, longer terms, and more flexible qualification terms and down payments. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> Although these loans are secured by the SBA, they are directly provided by banks, credit unions, and other lending organizations, so there are as many varieties of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">SBA loan packages</a> as there are institutions providing SBA loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> To evaluate SBA lenders, we researched more than 30 of the most active SBA lenders to find the winners in nine categories below. We selected banks that belong to the SBA's Preferred Lender program and that had national reach. We next compared available loan options, and finally, average interest rates, derived from aggregated SBA data from last year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best SBA Lenders for 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=lob&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Live Oak Bank</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Quick &amp; Easy Process:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://fundingcircle.1west.com" rel="nofollow noskim noopener nocaes" target="_blank"> Funding Circle</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Small Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=umwsb&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> United Midwest Savings Bank</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Large Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=botw&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Bank of the West</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Real Estate:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=byline&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Byline Bank</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for an In-Person Experience:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="s1=${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.consumersadvocate.org/pr/t9e669fa0deb" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> JP Morgan Chase</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Startups:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://fundera.34rwxn.net/c/2104074/764494/10988" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Fundera</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Bad Credit:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Fundbox</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>All of the lenders we considered and that are highlighted below are SBA Preferred Lenders. Choosing a Preferred Lender significantly shortens how long the loan approval and funding process take.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> <div class="comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block" id="even-loan-block_1-0"></div><!-- end: comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="false" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best SBA Lenders</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best SBA Lenders" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best SBA Lenders</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Live Oak Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Live Oak Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-live-oak-bank" rel="nocaes"> <span class="link__wrapper">Live Oak Bank</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Funding Circle" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Funding Circle" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-quick--easy-process-funding-circle" rel="nocaes"> <span class="link__wrapper">Funding Circle</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-United Midwest Savings Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-United Midwest Savings Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-loans-united-midwest-savings-bank" rel="nocaes"> <span class="link__wrapper">United Midwest Savings Bank</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bank of the West" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bank of the West" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-large-loans-bank-of-the-west" rel="nocaes"> <span class="link__wrapper">Bank of the West</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Byline Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Byline Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-real-estate-byline-bank" rel="nocaes"> <span class="link__wrapper">Byline Bank</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-JP Morgan Chase" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-JP Morgan Chase" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-an-in-person-experience-jp-morgan-chase" rel="nocaes"> <span class="link__wrapper">JP Morgan Chase</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Fundera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fundera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-startups-fundera" rel="nocaes"> <span class="link__wrapper">Fundera</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Fundbox" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-7"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fundbox" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-bad-credit-fundbox" rel="nocaes"> <span class="link__wrapper">Fundbox</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (5)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is an SBA Loan?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-an-sba-loan" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">What Is an SBA Loan?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is an SBA Preferred Lender?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-an-sba-preferred-lender" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">What Is an SBA Preferred Lender?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Who Should Get an SBA Loan?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-who-should-get-an-sba-loan" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Who Should Get an SBA Loan?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-sba-lenders" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-live-oak-bank"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Live Oak Bank</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 855px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Live Oak Bank" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/70zciXP-ILU07bfP5rm2siUGjLA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/LiveOakBank-8af9f4e4e46645509b6e5dcd4fc0111c.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Live Oak Bank" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/70zciXP-ILU07bfP5rm2siUGjLA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/LiveOakBank-8af9f4e4e46645509b6e5dcd4fc0111c.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Live Oak Bank</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=lob&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> As the biggest SBA 7(a) lender in the country, Live Oak Bank is a well-oiled loan-making machine that offers a variety of small business financing options, a solid online experience, competitive rates, and nationwide availability, making it our overall choice for best SBA lender.<span class="ql-inline-citation" data-cite="4"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers a broad array of business loan types</p></li> <li><p>Available to businesses in all 50 states</p></li> <li><p>Its commercial bankers are highly experienced in numerous industries</p></li> <li><p>Has loaned more SBA 7(a) dollars than any other lender in fiscal year 2022 through March 31, 2022</p></li> <li><p>Bauer Financial bank safety rating of 4 stars (“excellent”)</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No physical branches</p></li> <li><p>Only lends to businesses within its list of target industries/sectors</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> The SBA publishes a list of the 100 most active SBA 7(a) lenders for its fiscal year, which ends September 30. For fiscal year 2022 through March 31, 2022, Live Oak is number one in loan value with over $789 million dollars.<span class="ql-inline-citation" data-cite="3"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> By offering SBA 7(a) and 504 loans, providing a specialized team of bankers with deep knowledge in a number of industries, and making competitive-rate loans available to businesses in all 50 states, Live Oak takes our prize for best overall SBA lender.<span class="ql-inline-citation" data-cite="5"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> Live Oak was founded in 2008 specifically as a commercial lending institution. Its main location is in Wilmington, North Carolina. But its website and user interface are well-designed, and its team of commercial bankers is highly experienced in many industries.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Live Oak offers financing solutions to buy a business or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/franchise.asp">franchise</a>, build or remodel physical space, or expand and scale your existing business. It also offers high-yield business savings and CD accounts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-quick--easy-process-funding-circle"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Quick &amp; Easy Process</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Funding Circle</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-8" style="--imgWidth: 732px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Funding Circle" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/5nKXMpw_OsWovwmL2ccpFXNcLq8=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/FundingCircle-f0edb5909b6d43a6948be1b415940e0b.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Funding Circle" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/5nKXMpw_OsWovwmL2ccpFXNcLq8=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/FundingCircle-f0edb5909b6d43a6948be1b415940e0b.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p> Funding Circle</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-9"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at 1West" data-retailer-type="other" data-tracking-container="true" href="https://fundingcircle.1west.com" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Funding Circle’s wide network of lenders makes them a great choice when you want to move from overwhelmed to feeling on track for a business loan.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-11"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>One brief online application connects you to a large network of business loan opportunities</p></li> <li><p>Decisions can be delivered in as little as 24 hours</p></li> <li><p>SBA loans are just one of six types of business financing vehicles offered</p></li> <li><p>Includes loans with fixed interest rates and fixed monthly payments</p></li> <li><p>Its top-notch website is full of useful resources and clear information</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Loan amounts max out at $500,000</p></li> <li><p>In-person offices within the U.S. only exist in Denver</p></li> <li><p>Not available to Nevada businesses</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> Funding Circle enables you to complete one online application in six minutes to be paired with one or more business lenders, making it our top pick for a quick and easy process.<span class="ql-inline-citation" data-cite="6"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> You’ll hear back from a dedicated account manager as soon as possible with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/funding-circle-business-loans-review-7555978">financing options</a> that fit your needs and qualifications. In addition to SBA loans, it also offers non-SBA term loans, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashadvance.asp">cash advances</a>, lines of credit, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/factor.asp">invoice factoring</a> from its network of investor lenders, giving you access to more options than if you applied solely for an SBA loan. Though processing times vary by product, Funding Circle indicates that for SBA loans you could get your funds in as little as 3 days. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Funding Circle will not work, however, for those seeking fairly large loans (their maximum loan amount is $500,000) or for those wanting to borrow less than $25,000.<span class="ql-inline-citation" data-cite="6"></span> It is also unavailable to businesses in Nevada. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-small-loans-united-midwest-savings-bank"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Small Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> United Midwest Savings Bank</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-15" style="--imgWidth: 845px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="United Midwest Savings Bank" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/9Yku_7PQrdIoF24E7pu2DmLXb6k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/UnitedMidwestSavingsBank-cd1eded87988444991e1da3757c6cab8.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="United Midwest Savings Bank" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/9Yku_7PQrdIoF24E7pu2DmLXb6k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/UnitedMidwestSavingsBank-cd1eded87988444991e1da3757c6cab8.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> United Midwest Savings Bank</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-16"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=umwsb&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> With its specialized SBA program for loans of up to $150,000 and its nationwide coverage, United Midwest Savings Bank is our top choice for smaller SBA loans.<span class="ql-inline-citation" data-cite="7"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-18"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Operates a program specifically focused on SBA loans of $150,000 or less</p></li> <li><p>Available to businesses in all 50 states</p></li> <li><p>Application can be completed easily and securely online</p></li> <li><p>Bauer Financial bank safety rating of 5 stars (“superior”)</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Your application is for a single loan and program</p></li> <li><p>SBA loan amounts above $150,000 aren’t available unless you move to their combined SBA/<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/usda.asp" rel="noopener noreferrer">USDA</a> loan product</p></li> <li><p>Offers branches only in Ohio</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> Originally established in 1889, United Midwest Savings Bank appears on the list of most active SBA lenders for FY2022 through March 31, 2022. It made 339 SBA loans for more than 100 million dollars.<span class="ql-inline-citation" data-cite="3"></span> Its design of a specific program focused on loans below $150,000 earns it our top spot for the best lender of small SBA loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> All SBA loan applications at the bank begin online unless you want more than $150,000, in which case you need to go through the combined SBA/USDA loan program. It serves businesses in every state and territory.<span class="ql-inline-citation" data-cite="7"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> United Midwest leverages its nimble size and specialized focus to enable quick loan decisions and an efficient closing process, with a secure portal for transferring your application and required documents. As a result, it can fund loans in as little as 10 days.<span class="ql-inline-citation" data-cite="7"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> United Midwest focuses primarily on the industries of medical, dental, optometry, and veterinary practices; hospitality businesses; funeral homes; and insurance agencies. But it also has a general category in which it can consider applicants from other industries.<span class="ql-inline-citation" data-cite="8"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-large-loans-bank-of-the-west"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Large Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Bank of the West</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-23" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Bank of the West" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/p93CZyfWTZfyHzYgZ3c-rgfDgUE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BankoftheWest-dbeb9f5e2a5c4873923fbb5f362f1a85.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Bank of the West" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/p93CZyfWTZfyHzYgZ3c-rgfDgUE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BankoftheWest-dbeb9f5e2a5c4873923fbb5f362f1a85.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> Bank of the West</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-24"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=botw&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> With SBA 7(a) loans offered up to $5 million and an SBA 504 loan option for amounts as high as $15 million, Bank of the West takes the honors for best SBA lender for large loan amounts.<span class="ql-inline-citation" data-cite="9"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-26"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Maximum loan amount exceeds what most other SBA lenders offer</p></li> <li><p>Interest rates that are among the lowest offered by SBA lenders</p></li> <li><p>Branches in 19 states</p></li> <li><p>Bauer Financial bank safety rating of 5 stars (“superior”)</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No options available for loans below $50,000</p></li> <li><p>Available mostly in states west of the Mississippi</p></li> <li><p>No online application</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> Bank of the West provides the option for an SBA 504 loan of up to $15 million, which is among the highest in the industry.<span class="ql-inline-citation" data-cite="9"></span> That makes it ideal for large real estate, construction, or equipment investments, and thus earns it our top ranking for the best SBA lender for large loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> Founded in San Francisco in 1874, Bank of the West has since spread to serve most of the western United States and some of the midwestern states as well. You can find a map of their locations on their website. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Even if you don’t need $15 million, Bank of the West can be a great choice if you’re shopping for the best rate. They have a reputation for having some of the lowest rates. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> You’ll need to contact a banker to start the process. It doesn't matter if you’re after a $50,000 SBA 7(a) loan or a $15 million 504 loan, there is no online application process. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-real-estate-byline-bank"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Real Estate</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Byline Bank</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-31" style="--imgWidth: 698px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Byline Bank" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/XI5oAzqTTS9o1z5ZVrUmEQ3ScY0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BylineBank-4acd4a65c95146fe97055a09f40a13d0.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Byline Bank" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/XI5oAzqTTS9o1z5ZVrUmEQ3ScY0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BylineBank-4acd4a65c95146fe97055a09f40a13d0.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Byline Bank</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-32"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=byline&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> Byline Bank’s rock-solid track record as the fifth most active SBA lender in the country and its array of three business loans that can be used for real estate make it our number-one pick for SBA real estate loans.<span class="ql-inline-citation" data-cite="3"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-34"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers SBA 7(a) and 504 loans, as well as SBA credit lines</p></li> <li><p>Loan amounts up to $10 million</p></li> <li><p>Long history as one of the most active SBA lenders nationwide</p></li> <li><p>30 lenders in 10 states, helping business owners nationwide</p></li> <li><p>Bauer Financial bank safety rating of 5 stars (“superior”)</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No online application</p></li> <li><p>Physical bank branches only in the Milwaukee and Chicago area</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> In the SBA program’s latest year Byline Bank made 147 SBA 7(a) loans totaling over 159 million dollars.<span class="ql-inline-citation" data-cite="3"></span> Byline has also been the number one SBA lender in Illinois and Wisconsin for many years running. With its extensive SBA history and experience and its offering of multiple SBA and USDA business loans that can be used for large real estate purchases and construction projects, Byline is our winner for the best SBA lender for real estate loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> Byline Bank has only operated under that name since 2013, but as North Community Bank, it has operated in Chicagoland since 1972. It has been Illinois’ top SBA lender for 12 years running, and Wisconsin’s for 7 years.<span class="ql-inline-citation" data-cite="10"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> In addition to its Illinois footprint, the bank does SBA lending nationwide. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> Byline’s product line stands out for also including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/072913/basics-lines-credit.asp">credit lines</a> through the SBA CAPLines program, and USDA B&amp;I loans for businesses located in rural communities.<span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="11"></span> Additionally, several non-government business loans are only offered at Byline, from condo and townhome association loans to letters of credit to private working capital loans.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> To get started, you’ll have to complete a brief contact form and talk directly with an online banker; there is no online process here. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-an-in-person-experience-jp-morgan-chase"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for an In-Person Experience</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> JP Morgan Chase</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-40" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Chase" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/_0Hc35Nmoik-1qdjy6I6uRL7brU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-05fe3cac3af34e219cafd42723ed69f7.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Chase" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/_0Hc35Nmoik-1qdjy6I6uRL7brU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-05fe3cac3af34e219cafd42723ed69f7.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Chase</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-41"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="s1=${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at ConsumersAdvocate" data-retailer-type="other" data-tracking-container="true" href="https://www.consumersadvocate.org/pr/t9e669fa0deb" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> As the nation’s largest bank with thousands of branches across the country, Chase earns the top spot for best SBA lender offering an in-person experience. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-43"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers physical branch locations in 48 states</p></li> <li><p>Very large loans can be secured through their SBA 504 program</p></li> <li><p>Unbeatable reputation as a safe, long-standing bank</p></li> <li><p>Offers SBA Express loans</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Chase’s prominence could mean you will compete with more applicants</p></li> <li><p>No online loan process</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> Chase is the largest U.S. bank by assets and is an active SBA lender, making 259 SBA 7(a) loans in fiscal year 2022 through March 31, 2022.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="3"></span> But what lands it on our “best of” list is the ability for so many U.S. business owners to have an in-person SBA experience given the bank’s more than 4,800 branches spread out across 48 states and Washington, D.C. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chase-business-loan-review-7507442">Chase’s business lending</a> department offers SBA 7(a) loans of up to $5 million and SBA 504 loans to a generous $12.5 million loan limit. In addition, Chase offers the option for SBA Express loans and lines of credit up to $500,000.<span class="ql-inline-citation" data-cite="13"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> As a full-service bank, it also provides non-SBA business and commercial real estate loans, as well as robust business checking, savings, CDs, business credit cards, merchant services, and lines of credit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> Exploring SBA or other business lending with Chase requires talking with a banker; an online process is not available. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-for-startups-fundera"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Startups</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fundera</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-48" style="--imgWidth: 560px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Fundera" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/LQRzGLIdQon9p-ImL0Oh71GPTBo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundera-04e902e2ccf34494b2ed13a2227f4552.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Fundera" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/LQRzGLIdQon9p-ImL0Oh71GPTBo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundera-04e902e2ccf34494b2ed13a2227f4552.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p> Fundera</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-49"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Fundera" data-retailer-type="other" data-tracking-container="true" href="https://fundera.34rwxn.net/c/2104074/764494/10988" id="button_1-0-6" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50"> Given its built-in search tool for finding startup loans and its extensive online information on the various options to explore, Fundera earns our highest marks for an SBA lender focused on startup loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-51"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Completing one questionnaire on Fundera connects you to a variety of lenders</p></li> <li><p>Provides a dedicated resource specifically on startup financing options</p></li> <li><p>Access to Fundera’s network of recommended lenders is available nationwide and online</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must wait for a lending specialist to contact you with next steps</p></li> <li><p>Many of the options may require your business to already be registered and licensed as well as have funds and/or strong financial projections</p></li> <li><p>Your startup may be limited to the SBA’s microloan program</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> Fundera’s network connects borrowers to lenders not just for SBA loans but also for private business loans, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-cards/how-to-use-small-business-credit-cards/">business credit cards</a>, business bank accounts, lines of credit, and many professional services such as accounting and HR thus it tops our list for best startup lender. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Fundera does not make any loans itself. It is simply a marketplace for lenders and borrowers to come together with the convenience factor of filling out one application and being presented with various possibilities to consider. This is especially useful if an SBA loan turns out to be a non-option for your startup. Rather than receive merely a rejection on the SBA loan, Fundera presents you with other lending vehicles that your startup would qualify for. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> Founded in 2013 and based in New York, Fundera’s primary focus is small businesses, not just small business lending. So in addition to business loans, lines of credit, and credit cards, it also links business owners to service providers for operational aspects such as point-of-sale systems, human resources, accounting, and legal services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-best-for-bad-credit-fundbox"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Bad Credit</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fundbox</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-55" style="--imgWidth: 300px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Fundbox" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/7GEtTt6A8_BsBkutlb1_ZN__OnE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-5377404e95e4484587067a81bbda7cd1.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-7" width="1500"/> <noscript> <img alt="Fundbox" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/7GEtTt6A8_BsBkutlb1_ZN__OnE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-5377404e95e4484587067a81bbda7cd1.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-7"> <span class="figure-article-caption-owner"><p> Fundbox</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-56"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-7"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Fundbox" data-retailer-type="other" data-tracking-container="true" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" id="button_1-0-7" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Fundbox’s straightforward approach to providing cash to your business without a hard credit pull earns it a mention for best business funding for those with bad credit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-58"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Cash is extended as a revolving line of credit</p></li> <li><p>Applying to Fundbox does not impact your credit score</p></li> <li><p>The interest you’ll pay is clearly indicated upfront</p></li> <li><p>Repayment can be done on a weekly auto-debit basis</p></li> <li><p>Applying for and managing your line of credit is all handled online</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>The maximum line of credit is $150,000</p></li> <li><p>Repayment terms are only 12 weeks or 24 weeks</p></li> <li><p>Applying businesses must have $100,000 or more in annual revenue to qualify</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> Fundbox’s business line of credit program could meet the needs of a business building credit, making it our best recommendation for small business funding for those with low credit scores. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> The way it works is business owners apply online for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/110614/what-are-differences-between-revolving-credit-and-line-credit.asp">revolving line of credit</a>, with Fundbox capping the highest limits at $150,000. You’ll have to demonstrate that you’ve been in business for at least six months and that you have an annualized revenue of at least $100,000.<span class="ql-inline-citation" data-cite="14"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> Once approved, you can draw funds from your credit line and choose either a 12- or 24-week repayment period, with a higher interest rate charged on the longer option. Payments are auto-debited from your linked bank account on a weekly basis, and your credit limit replenishes with every amount of principal you repay.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> The amount you’ll pay in interest with each payment, and in total, will be made clear to you at the time you’re requesting the funds, thus preventing surprises. There are no prepayment penalties.<span class="ql-inline-citation" data-cite="14"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0"> <span class="heading-toc" id="toc-what-is-an-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is an SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA makes private lenders’ loans more affordable and attractive by guaranteeing a significant portion of the loan amount. Because the SBA’s guaranty substantially reduces the lenders’ risk of default, they are willing to make SBA loans with lower interest rates and fees, longer terms, more flexible <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410">qualification requirements</a>, and/or lower down payment requirements. </p><p>SBA loans come in various flavors, but by far the most prominent is the basic 7(a) loan. It can be used as working capital; to acquire land; to purchase, construct, renovate, or expand buildings; to purchase supplies, inventory, or fixed assets; and even to start or purchase a new business.</p><p>Among the other common SBA offerings are smaller loans called microloans, and larger loans with longer terms called 504 loans, which are often targeted for investment in fixed assets and real estate.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-1"> <span class="heading-toc" id="toc-what-is-an-sba-preferred-lender"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is an SBA Preferred Lender?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To offer SBA loans, a financial institution or organization must become certified as an approved SBA lender. But there is another tier of lender status within the SBA program, and it has a big impact on the borrower.</p><p>Some institutions are elevated to the Preferred Lender Program (PLP). These lenders have a successful track record of processing and servicing a large number of SBA loans and have demonstrated their solid understanding of effective SBA loan underwriting. Consequently, they are granted the status of Preferred Lenders, which allows them to do their own loan approvals in-house and get a streamlined approval from the SBA to finalize the loan.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-2"> <span class="heading-toc" id="toc-who-should-get-an-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Should Get an SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Businesses that meet eligibility requirements that need funding should <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-a-sba-loan-7642281">apply for an SBA loan</a>. Eligible businesses must be incorporated as a for-profit enterprise, do business (or plan to do business) in the U.S. or its territories, demonstrate that there is reasonable owner equity to invest in the business, and show that other funding sources have been used or attempted before seeking SBA funding.</p><p>On the flip side, some business owners should not waste their time even exploring SBA loan options. If you have <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-small-business-loans-for-bad-credit-5114623">bad credit</a>, have defaulted on a government loan in the past (including a government-backed student loan), or have a criminal record, you are highly unlikely to be approved for an SBA loan of any type. Additionally, some business types are ineligible, such as those involved in gambling, illegal activities, and pyramid schemes, as well as real estate investment firms, religious organizations, and nonprofits.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-how-we-chose-the-best-sba-lenders"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> How We Chose the Best SBA Lenders </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> We began our research by looking at the past year’s most active SBA 7(a) lenders, filtering the list to about the top three dozen by both largest amount loaned and highest number of SBA loans processed. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> In contrast, standard SBA lenders must send their applications to the SBA for underwriting and approval taking as much as a month to review. Since most business owners are anxious to have their loans approved and funded as quickly as possible, choosing a Preferred Lender will deliver the fastest turnaround. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> We then filtered by Preferred Lender status, so as to avoid leading readers to any SBA lenders whose process would require an extra month in the timeline for SBA loan approval. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> Next, we researched the geographic range of the remaining lenders, opting for those providing nationwide loans or, alternatively, covering as many states as possible. Some analysis was then conducted to compare program features, loan limits, number of available financing choices, the steps involved, and (via the SBA’s annual lender activity report) what the average interest rates were from the lenders last year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:56.2%;"> <img alt="SBA Lenders" class="primary-image__image mntl-primary-image--blurry" height="3456" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/vKxjogjHHJD_HRh0ctCLXgyrePo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg" srcset="https://www.investopedia.com/thmb/UM6wHt0thnW7cuLZUjYZ73BKvW4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="6144"/> <noscript> <img alt="SBA Lenders" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="3456" sizes="750px" src="https://www.investopedia.com/thmb/vKxjogjHHJD_HRh0ctCLXgyrePo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg" srcset="https://www.investopedia.com/thmb/UM6wHt0thnW7cuLZUjYZ73BKvW4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg 750w" width="6144"/> </noscript> </div> </div> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-4"><p>Live Oak Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.liveoakbank.com/sba-loans/" rel="nofollow sponsored">SBA Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>U.S. Small Business Administration. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://careports.sba.gov/views/7a504LenderReport/LenderReport?%3Aembed=yes&amp;%3Atoolbar=no">7(a) &amp; 504 Lender Report</a>."</p></li> <li class="mntl-sources__source" id="citation-5"><p>Live Oak Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.liveoakbank.com/about-live-oak-bank/" rel="nofollow sponsored">About Live Oak Bank</a>."</p></li> <li class="mntl-sources__source" id="citation-6"><p>Funding Circle. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.fundingcircle.com/us/simple-loans/?utm_medium=affiliate&amp;utm_source=consumers_advocate&amp;utm_content=visit_site&amp;utm_campaign=best-small-business-loans&amp;utm_audience=prospect&amp;utm_segment=acquisition" rel="nofollow sponsored">Funding Circle Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-7"><p>United Midwest Savings Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.umwsb.com/business-lending/sba-loans-up-to-150k/" rel="nofollow sponsored">Business Lending</a>."</p></li> <li class="mntl-sources__source" id="citation-8"><p>United Midwest Savings Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.umwsb.com/business-lending/sba-loans-over-150k/" rel="nofollow sponsored">Commercial SBA Loans (Over $150,000)</a>."</p></li> <li class="mntl-sources__source" id="citation-9"><p>Bank of the West. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bankofthewest.com/Small-Business/Lending/sba-loans" rel="nofollow sponsored">SBA Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-10"><p>Byline Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bylinebank.com/about-us/" rel="nofollow sponsored">About Us</a>."</p></li> <li class="mntl-sources__source" id="citation-12"><p>Byline Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bylinebank.com/small-business-capital/sba-caplines/" rel="nofollow sponsored">SBA CAPLines</a>."</p></li> <li class="mntl-sources__source" id="citation-11"><p>Byline Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bylinebank.com/small-business-capital/usda-loans/business-and-industry/" rel="nofollow sponsored">USDA Business &amp; Industry Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>Federal Reserve Board. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.federalreserve.gov/releases/lbr/current/">Large Commercial Banks</a>."</p></li> <li class="mntl-sources__source" id="citation-13"><p>JP Morgan Chase &amp; Co. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chase.com/business/loans/sba-loans" rel="nofollow sponsored">SBA Financing</a>."</p></li> <li class="mntl-sources__source" id="citation-14"><p>Fundbox. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fundbox.com/get-credit/" rel="nofollow sponsored">Line of Credit</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5112018" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-startup-business-loans-5112018" id="mntl-card-list-items_1-0"> 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While there is no shortage of lenders offering private commercial loans, perhaps the most coveted form of [business financing](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp) is the family of loans backed by the [U.S. Small Business Administration](https://www.investopedia.com/terms/s/small-business-administration.asp), or SBA. That’s because SBA loans offer better rates, lower fees, longer terms, and more flexible qualification terms and down payments. Although these loans are secured by the SBA, they are directly provided by banks, credit unions, and other lending organizations, so there are as many varieties of [SBA loan packages](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp) as there are institutions providing SBA loans. To evaluate SBA lenders, we researched more than 30 of the most active SBA lenders to find the winners in nine categories below. We selected banks that belong to the SBA's Preferred Lender program and that had national reach. We next compared available loan options, and finally, average interest rates, derived from aggregated SBA data from last year. ## Best SBA Lenders for 2024 * **Best Overall:** [Live Oak Bank](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=lob&bwid_id=6388b14276b3780decf128fd) * **Best for Quick & Easy Process:** [Funding Circle](https://fundingcircle.1west.com) * **Best for Small Loans:** [United Midwest Savings Bank](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=umwsb&bwid_id=6388b14276b3780decf128fd) * **Best for Large Loans:** [Bank of the West](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=botw&bwid_id=6388b14276b3780decf128fd) * **Best for Real Estate:** [Byline Bank](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=byline&bwid_id=6388b14276b3780decf128fd) * **Best for an In-Person Experience:** [JP Morgan Chase](https://www.consumersadvocate.org/pr/t9e669fa0deb) * **Best for Startups:** [Fundera](https://fundera.34rwxn.net/c/2104074/764494/10988) * **Best for Bad Credit:** [Fundbox](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) All of the lenders we considered and that are highlighted below are SBA Preferred Lenders. Choosing a Preferred Lender significantly shortens how long the loan approval and funding process take. Best SBA Lenders Expand Best SBA Lenders * [Our Top Picks](#summary-list) * [Live Oak Bank](#toc-best-overall-live-oak-bank) * [Funding Circle](#toc-best-for-quick--easy-process-funding-circle) * [United Midwest Savings Bank](#toc-best-for-small-loans-united-midwest-savings-bank) * [Bank of the West](#toc-best-for-large-loans-bank-of-the-west) * [Byline Bank](#toc-best-for-real-estate-byline-bank) * [JP Morgan Chase](#toc-best-for-an-in-person-experience-jp-morgan-chase) * [Fundera](#toc-best-for-startups-fundera) * [Fundbox](#toc-best-for-bad-credit-fundbox) * See More (5) * [What Is an SBA Loan?](#toc-what-is-an-sba-loan) * [What Is an SBA Preferred Lender?](#toc-what-is-an-sba-preferred-lender) * [Who Should Get an SBA Loan?](#toc-who-should-get-an-sba-loan) * [Methodology](#toc-how-we-chose-the-best-sba-lenders) ### Best Overall : Live Oak Bank --- ![Live Oak Bank]() :fill(white):max_bytes(150000):strip_icc()/LiveOakBank-8af9f4e4e46645509b6e5dcd4fc0111c.png) Live Oak Bank [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=lob&bwid_id=6388b14276b3780decf128fd) As the biggest SBA 7(a) lender in the country, Live Oak Bank is a well-oiled loan-making machine that offers a variety of small business financing options, a solid online experience, competitive rates, and nationwide availability, making it our overall choice for best SBA lender. Pros * Offers a broad array of business loan types * Available to businesses in all 50 states * Its commercial bankers are highly experienced in numerous industries * Has loaned more SBA 7(a) dollars than any other lender in fiscal year 2022 through March 31, 2022 * Bauer Financial bank safety rating of 4 stars (“excellent”) Cons * No physical branches * Only lends to businesses within its list of target industries/sectors The SBA publishes a list of the 100 most active SBA 7(a) lenders for its fiscal year, which ends September 30. For fiscal year 2022 through March 31, 2022, Live Oak is number one in loan value with over $789 million dollars. By offering SBA 7(a) and 504 loans, providing a specialized team of bankers with deep knowledge in a number of industries, and making competitive-rate loans available to businesses in all 50 states, Live Oak takes our prize for best overall SBA lender. Live Oak was founded in 2008 specifically as a commercial lending institution. Its main location is in Wilmington, North Carolina. But its website and user interface are well-designed, and its team of commercial bankers is highly experienced in many industries.  Live Oak offers financing solutions to buy a business or [franchise](https://www.investopedia.com/terms/f/franchise.asp), build or remodel physical space, or expand and scale your existing business. It also offers high-yield business savings and CD accounts. ### Best for Quick & Easy Process : Funding Circle --- ![Funding Circle]() :fill(white):max_bytes(150000):strip_icc()/FundingCircle-f0edb5909b6d43a6948be1b415940e0b.jpg)  Funding Circle [Apply Now](https://fundingcircle.1west.com) Funding Circle’s wide network of lenders makes them a great choice when you want to move from overwhelmed to feeling on track for a business loan.  Pros * One brief online application connects you to a large network of business loan opportunities * Decisions can be delivered in as little as 24 hours * SBA loans are just one of six types of business financing vehicles offered * Includes loans with fixed interest rates and fixed monthly payments * Its top-notch website is full of useful resources and clear information Cons * Loan amounts max out at $500,000 * In-person offices within the U.S. only exist in Denver * Not available to Nevada businesses Funding Circle enables you to complete one online application in six minutes to be paired with one or more business lenders, making it our top pick for a quick and easy process. You’ll hear back from a dedicated account manager as soon as possible with [financing options](https://www.investopedia.com/funding-circle-business-loans-review-7555978) that fit your needs and qualifications. In addition to SBA loans, it also offers non-SBA term loans, [cash advances](https://www.investopedia.com/terms/c/cashadvance.asp), lines of credit, and [invoice factoring](https://www.investopedia.com/terms/f/factor.asp) from its network of investor lenders, giving you access to more options than if you applied solely for an SBA loan. Though processing times vary by product, Funding Circle indicates that for SBA loans you could get your funds in as little as 3 days. Funding Circle will not work, however, for those seeking fairly large loans (their maximum loan amount is $500,000) or for those wanting to borrow less than $25,000. It is also unavailable to businesses in Nevada. ### Best for Small Loans : United Midwest Savings Bank --- ![United Midwest Savings Bank]() :fill(white):max_bytes(150000):strip_icc()/UnitedMidwestSavingsBank-cd1eded87988444991e1da3757c6cab8.jpg)  United Midwest Savings Bank [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=umwsb&bwid_id=6388b14276b3780decf128fd) With its specialized SBA program for loans of up to $150,000 and its nationwide coverage, United Midwest Savings Bank is our top choice for smaller SBA loans. Pros * Operates a program specifically focused on SBA loans of $150,000 or less * Available to businesses in all 50 states * Application can be completed easily and securely online * Bauer Financial bank safety rating of 5 stars (“superior”) Cons * Your application is for a single loan and program * SBA loan amounts above $150,000 aren’t available unless you move to their combined SBA/[USDA](https://www.investopedia.com/terms/u/usda.asp) loan product * Offers branches only in Ohio Originally established in 1889, United Midwest Savings Bank appears on the list of most active SBA lenders for FY2022 through March 31, 2022. It made 339 SBA loans for more than 100 million dollars. Its design of a specific program focused on loans below $150,000 earns it our top spot for the best lender of small SBA loans. All SBA loan applications at the bank begin online unless you want more than $150,000, in which case you need to go through the combined SBA/USDA loan program. It serves businesses in every state and territory. United Midwest leverages its nimble size and specialized focus to enable quick loan decisions and an efficient closing process, with a secure portal for transferring your application and required documents. As a result, it can fund loans in as little as 10 days. United Midwest focuses primarily on the industries of medical, dental, optometry, and veterinary practices; hospitality businesses; funeral homes; and insurance agencies. But it also has a general category in which it can consider applicants from other industries. ### Best for Large Loans : Bank of the West --- ![Bank of the West]() :fill(white):max_bytes(150000):strip_icc()/BankoftheWest-dbeb9f5e2a5c4873923fbb5f362f1a85.jpg)  Bank of the West [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=botw&bwid_id=6388b14276b3780decf128fd) With SBA 7(a) loans offered up to $5 million and an SBA 504 loan option for amounts as high as $15 million, Bank of the West takes the honors for best SBA lender for large loan amounts. Pros * Maximum loan amount exceeds what most other SBA lenders offer * Interest rates that are among the lowest offered by SBA lenders * Branches in 19 states * Bauer Financial bank safety rating of 5 stars (“superior”) Cons * No options available for loans below $50,000 * Available mostly in states west of the Mississippi * No online application Bank of the West provides the option for an SBA 504 loan of up to $15 million, which is among the highest in the industry. That makes it ideal for large real estate, construction, or equipment investments, and thus earns it our top ranking for the best SBA lender for large loans. Founded in San Francisco in 1874, Bank of the West has since spread to serve most of the western United States and some of the midwestern states as well. You can find a map of their locations on their website. Even if you don’t need $15 million, Bank of the West can be a great choice if you’re shopping for the best rate. They have a reputation for having some of the lowest rates. You’ll need to contact a banker to start the process. It doesn't matter if you’re after a $50,000 SBA 7(a) loan or a $15 million 504 loan, there is no online application process. ### Best for Real Estate : Byline Bank --- ![Byline Bank]() :fill(white):max_bytes(150000):strip_icc()/BylineBank-4acd4a65c95146fe97055a09f40a13d0.jpg)  Byline Bank [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=byline&bwid_id=6388b14276b3780decf128fd) Byline Bank’s rock-solid track record as the fifth most active SBA lender in the country and its array of three business loans that can be used for real estate make it our number-one pick for SBA real estate loans. Pros * Offers SBA 7(a) and 504 loans, as well as SBA credit lines * Loan amounts up to $10 million * Long history as one of the most active SBA lenders nationwide * 30 lenders in 10 states, helping business owners nationwide * Bauer Financial bank safety rating of 5 stars (“superior”) Cons * No online application * Physical bank branches only in the Milwaukee and Chicago area In the SBA program’s latest year Byline Bank made 147 SBA 7(a) loans totaling over 159 million dollars. Byline has also been the number one SBA lender in Illinois and Wisconsin for many years running. With its extensive SBA history and experience and its offering of multiple SBA and USDA business loans that can be used for large real estate purchases and construction projects, Byline is our winner for the best SBA lender for real estate loans. Byline Bank has only operated under that name since 2013, but as North Community Bank, it has operated in Chicagoland since 1972. It has been Illinois’ top SBA lender for 12 years running, and Wisconsin’s for 7 years.  In addition to its Illinois footprint, the bank does SBA lending nationwide. Byline’s product line stands out for also including [credit lines](https://www.investopedia.com/articles/personal-finance/072913/basics-lines-credit.asp) through the SBA CAPLines program, and USDA B&I loans for businesses located in rural communities. Additionally, several non-government business loans are only offered at Byline, from condo and townhome association loans to letters of credit to private working capital loans.  To get started, you’ll have to complete a brief contact form and talk directly with an online banker; there is no online process here. ### Best for an In-Person Experience : JP Morgan Chase --- ![Chase]() :fill(white):max_bytes(150000):strip_icc()/Chase-05fe3cac3af34e219cafd42723ed69f7.jpg)  Chase [Apply Now](https://www.consumersadvocate.org/pr/t9e669fa0deb) As the nation’s largest bank with thousands of branches across the country, Chase earns the top spot for best SBA lender offering an in-person experience. Pros * Offers physical branch locations in 48 states * Very large loans can be secured through their SBA 504 program * Unbeatable reputation as a safe, long-standing bank * Offers SBA Express loans Cons * Chase’s prominence could mean you will compete with more applicants * No online loan process Chase is the largest U.S. bank by assets and is an active SBA lender, making 259 SBA 7(a) loans in fiscal year 2022 through March 31, 2022. But what lands it on our “best of” list is the ability for so many U.S. business owners to have an in-person SBA experience given the bank’s more than 4,800 branches spread out across 48 states and Washington, D.C. [Chase’s business lending](https://www.investopedia.com/chase-business-loan-review-7507442) department offers SBA 7(a) loans of up to $5 million and SBA 504 loans to a generous $12.5 million loan limit. In addition, Chase offers the option for SBA Express loans and lines of credit up to $500,000. As a full-service bank, it also provides non-SBA business and commercial real estate loans, as well as robust business checking, savings, CDs, business credit cards, merchant services, and lines of credit. Exploring SBA or other business lending with Chase requires talking with a banker; an online process is not available. ### Best for Startups : Fundera --- ![Fundera]() :fill(white):max_bytes(150000):strip_icc()/Fundera-04e902e2ccf34494b2ed13a2227f4552.png)  Fundera [Apply Now](https://fundera.34rwxn.net/c/2104074/764494/10988) Given its built-in search tool for finding startup loans and its extensive online information on the various options to explore, Fundera earns our highest marks for an SBA lender focused on startup loans. Pros * Completing one questionnaire on Fundera connects you to a variety of lenders * Provides a dedicated resource specifically on startup financing options * Access to Fundera’s network of recommended lenders is available nationwide and online Cons * Must wait for a lending specialist to contact you with next steps * Many of the options may require your business to already be registered and licensed as well as have funds and/or strong financial projections * Your startup may be limited to the SBA’s microloan program Fundera’s network connects borrowers to lenders not just for SBA loans but also for private business loans, [business credit cards](https://www.investopedia.com/credit-cards/how-to-use-small-business-credit-cards/), business bank accounts, lines of credit, and many professional services such as accounting and HR thus it tops our list for best startup lender. Fundera does not make any loans itself. It is simply a marketplace for lenders and borrowers to come together with the convenience factor of filling out one application and being presented with various possibilities to consider. This is especially useful if an SBA loan turns out to be a non-option for your startup. Rather than receive merely a rejection on the SBA loan, Fundera presents you with other lending vehicles that your startup would qualify for. Founded in 2013 and based in New York, Fundera’s primary focus is small businesses, not just small business lending. So in addition to business loans, lines of credit, and credit cards, it also links business owners to service providers for operational aspects such as point-of-sale systems, human resources, accounting, and legal services. ### Best for Bad Credit : Fundbox --- ![Fundbox]() :fill(white):max_bytes(150000):strip_icc()/Fundbox-5377404e95e4484587067a81bbda7cd1.jpg)  Fundbox [Apply Now](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Fundbox’s straightforward approach to providing cash to your business without a hard credit pull earns it a mention for best business funding for those with bad credit. Pros * Cash is extended as a revolving line of credit * Applying to Fundbox does not impact your credit score * The interest you’ll pay is clearly indicated upfront * Repayment can be done on a weekly auto-debit basis * Applying for and managing your line of credit is all handled online Cons * The maximum line of credit is $150,000 * Repayment terms are only 12 weeks or 24 weeks * Applying businesses must have $100,000 or more in annual revenue to qualify Fundbox’s business line of credit program could meet the needs of a business building credit, making it our best recommendation for small business funding for those with low credit scores. The way it works is business owners apply online for a [revolving line of credit](https://www.investopedia.com/ask/answers/110614/what-are-differences-between-revolving-credit-and-line-credit.asp), with Fundbox capping the highest limits at $150,000. You’ll have to demonstrate that you’ve been in business for at least six months and that you have an annualized revenue of at least $100,000. Once approved, you can draw funds from your credit line and choose either a 12- or 24-week repayment period, with a higher interest rate charged on the longer option. Payments are auto-debited from your linked bank account on a weekly basis, and your credit limit replenishes with every amount of principal you repay.  The amount you’ll pay in interest with each payment, and in total, will be made clear to you at the time you’re requesting the funds, thus preventing surprises. There are no prepayment penalties. ## What Is an SBA Loan? The SBA makes private lenders’ loans more affordable and attractive by guaranteeing a significant portion of the loan amount. Because the SBA’s guaranty substantially reduces the lenders’ risk of default, they are willing to make SBA loans with lower interest rates and fees, longer terms, more flexible [qualification requirements](https://www.investopedia.com/how-to-qualify-for-an-sba-loan-7507410), and/or lower down payment requirements.  SBA loans come in various flavors, but by far the most prominent is the basic 7(a) loan. It can be used as working capital; to acquire land; to purchase, construct, renovate, or expand buildings; to purchase supplies, inventory, or fixed assets; and even to start or purchase a new business. Among the other common SBA offerings are smaller loans called microloans, and larger loans with longer terms called 504 loans, which are often targeted for investment in fixed assets and real estate. ## What Is an SBA Preferred Lender? To offer SBA loans, a financial institution or organization must become certified as an approved SBA lender. But there is another tier of lender status within the SBA program, and it has a big impact on the borrower. Some institutions are elevated to the Preferred Lender Program (PLP). These lenders have a successful track record of processing and servicing a large number of SBA loans and have demonstrated their solid understanding of effective SBA loan underwriting. Consequently, they are granted the status of Preferred Lenders, which allows them to do their own loan approvals in-house and get a streamlined approval from the SBA to finalize the loan. ## Who Should Get an SBA Loan? Businesses that meet eligibility requirements that need funding should [apply for an SBA loan](https://www.investopedia.com/how-to-apply-for-a-sba-loan-7642281). Eligible businesses must be incorporated as a for-profit enterprise, do business (or plan to do business) in the U.S. or its territories, demonstrate that there is reasonable owner equity to invest in the business, and show that other funding sources have been used or attempted before seeking SBA funding. On the flip side, some business owners should not waste their time even exploring SBA loan options. If you have [bad credit](https://www.investopedia.com/best-small-business-loans-for-bad-credit-5114623), have defaulted on a government loan in the past (including a government-backed student loan), or have a criminal record, you are highly unlikely to be approved for an SBA loan of any type. Additionally, some business types are ineligible, such as those involved in gambling, illegal activities, and pyramid schemes, as well as real estate investment firms, religious organizations, and nonprofits. ## How We Chose the Best SBA Lenders We began our research by looking at the past year’s most active SBA 7(a) lenders, filtering the list to about the top three dozen by both largest amount loaned and highest number of SBA loans processed. In contrast, standard SBA lenders must send their applications to the SBA for underwriting and approval taking as much as a month to review. Since most business owners are anxious to have their loans approved and funded as quickly as possible, choosing a Preferred Lender will deliver the fastest turnaround. We then filtered by Preferred Lender status, so as to avoid leading readers to any SBA lenders whose process would require an extra month in the timeline for SBA loan approval. Next, we researched the geographic range of the remaining lenders, opting for those providing nationwide loans or, alternatively, covering as many states as possible. Some analysis was then conducted to compare program features, loan limits, number of available financing choices, the steps involved, and (via the SBA’s annual lender activity report) what the average interest rates were from the lenders last year. :max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg) :max_bytes(150000):strip_icc()/GettyImages-1319565513-35af049c5e2f41909a8ff64bd3a72c11.jpg) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Live Oak Bank. "[SBA Loans](https://www.liveoakbank.com/sba-loans/)." 2. U.S. Small Business Administration. "[7(a) & 504 Lender Report](https://careports.sba.gov/views/7a504LenderReport/LenderReport?%3Aembed=yes&%3Atoolbar=no)." 3. Live Oak Bank. "[About Live Oak Bank](https://www.liveoakbank.com/about-live-oak-bank/)." 4. Funding Circle. "[Funding Circle Loans](https://www.fundingcircle.com/us/simple-loans/?utm_medium=affiliate&utm_source=consumers_advocate&utm_content=visit_site&utm_campaign=best-small-business-loans&utm_audience=prospect&utm_segment=acquisition)." 5. United Midwest Savings Bank. "[Business Lending](https://www.umwsb.com/business-lending/sba-loans-up-to-150k/)." 6. United Midwest Savings Bank. "[Commercial SBA Loans (Over $150,000)](https://www.umwsb.com/business-lending/sba-loans-over-150k/)." 7. Bank of the West. "[SBA Loans](https://www.bankofthewest.com/Small-Business/Lending/sba-loans)." 8. Byline Bank. "[About Us](https://www.bylinebank.com/about-us/)." 9. Byline Bank. "[SBA CAPLines](https://www.bylinebank.com/small-business-capital/sba-caplines/)." 10. Byline Bank. "[USDA Business & Industry Loans](https://www.bylinebank.com/small-business-capital/usda-loans/business-and-industry/)." 11. Federal Reserve Board. "[Large Commercial Banks](https://www.federalreserve.gov/releases/lbr/current/)." 12. JP Morgan Chase & Co. "[SBA Financing](https://www.chase.com/business/loans/sba-loans)." 13. Fundbox. "[Line of Credit](https://fundbox.com/get-credit/)." Related Articles [![Customer shops for bike small business loan]() :max_bytes(150000):strip_icc()/Primary-Images-best-startup-business-loans-5112018-438ee29e880843e4a2f5ca6c750f9082.jpg) Best Startup Business Loans for May 2024](https://www.investopedia.com/best-startup-business-loans-5112018) [![Small Business Start up owner standing by desk working on a computer for a SBA loan]() :max_bytes(150000):strip_icc()/Primary-Image-best-sba-loans-for-startups-of-2023-7509414-3703c627841444c9a1771e122d4be33b.jpg) Best SBA Loans for Startups of 2024](https://www.investopedia.com/best-sba-loans-for-startups-7509414) [![Young Asian woman holding a pen and signing paperwork in the living room at home]() :max_bytes(150000):strip_icc()/GettyImages-1329209757-f0022f8c3e97445c91f781b2d182760f.jpg) 4 Steps to Getting a Small Business Loan Without Collateral](https://www.investopedia.com/articles/personal-finance/082616/4-steps-getting-small-business-loan-without-collateral.asp) [![Funding Circle Recirc]() :max_bytes(150000):strip_icc()/Funding-Circle-Recirc-cb08691200f84326bd5ad4e43ea85d3c.jpg) Funding Circle Business Loans Review for 2024](https://www.investopedia.com/funding-circle-business-loans-review-7555978) [![A business owner reviews information on a device.]() :max_bytes(150000):strip_icc()/businessowner2-6add02d23a3f4b4fa235e8083eaec5ac.jpg) How Long Does It Take to Get an SBA Loan?](https://www.investopedia.com/how-long-does-it-take-to-get-an-sba-loan-7644450) [![Happy mature couple looking away while standing against food truck]() :max_bytes(150000):strip_icc()/Primary_Image-715e6dcb60264c418923b53dffa49a69.jpg) The Best Small Business Loans for Bad Credit for May 2024](https://www.investopedia.com/best-small-business-loans-for-bad-credit-5114623) Related Terms [Small Business Administration (SBA): Definition and What It Does](https://www.investopedia.com/terms/s/small-business-administration.asp) The Small Business Administration (SBA) is a U.S. government agency established to promote and strengthen the overall economy by assisting small businesses. [more](https://www.investopedia.com/terms/s/small-business-administration.asp) [What Is Redlining? Definition, Legality, and Effects](https://www.investopedia.com/terms/r/redlining.asp) Redlining is the discriminatory practice of denying services—typically financial—to residents of certain areas based on their race or ethnicity. [more](https://www.investopedia.com/terms/r/redlining.asp) [Lenders: Definition, Types, and How They Make Decisions on Loans](https://www.investopedia.com/terms/l/lender.asp) A lender is an individual, a group, or a financial institution that lends funds with the expectation that the funds will be repaid. [more](https://www.investopedia.com/terms/l/lender.asp) [What Is a No-Doc Business Loan, and Is One Right for Your Business?](https://www.investopedia.com/no-doc-business-loan-7500908) A no-doc business loan can be a quick way for business owners to secure financing that they may not be able to access through a traditional bank loan. [more](https://www.investopedia.com/no-doc-business-loan-7500908) [Term Loan Definition, Types, and Common Attributes](https://www.investopedia.com/terms/t/termloan.asp) A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. [more](https://www.investopedia.com/terms/t/termloan.asp) [Emergency Loan: Types, Eligibility, Pros and Cons](https://www.investopedia.com/emergency-loan-types-eligibility-pros-and-cons-8637206) Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. [more](https://www.investopedia.com/emergency-loan-types-eligibility-pros-and-cons-8637206)

While there is no shortage of lenders offering private commercial loans, perhaps the most coveted form of business financing is the family of loans backed by the U.S. Small Business Administration, or SBA. That’s because SBA loans offer better rates, lower fees, longer terms, and more flexible qualification terms and down payments. Although these loans are secured by the SBA, they are directly provided by banks, credit unions, and other lending organizations, so there are as many varieties of SBA loan packages as there are institutions providing SBA loans. To evaluate SBA lenders, we researched more than 30 of the most active SBA lenders to find the winners in nine categories below. We selected banks that belong to the SBA's Preferred Lender program and that had national reach. We next compared available loan options, and finally, average interest rates, derived from aggregated SBA data from last year. Best SBA Lenders for 2024 Best Overall: Live Oak Bank Best for Quick & Easy Process: Funding Circle Best for Small Loans: United Midwest Savings Bank Best for Large Loans: Bank of the West Best for Real Estate: Byline Bank Best for an In-Person Experience: JP Morgan Chase Best for Startups: Fundera Best for Bad Credit: Fundbox All of the lenders we considered and that are highlighted below are SBA Preferred Lenders. Choosing a Preferred Lender significantly shortens how long the loan approval and funding process take. Best SBA Lenders Expand Best SBA Lenders Our Top Picks Live Oak Bank Funding Circle United Midwest Savings Bank Bank of the West Byline Bank JP Morgan Chase Fundera Fundbox See More (5) What Is an SBA Loan? What Is an SBA Preferred Lender? Who Should Get an SBA Loan? Methodology Best Overall : Live Oak Bank Live Oak Bank Apply Now As the biggest SBA 7(a) lender in the country, Live Oak Bank is a well-oiled loan-making machine that offers a variety of small business financing options, a solid online experience, competitive rates, and nationwide availability, making it our overall choice for best SBA lender. Pros Offers a broad array of business loan types Available to businesses in all 50 states Its commercial bankers are highly experienced in numerous industries Has loaned more SBA 7(a) dollars than any other lender in fiscal year 2022 through March 31, 2022 Bauer Financial bank safety rating of 4 stars (“excellent”) Cons No physical branches Only lends to businesses within its list of target industries/sectors The SBA publishes a list of the 100 most active SBA 7(a) lenders for its fiscal year, which ends September 30. For fiscal year 2022 through March 31, 2022, Live Oak is number one in loan value with over $789 million dollars. By offering SBA 7(a) and 504 loans, providing a specialized team of bankers with deep knowledge in a number of industries, and making competitive-rate loans available to businesses in all 50 states, Live Oak takes our prize for best overall SBA lender. Live Oak was founded in 2008 specifically as a commercial lending institution. Its main location is in Wilmington, North Carolina. But its website and user interface are well-designed, and its team of commercial bankers is highly experienced in many industries.  Live Oak offers financing solutions to buy a business or franchise, build or remodel physical space, or expand and scale your existing business. It also offers high-yield business savings and CD accounts. Best for Quick & Easy Process : Funding Circle  Funding Circle Apply Now Funding Circle’s wide network of lenders makes them a great choice when you want to move from overwhelmed to feeling on track for a business loan.  Pros One brief online application connects you to a large network of business loan opportunities Decisions can be delivered in as little as 24 hours SBA loans are just one of six types of business financing vehicles offered Includes loans with fixed interest rates and fixed monthly payments Its top-notch website is full of useful resources and clear information Cons Loan amounts max out at $500,000 In-person offices within the U.S. only exist in Denver Not available to Nevada businesses Funding Circle enables you to complete one online application in six minutes to be paired with one or more business lenders, making it our top pick for a quick and easy process. You’ll hear back from a dedicated account manager as soon as possible with financing options that fit your needs and qualifications. In addition to SBA loans, it also offers non-SBA term loans, cash advances, lines of credit, and invoice factoring from its network of investor lenders, giving you access to more options than if you applied solely for an SBA loan. Though processing times vary by product, Funding Circle indicates that for SBA loans you could get your funds in as little as 3 days. Funding Circle will not work, however, for those seeking fairly large loans (their maximum loan amount is $500,000) or for those wanting to borrow less than $25,000. It is also unavailable to businesses in Nevada. Best for Small Loans : United Midwest Savings Bank  United Midwest Savings Bank Apply Now With its specialized SBA program for loans of up to $150,000 and its nationwide coverage, United Midwest Savings Bank is our top choice for smaller SBA loans. Pros Operates a program specifically focused on SBA loans of $150,000 or less Available to businesses in all 50 states Application can be completed easily and securely online Bauer Financial bank safety rating of 5 stars (“superior”) Cons Your application is for a single loan and program SBA loan amounts above $150,000 aren’t available unless you move to their combined SBA/USDA loan product Offers branches only in Ohio Originally established in 1889, United Midwest Savings Bank appears on the list of most active SBA lenders for FY2022 through March 31, 2022. It made 339 SBA loans for more than 100 million dollars. Its design of a specific program focused on loans below $150,000 earns it our top spot for the best lender of small SBA loans. All SBA loan applications at the bank begin online unless you want more than $150,000, in which case you need to go through the combined SBA/USDA loan program. It serves businesses in every state and territory. United Midwest leverages its nimble size and specialized focus to enable quick loan decisions and an efficient closing process, with a secure portal for transferring your application and required documents. As a result, it can fund loans in as little as 10 days. United Midwest focuses primarily on the industries of medical, dental, optometry, and veterinary practices; hospitality businesses; funeral homes; and insurance agencies. But it also has a general category in which it can consider applicants from other industries. Best for Large Loans : Bank of the West  Bank of the West Apply Now With SBA 7(a) loans offered up to $5 million and an SBA 504 loan option for amounts as high as $15 million, Bank of the West takes the honors for best SBA lender for large loan amounts. Pros Maximum loan amount exceeds what most other SBA lenders offer Interest rates that are among the lowest offered by SBA lenders Branches in 19 states Bauer Financial bank safety rating of 5 stars (“superior”) Cons No options available for loans below $50,000 Available mostly in states west of the Mississippi No online application Bank of the West provides the option for an SBA 504 loan of up to $15 million, which is among the highest in the industry. That makes it ideal for large real estate, construction, or equipment investments, and thus earns it our top ranking for the best SBA lender for large loans. Founded in San Francisco in 1874, Bank of the West has since spread to serve most of the western United States and some of the midwestern states as well. You can find a map of their locations on their website. Even if you don’t need $15 million, Bank of the West can be a great choice if you’re shopping for the best rate. They have a reputation for having some of the lowest rates. You’ll need to contact a banker to start the process. It doesn't matter if you’re after a $50,000 SBA 7(a) loan or a $15 million 504 loan, there is no online application process. Best for Real Estate : Byline Bank  Byline Bank Apply Now Byline Bank’s rock-solid track record as the fifth most active SBA lender in the country and its array of three business loans that can be used for real estate make it our number-one pick for SBA real estate loans. Pros Offers SBA 7(a) and 504 loans, as well as SBA credit lines Loan amounts up to $10 million Long history as one of the most active SBA lenders nationwide 30 lenders in 10 states, helping business owners nationwide Bauer Financial bank safety rating of 5 stars (“superior”) Cons No online application Physical bank branches only in the Milwaukee and Chicago area In the SBA program’s latest year Byline Bank made 147 SBA 7(a) loans totaling over 159 million dollars. Byline has also been the number one SBA lender in Illinois and Wisconsin for many years running. With its extensive SBA history and experience and its offering of multiple SBA and USDA business loans that can be used for large real estate purchases and construction projects, Byline is our winner for the best SBA lender for real estate loans. Byline Bank has only operated under that name since 2013, but as North Community Bank, it has operated in Chicagoland since 1972. It has been Illinois’ top SBA lender for 12 years running, and Wisconsin’s for 7 years.  In addition to its Illinois footprint, the bank does SBA lending nationwide. Byline’s product line stands out for also including credit lines through the SBA CAPLines program, and USDA B&I loans for businesses located in rural communities. Additionally, several non-government business loans are only offered at Byline, from condo and townhome association loans to letters of credit to private working capital loans.  To get started, you’ll have to complete a brief contact form and talk directly with an online banker; there is no online process here. Best for an In-Person Experience : JP Morgan Chase  Chase Apply Now As the nation’s largest bank with thousands of branches across the country, Chase earns the top spot for best SBA lender offering an in-person experience. Pros Offers physical branch locations in 48 states Very large loans can be secured through their SBA 504 program Unbeatable reputation as a safe, long-standing bank Offers SBA Express loans Cons Chase’s prominence could mean you will compete with more applicants No online loan process Chase is the largest U.S. bank by assets and is an active SBA lender, making 259 SBA 7(a) loans in fiscal year 2022 through March 31, 2022. But what lands it on our “best of” list is the ability for so many U.S. business owners to have an in-person SBA experience given the bank’s more than 4,800 branches spread out across 48 states and Washington, D.C. Chase’s business lending department offers SBA 7(a) loans of up to $5 million and SBA 504 loans to a generous $12.5 million loan limit. In addition, Chase offers the option for SBA Express loans and lines of credit up to $500,000. As a full-service bank, it also provides non-SBA business and commercial real estate loans, as well as robust business checking, savings, CDs, business credit cards, merchant services, and lines of credit. Exploring SBA or other business lending with Chase requires talking with a banker; an online process is not available. Best for Startups : Fundera  Fundera Apply Now Given its built-in search tool for finding startup loans and its extensive online information on the various options to explore, Fundera earns our highest marks for an SBA lender focused on startup loans. Pros Completing one questionnaire on Fundera connects you to a variety of lenders Provides a dedicated resource specifically on startup financing options Access to Fundera’s network of recommended lenders is available nationwide and online Cons Must wait for a lending specialist to contact you with next steps Many of the options may require your business to already be registered and licensed as well as have funds and/or strong financial projections Your startup may be limited to the SBA’s microloan program Fundera’s network connects borrowers to lenders not just for SBA loans but also for private business loans, business credit cards, business bank accounts, lines of credit, and many professional services such as accounting and HR thus it tops our list for best startup lender. Fundera does not make any loans itself. It is simply a marketplace for lenders and borrowers to come together with the convenience factor of filling out one application and being presented with various possibilities to consider. This is especially useful if an SBA loan turns out to be a non-option for your startup. Rather than receive merely a rejection on the SBA loan, Fundera presents you with other lending vehicles that your startup would qualify for. Founded in 2013 and based in New York, Fundera’s primary focus is small businesses, not just small business lending. So in addition to business loans, lines of credit, and credit cards, it also links business owners to service providers for operational aspects such as point-of-sale systems, human resources, accounting, and legal services. Best for Bad Credit : Fundbox  Fundbox Apply Now Fundbox’s straightforward approach to providing cash to your business without a hard credit pull earns it a mention for best business funding for those with bad credit. Pros Cash is extended as a revolving line of credit Applying to Fundbox does not impact your credit score The interest you’ll pay is clearly indicated upfront Repayment can be done on a weekly auto-debit basis Applying for and managing your line of credit is all handled online Cons The maximum line of credit is $150,000 Repayment terms are only 12 weeks or 24 weeks Applying businesses must have $100,000 or more in annual revenue to qualify Fundbox’s business line of credit program could meet the needs of a business building credit, making it our best recommendation for small business funding for those with low credit scores. The way it works is business owners apply online for a revolving line of credit, with Fundbox capping the highest limits at $150,000. You’ll have to demonstrate that you’ve been in business for at least six months and that you have an annualized revenue of at least $100,000. Once approved, you can draw funds from your credit line and choose either a 12- or 24-week repayment period, with a higher interest rate charged on the longer option. Payments are auto-debited from your linked bank account on a weekly basis, and your credit limit replenishes with every amount of principal you repay.  The amount you’ll pay in interest with each payment, and in total, will be made clear to you at the time you’re requesting the funds, thus preventing surprises. There are no prepayment penalties. What Is an SBA Loan? The SBA makes private lenders’ loans more affordable and attractive by guaranteeing a significant portion of the loan amount. Because the SBA’s guaranty substantially reduces the lenders’ risk of default, they are willing to make SBA loans with lower interest rates and fees, longer terms, more flexible qualification requirements, and/or lower down payment requirements. SBA loans come in various flavors, but by far the most prominent is the basic 7(a) loan. It can be used as working capital; to acquire land; to purchase, construct, renovate, or expand buildings; to purchase supplies, inventory, or fixed assets; and even to start or purchase a new business.Among the other common SBA offerings are smaller loans called microloans, and larger loans with longer terms called 504 loans, which are often targeted for investment in fixed assets and real estate. What Is an SBA Preferred Lender? To offer SBA loans, a financial institution or organization must become certified as an approved SBA lender. But there is another tier of lender status within the SBA program, and it has a big impact on the borrower.Some institutions are elevated to the Preferred Lender Program (PLP). These lenders have a successful track record of processing and servicing a large number of SBA loans and have demonstrated their solid understanding of effective SBA loan underwriting. Consequently, they are granted the status of Preferred Lenders, which allows them to do their own loan approvals in-house and get a streamlined approval from the SBA to finalize the loan. Who Should Get an SBA Loan? Businesses that meet eligibility requirements that need funding should apply for an SBA loan. Eligible businesses must be incorporated as a for-profit enterprise, do business (or plan to do business) in the U.S. or its territories, demonstrate that there is reasonable owner equity to invest in the business, and show that other funding sources have been used or attempted before seeking SBA funding.On the flip side, some business owners should not waste their time even exploring SBA loan options. If you have bad credit, have defaulted on a government loan in the past (including a government-backed student loan), or have a criminal record, you are highly unlikely to be approved for an SBA loan of any type. Additionally, some business types are ineligible, such as those involved in gambling, illegal activities, and pyramid schemes, as well as real estate investment firms, religious organizations, and nonprofits. How We Chose the Best SBA Lenders We began our research by looking at the past year’s most active SBA 7(a) lenders, filtering the list to about the top three dozen by both largest amount loaned and highest number of SBA loans processed. In contrast, standard SBA lenders must send their applications to the SBA for underwriting and approval taking as much as a month to review. Since most business owners are anxious to have their loans approved and funded as quickly as possible, choosing a Preferred Lender will deliver the fastest turnaround. We then filtered by Preferred Lender status, so as to avoid leading readers to any SBA lenders whose process would require an extra month in the timeline for SBA loan approval. Next, we researched the geographic range of the remaining lenders, opting for those providing nationwide loans or, alternatively, covering as many states as possible. Some analysis was then conducted to compare program features, loan limits, number of available financing choices, the steps involved, and (via the SBA’s annual lender activity report) what the average interest rates were from the lenders last year. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Live Oak Bank. "SBA Loans." U.S. Small Business Administration. "7(a) & 504 Lender Report." Live Oak Bank. "About Live Oak Bank." Funding Circle. "Funding Circle Loans." United Midwest Savings Bank. "Business Lending." United Midwest Savings Bank. "Commercial SBA Loans (Over $150,000)." Bank of the West. "SBA Loans." Byline Bank. "About Us." Byline Bank. "SBA CAPLines." Byline Bank. "USDA Business & Industry Loans." Federal Reserve Board. "Large Commercial Banks." JP Morgan Chase & Co. "SBA Financing." Fundbox. "Line of Credit." Related Articles Best Startup Business Loans for May 2024 Best SBA Loans for Startups of 2024 4 Steps to Getting a Small Business Loan Without Collateral Funding Circle Business Loans Review for 2024 How Long Does It Take to Get an SBA Loan? The Best Small Business Loans for Bad Credit for May 2024 Related Terms Small Business Administration (SBA): Definition and What It Does The Small Business Administration (SBA) is a U.S. government agency established to promote and strengthen the overall economy by assisting small businesses. more What Is Redlining? Definition, Legality, and Effects Redlining is the discriminatory practice of denying services—typically financial—to residents of certain areas based on their race or ethnicity. more Lenders: Definition, Types, and How They Make Decisions on Loans A lender is an individual, a group, or a financial institution that lends funds with the expectation that the funds will be repaid. more What Is a No-Doc Business Loan, and Is One Right for Your Business? A no-doc business loan can be a quick way for business owners to secure financing that they may not be able to access through a traditional bank loan. more Term Loan Definition, Types, and Common Attributes A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. more Emergency Loan: Types, Eligibility, Pros and Cons Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. more

https://www.investopedia.com/best-restaurant-business-loans-5116256

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Restaurant business loans provide <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/102315/what-can-working-capital-be-used.asp">working capital</a> to buy equipment, hire employees, or pay your bills during a slow time. Plenty of funding options exist from direct to alternative lenders. However, your interest rates and term length will vary by loan type, credit score, and revenue. Selecting an online lender can get funds into your account within days, whereas traditional bank lenders may take weeks.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> We reviewed 30 lenders to determine which ones offered a convenient application process, loans for various use cases, and features to manage your loan. We narrowed our list down by reviewing total costs, customer reviews, and perks, such as discounts for paying your loan off early. Our evaluation turned up eight providers offering the best restaurant business loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The Best Restaurant Business Loans of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=oCUucDAu9CHN&amp;term=ffinancial&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Fora Financial</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for SBA Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=smartbiz&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> SmartBiz</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Restaurant Equipment Financing:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=crest&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Crest Capital</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Surviving a Slowdown:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Fundbox</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Short-Term Loans:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://arf.1west.com/" rel="nofollow noskim noopener nocaes" target="_blank"> ARF Financial</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Bad Credit:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.credibly.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Credibly</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Quick Funding:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://rapidfinance.1west.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Rapid Finance</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Franchises:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=applepie&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> ApplePie Capital</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> <div class="comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block" id="even-loan-block_1-0"></div><!-- end: comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Restaurant Business Loans</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Restaurant Business Loans" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Restaurant Business Loans</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Fora Financial" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fora Financial" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-fora-financial" rel="nocaes"> <span class="link__wrapper">Fora Financial</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-SmartBiz" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-SmartBiz" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-sba-loans-smartbiz" rel="nocaes"> <span class="link__wrapper">SmartBiz</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Crest Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Crest Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-restaurant-equipment-financing-crest-capital" rel="nocaes"> <span class="link__wrapper">Crest Capital</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Fundbox" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fundbox" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-surviving-a-slowdown-fundbox" rel="nocaes"> <span class="link__wrapper">Fundbox</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-ARF Financial" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-ARF Financial" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-short-term-loans-arf-financial" rel="nocaes"> <span class="link__wrapper">ARF Financial</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Credibly" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Credibly" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-bad-credit-credibly" rel="nocaes"> <span class="link__wrapper">Credibly</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Rapid Finance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Rapid Finance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-quick-funding-rapid-finance" rel="nocaes"> <span class="link__wrapper">Rapid Finance</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-ApplePie Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-7"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-ApplePie Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-franchises-applepie-capital" rel="nocaes"> <span class="link__wrapper">ApplePie Capital</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (5)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-restaurant-business-loans" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Providers</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Types of Loans" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-types-of-restaurant-business-loans" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Types of Loans</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-db873e10-90c8-4cda-aab7-87d5902ad19e" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">FAQ</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-fora-financial"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fora Financial</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 758px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="FORA Financial" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/T93Fkuxu0zpAcktqFQToX-ABIp0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fora-fb97785e52464251ae07680b68f97673.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="FORA Financial" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/T93Fkuxu0zpAcktqFQToX-ABIp0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fora-fb97785e52464251ae07680b68f97673.jpg" width="1500"/> </noscript> </div> </div> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Minimum Credit Score</strong>: No minimum</li><li><strong>Loan Terms</strong>: Short-term: up to 12 months, medium-term: 12 to 36 months, and long-term: 3 to 25 years</li><li><strong>Key Benefits</strong>: Restriction-free funds and 24-hour loan approvals</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Lendio" data-retailer-type="other" data-tracking-container="true" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=oCUucDAu9CHN&amp;term=ffinancial&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Fora Financial is our top pick as the best overall choice for restaurant business loans because this lender offers restriction-free funds and 24-hour loan approvals combined with responsive customer service.<span class="ql-inline-citation" data-cite="17"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Early payment discounts</p></li> <li><p>No minimum credit score requirement</p></li> <li><p>Fast financing</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Interest rates and loan costs are not advertised</p></li> <li><p>Daily or weekly payments if you choose the revenue advance</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> Fora Financial is a direct lender offering working capital for small business owners, including restaurateurs and food truck owners. Its application process is simple, with a one-page application and a quick approval process. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> With a loan or merchant cash advance from Fora Financial, you can get $5,000 to $1.5 million for use within 72 hours after approval. The lender lets you pre-qualify for funds without affecting your credit score, and the one-page application is straightforward.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Both the loan and merchant cash advance comes with no restrictions on use with no <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> required. Fora Financial doesn’t rely solely on your credit score to make a determination. Instead, the lender looks at your restaurant’s revenue and years in business. The minimum requirements for funding are as follows: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> <li>Six months in business</li><li>A minimum of $15,000 gross monthly sales<span class="ql-inline-citation" data-cite="19"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> Fora Financial provides flexible terms, giving you the option to choose a short-term, medium-term, or long-term loan. Short-term loans are up to 12 months. Medium-term loans are from 12 to 36 months. Long-term loans are three to 25 years.<span class="ql-inline-citation" data-cite="20"></span> Or, if you opt for a merchant cash advance, you pay a percentage of your credit card transactions with no set terms.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> Unfortunately, Fora Financial does not share information about interest rates or loan fees on their website. To get information on the cost of borrowing from them, you'll have to either begin the application process or contact customer service. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Once you’ve paid off at least 60% of your loan, you may qualify for additional funding.<span class="ql-inline-citation" data-cite="21"></span> Fora Financial has a department dedicated to loan renewals, making it easy to get more cash. Fora Financial generally receives great reviews and responds to positive and negative ones alike.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-sba-loans-smartbiz"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for SBA Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> SmartBiz</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-15" style="--imgWidth: 428px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="SmartBiz" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/b5Dna7vowhLXM0uK9uKR0kXFdXo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Smart_Biz-8101134c03224c04ba0a9d9b190744ae.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="SmartBiz" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/b5Dna7vowhLXM0uK9uKR0kXFdXo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Smart_Biz-8101134c03224c04ba0a9d9b190744ae.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> SmartBiz</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> <li><strong>Minimum Credit Score</strong>: 650</li><li><strong>Loan Terms</strong>: 10 years or 25 (commercial real estate)</li><li><strong>Key Benefits</strong>: 90% of qualified applicants get an SBA loan</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-17"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=smartbiz&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> Since roughly 90% of qualified applications referred to banks by SmartBiz get funded, SmartBiz is our pick as the best for getting a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">U.S. Small Business Association (SBA)</a> loan.<span class="ql-inline-citation" data-cite="25"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-21"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Quicker process than a conventional SBA loan through a bank</p></li> <li><p>Competitive rates with many lender options</p></li> <li><p>Helpful customer support when applying for your loan</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Strict government requirements</p></li> <li><p>A minimum of two years in business</p></li> <li><p>A personal guarantee and lien against your business are required</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> SmartBiz partners with a network of banks to help you secure a loan through the SBA. Although SBA loans can be complex, the SmartBiz platform simplifies the process and connects you with the right lender for your financial situation. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> Although SmartBiz specializes in SBA loans, you can also secure bank loans and alternative financing. After a five-minute pre-qualification process, you can select loan options, such as:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> <li><strong>SBA 7(a): </strong>$30,000 to $350,000 for working capital, equipment purchases, or refinancing existing business debt</li><li><strong>SBA Commercial Real Estate:</strong> $500,000 to $5 million for buying or refinancing 51% owner-occupied commercial real estate</li><li><strong>Bank term:</strong> $30,000 to $500,000 for debt refinancing, hiring employees, equipment, marketing, inventory, construction, and more<span class="ql-inline-citation" data-cite="28"></span></li><li><strong>Alternative:</strong> You can connect with lenders to secure invoice financing loans, credit cards, or business lines of credit with varying rates</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> SmartBiz offers a convenient sliding scale calculator and transparent fee structure, making it easy to see what you’ll pay before applying. Typical terms consist of: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> <li><strong>Interest rates for SBA loans:</strong> 11% to 12%<span class="ql-inline-citation" data-cite="29"></span></li><li><strong>Repayment terms: </strong>10 years or 25 years (commercial real estate)<span class="ql-inline-citation" data-cite="30"></span></li><li><strong>Application fees:</strong> A one-time charge of up to $3,000</li><li><strong>SBA guarantee fee: </strong>Based on the loan amount, 0.00% to 3.75%<span class="ql-inline-citation" data-cite="31"></span> </li><li><strong>Bank closing costs: </strong>Working capital loans cost $450<span class="ql-inline-citation" data-cite="26"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> SBA loans usually take longer to process, but SmartBiz has optimized the process. Funds can arrive in your account as fast as seven days following approval. You can qualify for a loan if you’ve been in business for two years, earn enough monthly revenue to make payments, and don’t have any recent foreclosures or bankruptcies. You also must have at least a 650 credit score, among other requirements.<span class="ql-inline-citation" data-cite="22"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-restaurant-equipment-financing-crest-capital"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Restaurant Equipment Financing</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Crest Capital</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 303px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Crest Capital" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/jR5igrZje34mCNF0jRgHXzPVH00=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Crest_Captial-778a26de1aca42cdbe57192bd7cef8aa.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Crest Capital" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/jR5igrZje34mCNF0jRgHXzPVH00=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Crest_Captial-778a26de1aca42cdbe57192bd7cef8aa.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p> Crest Capital</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> <li><strong>Required Credit Score</strong>: Not indicated</li><li><strong>Loan Terms</strong>: 24 to 84 months</li><li><strong>Key Benefits</strong>: Buy new or used equipment from a business or private seller</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-31"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BusinessLoans" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=crest&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> Crest Capital allows borrowers to spend less on upfront expenses with no hidden costs and a four-hour turnaround time for equipment financing under $250,000, making it the best for restaurant equipment financing.<span class="ql-inline-citation" data-cite="36"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-35"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Many loan and lease options available</p></li> <li><p>Will finance 100% of equipment costs plus soft expenses</p></li> <li><p>Fast approval and funding</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Good credit required</p></li> <li><p>Not for startups</p></li> <li><p>Loans over $250,000 require more paperwork</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> Since 1989, Crest Capital has helped small to medium-sized businesses secure the equipment, vehicles, or software required to keep their company running.<span class="ql-inline-citation" data-cite="35"></span> Unlike other lenders, Crest Capital fully funds 100% of your equipment costs plus covers soft fees, such as delivery and installation. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> As a national lender, Crest Capital offers several types of equipment loans and leases. Plus, you can add an unrestricted working capital loan to any equipment funds. Your options include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> <li><strong>Equipment finance agreement (EFA): </strong>A fixed-rate equipment loan</li><li><strong>Guaranteed purchase agreement (PUT): </strong>Either a fixed-rate loan or a loan with a balloon payment</li><li><strong>$1 purchase agreement:</strong> A lease that works like a loan; when it ends, you pay $1 to buy your equipment</li><li><strong>First amendment lease:</strong> You lease the equipment and, at predetermined points, you can renew or purchase the equipment</li><li><strong>10% purchase option: </strong>A fixed monthly payment, and at the end of the lease, you can buy the equipment for 10% of its original value, renew, or return the equipment</li><li><strong>Fair market value (FMV) option:</strong> A low monthly lease payment, and you can renew, purchase, return, or upgrade equipment</li><li><strong>Operating lease:</strong> Equipment loans for items with strong aftermarket value</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> You can choose various plans for all of the above options, such as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/072913/basics-lines-credit.asp">line of credit</a>, step-up payments, deferred payments, or seasonal payments. You can access an online calculator by inputting your email address or get an instant eligibility check. Requirements and terms consist of: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> <li>24- to 84-month term length</li><li>$5,000 to $500,000 financing<span class="ql-inline-citation" data-cite="40"></span></li><li>Up to 25% of the loan can be soft costs</li><li>Must be in business for at least two years<span class="ql-inline-citation" data-cite="39"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> The application process is simple, and the company allows the financing of used or new equipment. Furthermore, you can even purchase from a private party. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-surviving-a-slowdown-fundbox"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Surviving a Slowdown</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fundbox</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-43" style="--imgWidth: 347px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Fundbox" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/_fPU3_nik8b2hR6PN5FUugHicWU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-961a023a840b43b18272e0af9b003d5a.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Fundbox" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/_fPU3_nik8b2hR6PN5FUugHicWU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-961a023a840b43b18272e0af9b003d5a.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Fundbox</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> <li><strong>Required Credit Score</strong>: 600<span class="ql-inline-citation" data-cite="41"></span></li><li><strong>Loan Terms</strong>: 12 or 24 weeks</li><li><strong>Key Benefits</strong>: Secure your funds with only three months of invoicing history</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-45"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Fundbox" data-retailer-type="other" data-tracking-container="true" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> Fundbox is the best for surviving a slowdown because it provides a flexible line of credit that you can access when you need it and only pay for what you use. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-49"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No origination fees</p></li> <li><p>600 minimum credit score</p></li> <li><p>No penalty for early payoff</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Business lien required</p></li> <li><p>Only offers funds up to $150,000</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51"> Fundbox has at times offered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/invoice-financing.asp">invoice financing</a> and term loans. However, the company now focuses on lines of credit. If you anticipate needing funds to get through a recession or cover out-of-season expenses, a flexible line of credit from Fundbox can help. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> When business starts to slow, you may need funds to cover basic expenses until your revenue situation improves. However, you may not know how much money you’ll need and it can be risky to get a lump sum term loan that you can’t pay back. Fundbox offers simple borrower requirements, meaning even if you’re seeing a decrease in business, you can still qualify for a line of credit. Fundbox only requires “[three] months of transaction history in a business checking account.”<span class="ql-inline-citation" data-cite="43"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> Once approved, you can draw funds at any time and the money gets transferred into your account as soon as the next business day. You only pay interest on the amount drawn, and each time you pay it off, you have access to the full line of credit again.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> Fundbox is currently offering lines of credit with terms of 12 or 24 weeks. The 12-week term has an interest rate starting at 4.66%, and the 24-week term has an interest rate starting at 8.99%. The company says that these rates can vary by customer and over time.<span class="ql-inline-citation" data-cite="41"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> With no restrictions on funds, you can use the money to survive a downturn and pay your loan off early without prepayment penalties. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-short-term-loans-arf-financial"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Short-Term Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> ARF Financial</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-56" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="ARF Financial" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/eMKfuAEVzpDV2FfIgoQ06gNhO5A=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ARF_Financial-773ddc8d7a4a4e999ece0eba6cdf1799.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="ARF Financial" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/eMKfuAEVzpDV2FfIgoQ06gNhO5A=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ARF_Financial-773ddc8d7a4a4e999ece0eba6cdf1799.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> ARF Financial</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> <li><strong>Required Credit Score</strong>: 551</li><li><strong>Loan Terms</strong>: 12, 18, 24, or 36 months</li><li><strong>Key Benefits</strong>: Discounts for early repayment</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-58"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at 1West" data-retailer-type="other" data-tracking-container="true" href="https://arf.1west.com/" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> ARF Financial allows borrowers to choose from four <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shorttermdebt.asp">short-term loan</a> options and receive funds within five days with no collateral required.<span class="ql-inline-citation" data-cite="46"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-62"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Discounts for paying off your loan early</p></li> <li><p>Multiple loan options</p></li> <li><p>12- to 36-month loan terms</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>High interest rates</p></li> <li><p>Weekly payments</p></li> <li><p>Loans based on a percentage of annual revenue</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64"> ARF Financial is a financial services company offering several unsecured loan options and flexible payment terms. Although ARF Financial lends to several industries, it focuses on food and beverage businesses. The ARF Financial experts work with you to find the terms for your needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65"> With ARF Financial, you can secure a loan for up to $1 million. The total loan amounts are based on a percentage of your annual sales, and the company works with people who have credit scores of at least 551.<span class="ql-inline-citation" data-cite="47"></span> Examples of loan amounts include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> <li><strong>12-month terms:</strong> 6% to 11% of annual sales</li><li><strong>18-month terms: </strong>Up to 16.5% of annual sales</li><li><strong>24-month terms:</strong> Up to 22% of annual sales</li><li><strong>36-month terms:</strong> Up to 33% of annual sales</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> You may be able to get a loan even if you’ve only been in business for a few months. ARF Financial funds businesses, such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> <li>Single unit restaurants</li><li>Multi-unit restaurants, franchises, and quick service</li><li>Bars and taverns</li><li>Caterers</li><li>Bakeries and cafes</li><li>Specialty food shops</li><li>Mall food outlets</li><li>Gourmet food stores</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> Choose from loan terms of 12, 18, 24, or 36 months with lower interest rates for shorter loan terms. Interest rates start at 6%.<span class="ql-inline-citation" data-cite="49"></span> Loan types include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> <li><strong>Interest-only flex-pay loan:</strong> Interest-only payments are for up to one year, then you can pay off the principal or roll it over for up to two years.<span class="ql-inline-citation" data-cite="50"></span></li> <li><strong>Flex pay loan: </strong>Defer up to 50% of your loan principal and get a renewable line of credit to use over six months.<span class="ql-inline-citation" data-cite="51"></span></li> <li><strong>Working capital:</strong> A classic bank loan that can be used for a wide variety of purposes.</li> <li><strong>Bridge loans:</strong> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bridgeloan.asp">bridge loan</a> is a flexible line of credit that fills the gap in funds while you’re waiting on approval for a larger traditional or SBA loan.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-bad-credit-credibly"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Bad Credit</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Credibly</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-71" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Credibly" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/F3TvFtY1zGEGNYH_kEz_aeF60rQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Credibly-9e11e686bf384d3b8247acbbfd62df5a.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Credibly" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/F3TvFtY1zGEGNYH_kEz_aeF60rQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Credibly-9e11e686bf384d3b8247acbbfd62df5a.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Credibly</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> <li><strong>Required Credit Score</strong>: 500</li><li><strong>Loan Terms</strong>: 6 to 15 months (working capital), 18 to 24 months (long-term)</li><li><strong>Key Benefits</strong>: Wide range of loan options</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-73"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Credibly" data-retailer-type="other" data-tracking-container="true" href="https://www.credibly.com/" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> Even with below-average or poor credit, you can get approved for a loan with Credibly, and same-day funding is possible. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-77"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Only need a credit score of 500 to qualify</p></li> <li><p>A range of loan options</p></li> <li><p>No hidden fees</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>High interest or invoice factor rates for poor credit</p></li> <li><p>Daily or weekly payments required</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79"> Since 2010, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credibly-business-loan-review-7556477">Credibly has loaned</a> more than two billion dollars to over 30,000 small to medium-sized enterprises.<span class="ql-inline-citation" data-cite="57"></span><span class="ql-inline-citation" data-cite="56"></span> If your credit score doesn’t qualify you for a traditional loan, Credibly can help you get the money you need. The company works with business owners with scores as low as 500.<span class="ql-inline-citation" data-cite="58"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-80"> Most lenders require credit scores of 550 or higher to secure a loan. However, Credibly has minimal borrower requirements, meaning you only need a personal Fair Isaac Corporation (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fico-credit-scores-explained-5072985">FICO</a>) score of 500 to qualify. Moreover, the company considers the overall health of your business, so it doesn’t rely solely on your credit score.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-81"> However, a business line of credit requires a credit score of 650 and annual revenue of $240,000. Working capital loans are less stringent. You must be in business for six months and show a three-month average revenue of $15,000.<span class="ql-inline-citation" data-cite="60"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> Loan amounts can be up to $400,000, and most business owners get funding the same day. You can choose from different loan types, such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-83"> <li><strong>Working capital loan:</strong> Up to $400,000 and terms of six to 15 months<span class="ql-inline-citation" data-cite="61"></span></li><li><strong>Merchant cash advance:</strong> Up to $400,000<span class="ql-inline-citation" data-cite="62"></span></li><li><strong>Business expansion loan:</strong> Up to $250,000 and 18- or 24-month loan terms<span class="ql-inline-citation" data-cite="63"></span></li><li><strong>Business line of credit: </strong>Up to $300,000 and varying loan terms<span class="ql-inline-citation" data-cite="64"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84"> Credibly charges a factor rate for working capital loans and merchant cash advances, starting at 1.11. Higher credit scores give you more favorable rates. You’ll also pay a one-time loan origination fee of 2.5% of the total loan amount that comes out of your loan balance.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-85"> As an alternative lender, Credibly offers other options through its partners, such as equipment loans or leases and long-term loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-for-quick-funding-rapid-finance"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Quick Funding</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Rapid Finance</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-86" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Rapid Finance" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/pSLZl1-XQACc-ZtA8ZyzuVxlu1k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/RapidFinance-b33a51e59e62444386a3cf35ffe5aa56.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Rapid Finance" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/pSLZl1-XQACc-ZtA8ZyzuVxlu1k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/RapidFinance-b33a51e59e62444386a3cf35ffe5aa56.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p>Rapid Finance</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-87"> <li><strong>Required Credit Score</strong>: Score not indicated, fair credit possibly accepted</li><li><strong>Loan Terms</strong>: 3 to 60 months</li><li><strong>Key Benefits</strong>: Same-day funding with many loan options</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-88"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at 1West" data-retailer-type="other" data-tracking-container="true" href="https://rapidfinance.1west.com/" id="button_1-0-6" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-90"> With Rapid Finance, you can secure a small business loan and get funds in your account on the same day. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-92"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Accepts some lower credit scores</p></li> <li><p>Same-day funding</p></li> <li><p>Several loan types available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Possibly more expensive than other loans</p></li> <li><p>No clear rate and fee schedule</p></li> <li><p>Three months of income history required</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-94"> Rapid Finance is a financial services company that funds loans and works with other providers to offer several funding types. Although many loans from other providers often take a few days to deliver funds, Rapid Finance can get money into your account within hours of approval. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-95"> Loan terms, interest rates, and factor rates are based on your credit score, the number of years in business, and monthly sales volume. You can choose from several loan options, such as: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-96"> <li><strong>Small business loans: </strong>$5,001 to $1 million and three- to 60-month loan terms</li><li><strong>Line of credit:</strong> $5,001 to $250,000 and three- to 18-month terms</li><li><strong>Bridge loan:</strong> $5,001 to $1 million and three- to 60-month payment terms</li><li><strong>SBA loans:</strong> $500 to $5.5 million and one- to 30-year terms</li><li><strong>Invoice factoring:</strong> $20,000 to $10 million</li><li><strong>Asset-based loan:</strong> $50,000 to $10 million and six- to 36-month payment terms</li><li><strong>Commercial real estate:</strong> $75,000 to $2 million and five- to 20-year loan terms</li><li><strong>Merchant cash advance: </strong>$5,000<strong> </strong>to $500,000 and flexible payment terms<span class="ql-inline-citation" data-cite="68"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-97"> All loans offer payments on an automatic daily, weekly, or monthly basis. To apply for a loan, you must have a business banking account, and show three months of income information.<span class="ql-inline-citation" data-cite="67"></span> Although Rapid Finance doesn’t offer rate information online, it receives high ratings and responds to every review. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-best-for-franchises-applepie-capital"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Franchises</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> ApplePie Capital</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-98" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Apple Pie Capital" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/97TA1YjrI0mxTP0v5Dt67hJhBOo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ApplePieCapital-8551a08f425d491ba1b8ffcbd9e3e253.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-7" width="1500"/> <noscript> <img alt="Apple Pie Capital" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/97TA1YjrI0mxTP0v5Dt67hJhBOo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ApplePieCapital-8551a08f425d491ba1b8ffcbd9e3e253.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p>Apple Pie Capital</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-99"> <li><strong>Required Credit Score</strong>: Not listed</li><li><strong>Loan Terms</strong>: 5 to 10 years<span class="ql-inline-citation" data-cite="70"></span></li><li><strong>Key Benefits</strong>: Partner with a company dedicated to franchise funding</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-100"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-7"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=applepie&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-7" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-102"> ApplePie Capital is a lending network that handles <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/franchise.asp">franchise</a> companies exclusively. The provider partners with a group of various lenders, and doesn’t place restrictions on the funds, making the loans best for franchises. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-104"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Long-term loans available</p></li> <li><p>Offers loans for refinancing and remodeling</p></li> <li><p>Financing available for first-time franchisees</p></li> <li><p>No personal collateral required</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Only for franchise companies</p></li> <li><p>Personalized rate information with no online fee schedule</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-106"> When ApplePie Capital was founded, it only offered its ApplePie Core loan. However, it now provides equipment financing, SBA loans, conventional funding, and refinancing options. ApplePie features: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-107"> <li>Five- to 10-year payment terms</li><li>Interest-only grace period</li><li>No prepayment penalties</li><li>Fixed and variable rate options</li><li>A minimum of $100,000 for loans and $15,000 for equipment financing</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-108"> Since ApplePie works with many different lenders, the rates vary and are dependent on factors, such as what the funds are used for, credit history, and type of loan. The company helps both existing and first time franchise business owners obtain financing. Requirements may be more strict for first timers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-109"> When you start your application, you can type in the name of the franchise. If the franchise you want to buy doesn’t come up, you can email them to begin your application. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Our top pick for best restaurant business loans is Fora Financial because of its food and beverage industry knowledge, fast funding, and straightforward application process. Moreover, the company considers many factors, such as years in business, to determine your rates and works with you to find the best funding solution. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> However, if your business is currently experiencing a slowdown or you need funding quickly, Fundbox or Rapid Finance may work better for your needs. Both companies offer relatively fast funding and reasonable repayment terms, with Fundbox allowing you to only pay for what you use. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-restaurant-business-loans"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Compare the Best Restaurant Business Loans </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-4"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Company</th> <th><b>Minimum Credit Score</b></th> <th><b>Loan Terms</b></th> <th>Key Benefits</th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=oCUucDAu9CHN&amp;term=ffinancial&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="sponsored nofollow">Fora Financial</a> <br/><b>Best Overall</b></td> <td>No minimum</td> <td>Short-term up to 12 months, medium-term 12 to 36 months, long-term 3 to 25 years</td> <td>Restriction-free funds and 24-hour loan approvals</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=smartbiz&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">SmartBiz</a> <br/><b>Best for SBA Loans</b></td> <td>650</td> <td>10 years or 25 years (commercial real estate)</td> <td>90% of qualified applicants get an SBA loan</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=crest&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">Crest Capital</a> <br/><b>Best for Restaurant Equipment Financing</b></td> <td>Not indicated</td> <td>24 to 84 months</td> <td>Buy new or used equipment from a business or private seller</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="sponsored nofollow">Fundbox</a> <br/><b>Best for Surviving a Slowdown</b></td> <td>600</td> <td>12 or 24 weeks</td> <td>Secure your funds with only three months of invoicing history</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://arf.1west.com/" rel="nofollow">ARF Financial</a> <br/><b>Best for Short-Term Loans</b></td> <td>551</td> <td>12, 18, 24, or 36 months</td> <td>Discounts for early repayment</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.credibly.com/" rel="sponsored nofollow">Credibly</a> <br/><b>Best for Bad Credit</b></td> <td>500</td> <td>6 to 15 months (working capital), 18 to 24 months (long-term)</td> <td>Wide range of loan options</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://rapidfinance.1west.com/" rel="nofollow">Rapid Finance</a> <br/><b>Best for Quick Funding</b></td> <td>Not indicated, but fair credit likely accepted</td> <td>3 to 60 months</td> <td>Same-day funding with many loan options</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=applepie&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">ApplePie Capital</a> <br/><b>Best for Franchises</b></td> <td>Not listed</td> <td>5 to 10 years</td> <td>Partner with a company dedicated to franchise funding</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-types-of-restaurant-business-loans"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> Types of Restaurant Business Loans </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> Restaurant business loans can take many forms, and a lending partner can help you decide which option is best for your company. The different types of loans include:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> <li><strong>Short-term loans: </strong>Pay off your loan in six to 36 months by making daily or weekly payments.</li><li><strong>Long-term loans:</strong> Secure funds and make payments for up to 30 years.</li><li><strong>Equipment loans:</strong> Get money to buy restaurant equipment, software, or delivery vehicles.</li><li><strong>Merchant advance: </strong>Agree to flexible terms with payments based on a fixed percentage of sales.</li><li><strong>Lines of credit:</strong> Only pay for what you use, and once you pay it off, you can access more funds.</li><li><strong>Small Business Administration loans:</strong> Get a government-backed loan with friendly payment terms.</li><li><strong>Invoice factoring: </strong>Get a loan based on unpaid invoices, and when you collect the money, the lender gets paid.</li><li><strong>Commercial real estate: </strong>Purchase property for your food and beverage business.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-8"> <span class="heading-toc" id="toc-faq-db873e10-90c8-4cda-aab7-87d5902ad19e"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Are Restaurant Business Loans?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Restaurant business loans are funds provided by a direct or alternative lender to companies in the food and beverage industry. Loans cover your working or operating capital needs. You can get money directly deposited into your account, open a line of credit, or use it to pay an equipment vendor. In exchange for a predetermined loan amount, you pay the lender daily, weekly, or monthly payments, including interest on your total loan amount. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Can Restaurants Use Business Loans For?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Restaurant business loans can pay for most expenses, except for refinancing debt or buying property. However, some lenders offer debt refinancing and commercial real estate loans. Use your restaurant business loan to:</p><ul><li>Pay employees</li><li>Buy inventory</li><li>Remodel </li><li>Upgrade equipment</li><li>Purchase software</li><li>Make repairs</li><li>Increase your marketing budget</li><li>Print new menus</li></ul> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Credit Score Do You Need for a Restaurant Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>The credit score you need to get a restaurant loan varies depending on what type of loan you're looking for and the lender. ApplePie Capital recommends a minimum credit score of 700 to get a franchise loan.<span class="ql-inline-citation" data-cite="14"></span> However, for a regular restaurant or SBA loan, lenders often require a lower score, like SmartBiz which requires a score of 650.<span class="ql-inline-citation" data-cite="72"></span> Even if you have poor credit, you can sometimes still get a restaurant business loan as long as your credit score is at least 500, though your interest rate will likely be higher.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Are the Top Three Expenses of the Restaurant Business?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>The top two expenses in the restaurant business are food and labor, since good food and quality service are the most important aspects of running a profitable restaurant. The third most expensive aspect varies. For some restaurants that create more complicated dishes, equipment can be a significant expense. For others in a high-cost area, rent may be more expensive.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">What Is the Average Overhead Cost for a Restaurant?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>Since restaurants can have significant differences in size, output and location, average overhead costs vary. However, the ideal average overhead percentage remains about the same. The Council of Smaller Enterprises recommends businesses aim for an overhead percentage of 35% or less.<span class="ql-inline-citation" data-cite="15"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-9"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> To determine the best restaurant business loans, we evaluated 30 direct and alternative lenders. We compared solutions by looking at business and credit requirements, loan types, and the minimum and maximum funding amounts. Furthermore, we examined the funding process, from what documents are required to how long it takes to get funds in your account. We also considered customer ratings and business use cases. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="woman is paying with smartphone in a restaurant" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/04AqtCEZ05-PgrIseVqecninUQ4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg" srcset="https://www.investopedia.com/thmb/ghNYY32oJm12dp37GJ0Aa4FdEFo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="woman is paying with smartphone in a restaurant" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/04AqtCEZ05-PgrIseVqecninUQ4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg" srcset="https://www.investopedia.com/thmb/ghNYY32oJm12dp37GJ0Aa4FdEFo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>EMS-FORSTER-PRODUCTIONS / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-17"><p>Fora Financial. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.forafinancial.com/loans-and-financing/small-business-loans/">Small Business Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-19"><p>Fora Financial. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.forafinancial.com/faq/">Frequently Asked Questions</a>," Click "What Are the Basic Qualifications for a Revenue Advance or Small Business Loan?"</p></li> <li class="mntl-sources__source" id="citation-20"><p>Fora Financial. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.forafinancial.com/loans-and-financing/small-business-loans/">Small Business Loans</a>," Click "What Are the Different Types of Term Loans?"</p></li> <li class="mntl-sources__source" id="citation-21"><p>Fora Financial. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.forafinancial.com/loans-and-financing/small-business-loans/">Small Business Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-25"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/sba-loan-approval" rel="nofollow sponsored">SBA Loan Approval</a>."</p></li> <li class="mntl-sources__source" id="citation-28"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/bank-term-loans" rel="nofollow sponsored">Bank Term Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-29"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/sba-loans" rel="nofollow sponsored">SBA Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-30"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/sba-loans-use-of-funds" rel="nofollow sponsored">SBA Use of Funds</a>."</p></li> <li class="mntl-sources__source" id="citation-31"><p>Small Business Administration. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/sites/default/files/2022-09/5000-836123%28R%29.pdf">SBA Information Notice</a>."</p></li> <li class="mntl-sources__source" id="citation-26"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/sba-rates-fees" rel="nofollow sponsored">SBA Loan Rates and Fees</a>."</p></li> <li class="mntl-sources__source" id="citation-22"><p>SmartBiz. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smartbizloans.com/sba-loan-approval" rel="nofollow sponsored">SBA Loan Approval</a>."</p></li> <li class="mntl-sources__source" id="citation-36"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/equipment_leasing_under_250" rel="nofollow sponsored">Financial Statements. Not Required</a>."</p></li> <li class="mntl-sources__source" id="citation-35"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/about_equipment_leasing_company" rel="nofollow sponsored">About Us</a>."</p></li> <li class="mntl-sources__source" id="citation-40"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/" rel="nofollow sponsored">Financing on Your Terms</a>."</p></li> <li class="mntl-sources__source" id="citation-39"><p>Crest Capital. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.crestcapital.com/equipment_financing_faqs" rel="nofollow sponsored">You Have Questions. We Have Answers</a>."</p></li> <li class="mntl-sources__source" id="citation-41"><p>Fundbox. 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Restaurant business loans provide [working capital](https://www.investopedia.com/ask/answers/102315/what-can-working-capital-be-used.asp) to buy equipment, hire employees, or pay your bills during a slow time. Plenty of funding options exist from direct to alternative lenders. However, your interest rates and term length will vary by loan type, credit score, and revenue. Selecting an online lender can get funds into your account within days, whereas traditional bank lenders may take weeks.  We reviewed 30 lenders to determine which ones offered a convenient application process, loans for various use cases, and features to manage your loan. We narrowed our list down by reviewing total costs, customer reviews, and perks, such as discounts for paying your loan off early. Our evaluation turned up eight providers offering the best restaurant business loans. ## The Best Restaurant Business Loans of 2024 * **Best Overall:** [Fora Financial](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=oCUucDAu9CHN&term=ffinancial&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) * **Best for SBA Loans:** [SmartBiz](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=smartbiz&bwid_id=6388b14276b3780decf128fd) * **Best for Restaurant Equipment Financing:** [Crest Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd) * **Best for Surviving a Slowdown:** [Fundbox](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) * **Best for Short-Term Loans:** [ARF Financial](https://arf.1west.com/) * **Best for Bad Credit:** [Credibly](https://www.credibly.com/) * **Best for Quick Funding:** [Rapid Finance](https://rapidfinance.1west.com/) * **Best for Franchises:** [ApplePie Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=applepie&bwid_id=6388b14276b3780decf128fd) Best Restaurant Business Loans Expand Best Restaurant Business Loans * [Our Top Picks](#summary-list) * [Fora Financial](#toc-best-overall-fora-financial) * [SmartBiz](#toc-best-for-sba-loans-smartbiz) * [Crest Capital](#toc-best-for-restaurant-equipment-financing-crest-capital) * [Fundbox](#toc-best-for-surviving-a-slowdown-fundbox) * [ARF Financial](#toc-best-for-short-term-loans-arf-financial) * [Credibly](#toc-best-for-bad-credit-credibly) * [Rapid Finance](#toc-best-for-quick-funding-rapid-finance) * [ApplePie Capital](#toc-best-for-franchises-applepie-capital) * See More (5) * [Final Verdict](#toc-final-verdict) * [Compare Providers](#toc-compare-the-best-restaurant-business-loans) * [Types of Loans](#toc-types-of-restaurant-business-loans) * [FAQ](#toc-faq-db873e10-90c8-4cda-aab7-87d5902ad19e) * [Methodology](#toc-methodology) ### Best Overall : Fora Financial --- ![FORA Financial]() :fill(white):max_bytes(150000):strip_icc()/Fora-fb97785e52464251ae07680b68f97673.jpg) * **Minimum Credit Score**: No minimum * **Loan Terms**: Short-term: up to 12 months, medium-term: 12 to 36 months, and long-term: 3 to 25 years * **Key Benefits**: Restriction-free funds and 24-hour loan approvals [Learn More](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=oCUucDAu9CHN&term=ffinancial&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Why We Chose It Fora Financial is our top pick as the best overall choice for restaurant business loans because this lender offers restriction-free funds and 24-hour loan approvals combined with responsive customer service. Pros & Cons Pros * Early payment discounts * No minimum credit score requirement * Fast financing Cons * Interest rates and loan costs are not advertised * Daily or weekly payments if you choose the revenue advance Overview Fora Financial is a direct lender offering working capital for small business owners, including restaurateurs and food truck owners. Its application process is simple, with a one-page application and a quick approval process. With a loan or merchant cash advance from Fora Financial, you can get $5,000 to $1.5 million for use within 72 hours after approval. The lender lets you pre-qualify for funds without affecting your credit score, and the one-page application is straightforward.  Both the loan and merchant cash advance comes with no restrictions on use with no [collateral](https://www.investopedia.com/terms/c/collateral.asp) required. Fora Financial doesn’t rely solely on your credit score to make a determination. Instead, the lender looks at your restaurant’s revenue and years in business. The minimum requirements for funding are as follows: * Six months in business * A minimum of $15,000 gross monthly sales Fora Financial provides flexible terms, giving you the option to choose a short-term, medium-term, or long-term loan. Short-term loans are up to 12 months. Medium-term loans are from 12 to 36 months. Long-term loans are three to 25 years. Or, if you opt for a merchant cash advance, you pay a percentage of your credit card transactions with no set terms.  Unfortunately, Fora Financial does not share information about interest rates or loan fees on their website. To get information on the cost of borrowing from them, you'll have to either begin the application process or contact customer service. Once you’ve paid off at least 60% of your loan, you may qualify for additional funding. Fora Financial has a department dedicated to loan renewals, making it easy to get more cash. Fora Financial generally receives great reviews and responds to positive and negative ones alike. ### Best for SBA Loans : SmartBiz --- ![SmartBiz]() :fill(white):max_bytes(150000):strip_icc()/Smart_Biz-8101134c03224c04ba0a9d9b190744ae.jpg)  SmartBiz * **Minimum Credit Score**: 650 * **Loan Terms**: 10 years or 25 (commercial real estate) * **Key Benefits**: 90% of qualified applicants get an SBA loan [Learn More](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=smartbiz&bwid_id=6388b14276b3780decf128fd) Why We Chose It Since roughly 90% of qualified applications referred to banks by SmartBiz get funded, SmartBiz is our pick as the best for getting a [U.S. Small Business Association (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) loan. Pros & Cons Pros * Quicker process than a conventional SBA loan through a bank * Competitive rates with many lender options * Helpful customer support when applying for your loan Cons * Strict government requirements * A minimum of two years in business * A personal guarantee and lien against your business are required Overview SmartBiz partners with a network of banks to help you secure a loan through the SBA. Although SBA loans can be complex, the SmartBiz platform simplifies the process and connects you with the right lender for your financial situation. Although SmartBiz specializes in SBA loans, you can also secure bank loans and alternative financing. After a five-minute pre-qualification process, you can select loan options, such as:  * **SBA 7(a):** $30,000 to $350,000 for working capital, equipment purchases, or refinancing existing business debt * **SBA Commercial Real Estate:** $500,000 to $5 million for buying or refinancing 51% owner-occupied commercial real estate * **Bank term:** $30,000 to $500,000 for debt refinancing, hiring employees, equipment, marketing, inventory, construction, and more * **Alternative:** You can connect with lenders to secure invoice financing loans, credit cards, or business lines of credit with varying rates SmartBiz offers a convenient sliding scale calculator and transparent fee structure, making it easy to see what you’ll pay before applying. Typical terms consist of: * **Interest rates for SBA loans:** 11% to 12% * **Repayment terms:** 10 years or 25 years (commercial real estate) * **Application fees:** A one-time charge of up to $3,000 * **SBA guarantee fee:** Based on the loan amount, 0.00% to 3.75% * **Bank closing costs:** Working capital loans cost $450 SBA loans usually take longer to process, but SmartBiz has optimized the process. Funds can arrive in your account as fast as seven days following approval. You can qualify for a loan if you’ve been in business for two years, earn enough monthly revenue to make payments, and don’t have any recent foreclosures or bankruptcies. You also must have at least a 650 credit score, among other requirements. ### Best for Restaurant Equipment Financing : Crest Capital --- ![Crest Capital]() :fill(white):max_bytes(150000):strip_icc()/Crest_Captial-778a26de1aca42cdbe57192bd7cef8aa.jpg)  Crest Capital * **Required Credit Score**: Not indicated * **Loan Terms**: 24 to 84 months * **Key Benefits**: Buy new or used equipment from a business or private seller [Learn More](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd) Why We Chose It Crest Capital allows borrowers to spend less on upfront expenses with no hidden costs and a four-hour turnaround time for equipment financing under $250,000, making it the best for restaurant equipment financing. Pros & Cons Pros * Many loan and lease options available * Will finance 100% of equipment costs plus soft expenses * Fast approval and funding Cons * Good credit required * Not for startups * Loans over $250,000 require more paperwork Overview Since 1989, Crest Capital has helped small to medium-sized businesses secure the equipment, vehicles, or software required to keep their company running. Unlike other lenders, Crest Capital fully funds 100% of your equipment costs plus covers soft fees, such as delivery and installation. As a national lender, Crest Capital offers several types of equipment loans and leases. Plus, you can add an unrestricted working capital loan to any equipment funds. Your options include: * **Equipment finance agreement (EFA):** A fixed-rate equipment loan * **Guaranteed purchase agreement (PUT):** Either a fixed-rate loan or a loan with a balloon payment * **$1 purchase agreement:** A lease that works like a loan; when it ends, you pay $1 to buy your equipment * **First amendment lease:** You lease the equipment and, at predetermined points, you can renew or purchase the equipment * **10% purchase option:** A fixed monthly payment, and at the end of the lease, you can buy the equipment for 10% of its original value, renew, or return the equipment * **Fair market value (FMV) option:** A low monthly lease payment, and you can renew, purchase, return, or upgrade equipment * **Operating lease:** Equipment loans for items with strong aftermarket value You can choose various plans for all of the above options, such as a [line of credit](https://www.investopedia.com/articles/personal-finance/072913/basics-lines-credit.asp), step-up payments, deferred payments, or seasonal payments. You can access an online calculator by inputting your email address or get an instant eligibility check. Requirements and terms consist of: * 24- to 84-month term length * $5,000 to $500,000 financing * Up to 25% of the loan can be soft costs * Must be in business for at least two years The application process is simple, and the company allows the financing of used or new equipment. Furthermore, you can even purchase from a private party. ### Best for Surviving a Slowdown : Fundbox --- ![Fundbox]() :fill(white):max_bytes(150000):strip_icc()/Fundbox-961a023a840b43b18272e0af9b003d5a.jpg)  Fundbox * **Required Credit Score**: 600 * **Loan Terms**: 12 or 24 weeks * **Key Benefits**: Secure your funds with only three months of invoicing history [Learn More](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Why We Chose It Fundbox is the best for surviving a slowdown because it provides a flexible line of credit that you can access when you need it and only pay for what you use. Pros & Cons Pros * No origination fees * 600 minimum credit score * No penalty for early payoff Cons * Business lien required * Only offers funds up to $150,000 Overview Fundbox has at times offered [invoice financing](https://www.investopedia.com/terms/i/invoice-financing.asp) and term loans. However, the company now focuses on lines of credit. If you anticipate needing funds to get through a recession or cover out-of-season expenses, a flexible line of credit from Fundbox can help. When business starts to slow, you may need funds to cover basic expenses until your revenue situation improves. However, you may not know how much money you’ll need and it can be risky to get a lump sum term loan that you can’t pay back. Fundbox offers simple borrower requirements, meaning even if you’re seeing a decrease in business, you can still qualify for a line of credit. Fundbox only requires “[three] months of transaction history in a business checking account.” Once approved, you can draw funds at any time and the money gets transferred into your account as soon as the next business day. You only pay interest on the amount drawn, and each time you pay it off, you have access to the full line of credit again.  Fundbox is currently offering lines of credit with terms of 12 or 24 weeks. The 12-week term has an interest rate starting at 4.66%, and the 24-week term has an interest rate starting at 8.99%. The company says that these rates can vary by customer and over time. With no restrictions on funds, you can use the money to survive a downturn and pay your loan off early without prepayment penalties. ### Best for Short-Term Loans : ARF Financial --- ![ARF Financial]() :fill(white):max_bytes(150000):strip_icc()/ARF_Financial-773ddc8d7a4a4e999ece0eba6cdf1799.jpg)  ARF Financial * **Required Credit Score**: 551 * **Loan Terms**: 12, 18, 24, or 36 months * **Key Benefits**: Discounts for early repayment [Learn More](https://arf.1west.com/) Why We Chose It ARF Financial allows borrowers to choose from four [short-term loan](https://www.investopedia.com/terms/s/shorttermdebt.asp) options and receive funds within five days with no collateral required. Pros & Cons Pros * Discounts for paying off your loan early * Multiple loan options * 12- to 36-month loan terms Cons * High interest rates * Weekly payments * Loans based on a percentage of annual revenue Overview ARF Financial is a financial services company offering several unsecured loan options and flexible payment terms. Although ARF Financial lends to several industries, it focuses on food and beverage businesses. The ARF Financial experts work with you to find the terms for your needs. With ARF Financial, you can secure a loan for up to $1 million. The total loan amounts are based on a percentage of your annual sales, and the company works with people who have credit scores of at least 551. Examples of loan amounts include: * **12-month terms:** 6% to 11% of annual sales * **18-month terms:** Up to 16.5% of annual sales * **24-month terms:** Up to 22% of annual sales * **36-month terms:** Up to 33% of annual sales You may be able to get a loan even if you’ve only been in business for a few months. ARF Financial funds businesses, such as: * Single unit restaurants * Multi-unit restaurants, franchises, and quick service * Bars and taverns * Caterers * Bakeries and cafes * Specialty food shops * Mall food outlets * Gourmet food stores Choose from loan terms of 12, 18, 24, or 36 months with lower interest rates for shorter loan terms. Interest rates start at 6%. Loan types include: * **Interest-only flex-pay loan:** Interest-only payments are for up to one year, then you can pay off the principal or roll it over for up to two years. * **Flex pay loan:** Defer up to 50% of your loan principal and get a renewable line of credit to use over six months. * **Working capital:** A classic bank loan that can be used for a wide variety of purposes. * **Bridge loans:** A [bridge loan](https://www.investopedia.com/terms/b/bridgeloan.asp) is a flexible line of credit that fills the gap in funds while you’re waiting on approval for a larger traditional or SBA loan. ### Best for Bad Credit : Credibly --- ![Credibly]() :fill(white):max_bytes(150000):strip_icc()/Credibly-9e11e686bf384d3b8247acbbfd62df5a.jpg)  Credibly * **Required Credit Score**: 500 * **Loan Terms**: 6 to 15 months (working capital), 18 to 24 months (long-term) * **Key Benefits**: Wide range of loan options [Learn More](https://www.credibly.com/) Why We Chose It Even with below-average or poor credit, you can get approved for a loan with Credibly, and same-day funding is possible. Pros & Cons Pros * Only need a credit score of 500 to qualify * A range of loan options * No hidden fees Cons * High interest or invoice factor rates for poor credit * Daily or weekly payments required Overview Since 2010, [Credibly has loaned](https://www.investopedia.com/credibly-business-loan-review-7556477) more than two billion dollars to over 30,000 small to medium-sized enterprises. If your credit score doesn’t qualify you for a traditional loan, Credibly can help you get the money you need. The company works with business owners with scores as low as 500. Most lenders require credit scores of 550 or higher to secure a loan. However, Credibly has minimal borrower requirements, meaning you only need a personal Fair Isaac Corporation ([FICO](https://www.investopedia.com/fico-credit-scores-explained-5072985)) score of 500 to qualify. Moreover, the company considers the overall health of your business, so it doesn’t rely solely on your credit score.  However, a business line of credit requires a credit score of 650 and annual revenue of $240,000. Working capital loans are less stringent. You must be in business for six months and show a three-month average revenue of $15,000. Loan amounts can be up to $400,000, and most business owners get funding the same day. You can choose from different loan types, such as: * **Working capital loan:** Up to $400,000 and terms of six to 15 months * **Merchant cash advance:** Up to $400,000 * **Business expansion loan:** Up to $250,000 and 18- or 24-month loan terms * **Business line of credit:** Up to $300,000 and varying loan terms Credibly charges a factor rate for working capital loans and merchant cash advances, starting at 1.11. Higher credit scores give you more favorable rates. You’ll also pay a one-time loan origination fee of 2.5% of the total loan amount that comes out of your loan balance.  As an alternative lender, Credibly offers other options through its partners, such as equipment loans or leases and long-term loans. ### Best for Quick Funding : Rapid Finance --- ![Rapid Finance]() :fill(white):max_bytes(150000):strip_icc()/RapidFinance-b33a51e59e62444386a3cf35ffe5aa56.jpg) Rapid Finance * **Required Credit Score**: Score not indicated, fair credit possibly accepted * **Loan Terms**: 3 to 60 months * **Key Benefits**: Same-day funding with many loan options [Learn More](https://rapidfinance.1west.com/) Why We Chose It With Rapid Finance, you can secure a small business loan and get funds in your account on the same day. Pros & Cons Pros * Accepts some lower credit scores * Same-day funding * Several loan types available Cons * Possibly more expensive than other loans * No clear rate and fee schedule * Three months of income history required Overview Rapid Finance is a financial services company that funds loans and works with other providers to offer several funding types. Although many loans from other providers often take a few days to deliver funds, Rapid Finance can get money into your account within hours of approval. Loan terms, interest rates, and factor rates are based on your credit score, the number of years in business, and monthly sales volume. You can choose from several loan options, such as: * **Small business loans:** $5,001 to $1 million and three- to 60-month loan terms * **Line of credit:** $5,001 to $250,000 and three- to 18-month terms * **Bridge loan:** $5,001 to $1 million and three- to 60-month payment terms * **SBA loans:** $500 to $5.5 million and one- to 30-year terms * **Invoice factoring:** $20,000 to $10 million * **Asset-based loan:** $50,000 to $10 million and six- to 36-month payment terms * **Commercial real estate:** $75,000 to $2 million and five- to 20-year loan terms * **Merchant cash advance:** $5,000to $500,000 and flexible payment terms All loans offer payments on an automatic daily, weekly, or monthly basis. To apply for a loan, you must have a business banking account, and show three months of income information. Although Rapid Finance doesn’t offer rate information online, it receives high ratings and responds to every review. ### Best for Franchises : ApplePie Capital --- ![Apple Pie Capital]() :fill(white):max_bytes(150000):strip_icc()/ApplePieCapital-8551a08f425d491ba1b8ffcbd9e3e253.jpg) Apple Pie Capital * **Required Credit Score**: Not listed * **Loan Terms**: 5 to 10 years * **Key Benefits**: Partner with a company dedicated to franchise funding [Learn More](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=applepie&bwid_id=6388b14276b3780decf128fd) Why We Chose It ApplePie Capital is a lending network that handles [franchise](https://www.investopedia.com/terms/f/franchise.asp) companies exclusively. The provider partners with a group of various lenders, and doesn’t place restrictions on the funds, making the loans best for franchises. Pros & Cons Pros * Long-term loans available * Offers loans for refinancing and remodeling * Financing available for first-time franchisees * No personal collateral required Cons * Only for franchise companies * Personalized rate information with no online fee schedule Overview When ApplePie Capital was founded, it only offered its ApplePie Core loan. However, it now provides equipment financing, SBA loans, conventional funding, and refinancing options. ApplePie features: * Five- to 10-year payment terms * Interest-only grace period * No prepayment penalties * Fixed and variable rate options * A minimum of $100,000 for loans and $15,000 for equipment financing Since ApplePie works with many different lenders, the rates vary and are dependent on factors, such as what the funds are used for, credit history, and type of loan. The company helps both existing and first time franchise business owners obtain financing. Requirements may be more strict for first timers. When you start your application, you can type in the name of the franchise. If the franchise you want to buy doesn’t come up, you can email them to begin your application. ## Final Verdict Our top pick for best restaurant business loans is Fora Financial because of its food and beverage industry knowledge, fast funding, and straightforward application process. Moreover, the company considers many factors, such as years in business, to determine your rates and works with you to find the best funding solution. However, if your business is currently experiencing a slowdown or you need funding quickly, Fundbox or Rapid Finance may work better for your needs. Both companies offer relatively fast funding and reasonable repayment terms, with Fundbox allowing you to only pay for what you use. ## Compare the Best Restaurant Business Loans | Company | **Minimum Credit Score** | **Loan Terms** | Key Benefits | | --- | --- | --- | --- | | [Fora Financial](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=oCUucDAu9CHN&term=ffinancial&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) **Best Overall** | No minimum | Short-term up to 12 months, medium-term 12 to 36 months, long-term 3 to 25 years | Restriction-free funds and 24-hour loan approvals | | [SmartBiz](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=smartbiz&bwid_id=6388b14276b3780decf128fd) **Best for SBA Loans** | 650 | 10 years or 25 years (commercial real estate) | 90% of qualified applicants get an SBA loan | | [Crest Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=crest&bwid_id=6388b14276b3780decf128fd) **Best for Restaurant Equipment Financing** | Not indicated | 24 to 84 months | Buy new or used equipment from a business or private seller | | [Fundbox](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) **Best for Surviving a Slowdown** | 600 | 12 or 24 weeks | Secure your funds with only three months of invoicing history | | [ARF Financial](https://arf.1west.com/) **Best for Short-Term Loans** | 551 | 12, 18, 24, or 36 months | Discounts for early repayment | | [Credibly](https://www.credibly.com/) **Best for Bad Credit** | 500 | 6 to 15 months (working capital), 18 to 24 months (long-term) | Wide range of loan options | | [Rapid Finance](https://rapidfinance.1west.com/) **Best for Quick Funding** | Not indicated, but fair credit likely accepted | 3 to 60 months | Same-day funding with many loan options | | [ApplePie Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=applepie&bwid_id=6388b14276b3780decf128fd) **Best for Franchises** | Not listed | 5 to 10 years | Partner with a company dedicated to franchise funding | ## Types of Restaurant Business Loans Restaurant business loans can take many forms, and a lending partner can help you decide which option is best for your company. The different types of loans include:  * **Short-term loans:** Pay off your loan in six to 36 months by making daily or weekly payments. * **Long-term loans:** Secure funds and make payments for up to 30 years. * **Equipment loans:** Get money to buy restaurant equipment, software, or delivery vehicles. * **Merchant advance:** Agree to flexible terms with payments based on a fixed percentage of sales. * **Lines of credit:** Only pay for what you use, and once you pay it off, you can access more funds. * **Small Business Administration loans:** Get a government-backed loan with friendly payment terms. * **Invoice factoring:** Get a loan based on unpaid invoices, and when you collect the money, the lender gets paid. * **Commercial real estate:** Purchase property for your food and beverage business. ## Frequently Asked Questions * ### What Are Restaurant Business Loans? Restaurant business loans are funds provided by a direct or alternative lender to companies in the food and beverage industry. Loans cover your working or operating capital needs. You can get money directly deposited into your account, open a line of credit, or use it to pay an equipment vendor. In exchange for a predetermined loan amount, you pay the lender daily, weekly, or monthly payments, including interest on your total loan amount. * ### What Can Restaurants Use Business Loans For? Restaurant business loans can pay for most expenses, except for refinancing debt or buying property. However, some lenders offer debt refinancing and commercial real estate loans. Use your restaurant business loan to: + Pay employees + Buy inventory + Remodel + Upgrade equipment + Purchase software + Make repairs + Increase your marketing budget + Print new menus * ### What Credit Score Do You Need for a Restaurant Loan? The credit score you need to get a restaurant loan varies depending on what type of loan you're looking for and the lender. ApplePie Capital recommends a minimum credit score of 700 to get a franchise loan. However, for a regular restaurant or SBA loan, lenders often require a lower score, like SmartBiz which requires a score of 650. Even if you have poor credit, you can sometimes still get a restaurant business loan as long as your credit score is at least 500, though your interest rate will likely be higher. * ### What Are the Top Three Expenses of the Restaurant Business? The top two expenses in the restaurant business are food and labor, since good food and quality service are the most important aspects of running a profitable restaurant. The third most expensive aspect varies. For some restaurants that create more complicated dishes, equipment can be a significant expense. For others in a high-cost area, rent may be more expensive. * ### What Is the Average Overhead Cost for a Restaurant? Since restaurants can have significant differences in size, output and location, average overhead costs vary. However, the ideal average overhead percentage remains about the same. The Council of Smaller Enterprises recommends businesses aim for an overhead percentage of 35% or less. ## Methodology To determine the best restaurant business loans, we evaluated 30 direct and alternative lenders. We compared solutions by looking at business and credit requirements, loan types, and the minimum and maximum funding amounts. Furthermore, we examined the funding process, from what documents are required to how long it takes to get funds in your account. We also considered customer ratings and business use cases. :max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-restaurant-business-loans-5116256-c61ead2b791b4fffa501de6beb5c992c.jpg) EMS-FORSTER-PRODUCTIONS / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Fora Financial. "[Small Business Loans](https://www.forafinancial.com/loans-and-financing/small-business-loans/)." 2. Fora Financial. "[Frequently Asked Questions](https://www.forafinancial.com/faq/)," Click "What Are the Basic Qualifications for a Revenue Advance or Small Business Loan?" 3. Fora Financial. "[Small Business Loans](https://www.forafinancial.com/loans-and-financing/small-business-loans/)," Click "What Are the Different Types of Term Loans?" 4. Fora Financial. "[Small Business Loans](https://www.forafinancial.com/loans-and-financing/small-business-loans/)." 5. SmartBiz. "[SBA Loan Approval](https://www.smartbizloans.com/sba-loan-approval)." 6. SmartBiz. "[Bank Term Loans](https://www.smartbizloans.com/bank-term-loans)." 7. SmartBiz. "[SBA Loans](https://www.smartbizloans.com/sba-loans)." 8. SmartBiz. "[SBA Use of Funds](https://www.smartbizloans.com/sba-loans-use-of-funds)." 9. Small Business Administration. "[SBA Information Notice](https://www.sba.gov/sites/default/files/2022-09/5000-836123%28R%29.pdf)." 10. SmartBiz. "[SBA Loan Rates and Fees](https://www.smartbizloans.com/sba-rates-fees)." 11. SmartBiz. "[SBA Loan Approval](https://www.smartbizloans.com/sba-loan-approval)." 12. Crest Capital. "[Financial Statements. Not Required](https://www.crestcapital.com/equipment_leasing_under_250)." 13. Crest Capital. "[About Us](https://www.crestcapital.com/about_equipment_leasing_company)." 14. Crest Capital. "[Financing on Your Terms](https://www.crestcapital.com/)." 15. Crest Capital. "[You Have Questions. We Have Answers](https://www.crestcapital.com/equipment_financing_faqs)." 16. Fundbox. "[Get a Business Line of Credit Up to $150K](https://fundbox.com/get-credit/)." 17. Fundbox. "[Who Is Eligible for Fundbox Financing](https://help.fundbox.com/hc/en-us/articles/360002197658-Who-is-eligible-for-Fundbox-financing-)." 18. ARF Financial. "[Lending Process](https://www.arffinancial.com/working-with-us/how-it-works/lending-process/)." 19. ARF Financial. "[Loan Approvals](https://www.arffinancial.com/working-with-us/how-it-works/approvals/)." 20. ARF Financial. "[Business Loan Terms](https://www.arffinancial.com/working-with-us/what-it-costs/terms/)." 21. ARF Financial. "[Interest-Only Flex Pay Loan](https://www.arffinancial.com/loans-by-product/interest-only-flex-pay-loan/)." 22. ARF Financial. "[Flex Pay Loans](https://www.arffinancial.com/loans-by-product/flex-pay-loans/)." 23. Crunchbase. "[Credibly](https://www.crunchbase.com/organization/retail-capital)." 24. Credibly. "[Small Business Loans](https://www.credibly.com/)." 25. Credibly. "[How to Secure a Business Loan With Bad Credit](https://www.credibly.com/guides/business-loans-for-bad-credit/)." 26. Credibly. "[Business Loans for Working Capital](https://www.credibly.com/working-capital-loans/)." 27. Credibly. "[Business Loans for Working Capital](https://www.credibly.com/working-capital-loans/)." 28. Credibly. "[Merchant Cash Advance for Small Business](https://www.credibly.com/merchant-cash-advance/)." 29. Credibly. "[Long-Term Business Loans](https://www.credibly.com/long-term-business-loans/#tab-id-4)." 30. Credibly. "[Small Business Line of Credit](https://www.credibly.com/business-line-of-credit/)." 31. Rapid Finance. "[Small Business Financing Options That Can Benefit Businesses](https://www.rapidfinance.com/financing-solutions/)." 32. Rapid Finance. "[Small Business Loans for All Your Business Needs](https://www.rapidfinance.com/financing-solutions/small-business-loan/)." 33. ApplePie Capital. "[Finance Your Franchise](https://www.applepiecapital.com/franchise-financing)." 34. ApplePie Capital. "[How to Get a Franchise Loan Approved](https://www.applepiecapital.com/franchise-forum/articles/how-to-get-a-business-loan-approved/#:~:text=Many%20lenders%20want%20to%20see,debts%20and%20bills%20on%20time.)." 35. SmartBiz. "[SBA Loan Approval](https://www.smartbizloans.com/sba-loan-approval)." 36. Council of Smaller Enterprises. "[Managing Overhead Costs to Improve Profitability](https://cose.org/2022/11/managing-overhead-costs-to-improve-profitability/)." 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Restaurant business loans provide working capital to buy equipment, hire employees, or pay your bills during a slow time. Plenty of funding options exist from direct to alternative lenders. However, your interest rates and term length will vary by loan type, credit score, and revenue. Selecting an online lender can get funds into your account within days, whereas traditional bank lenders may take weeks.  We reviewed 30 lenders to determine which ones offered a convenient application process, loans for various use cases, and features to manage your loan. We narrowed our list down by reviewing total costs, customer reviews, and perks, such as discounts for paying your loan off early. Our evaluation turned up eight providers offering the best restaurant business loans. The Best Restaurant Business Loans of 2024 Best Overall: Fora Financial Best for SBA Loans: SmartBiz Best for Restaurant Equipment Financing: Crest Capital Best for Surviving a Slowdown: Fundbox Best for Short-Term Loans: ARF Financial Best for Bad Credit: Credibly Best for Quick Funding: Rapid Finance Best for Franchises: ApplePie Capital Best Restaurant Business Loans Expand Best Restaurant Business Loans Our Top Picks Fora Financial SmartBiz Crest Capital Fundbox ARF Financial Credibly Rapid Finance ApplePie Capital See More (5) Final Verdict Compare Providers Types of Loans FAQ Methodology Best Overall : Fora Financial Minimum Credit Score: No minimumLoan Terms: Short-term: up to 12 months, medium-term: 12 to 36 months, and long-term: 3 to 25 yearsKey Benefits: Restriction-free funds and 24-hour loan approvals Learn More Why We Chose It Fora Financial is our top pick as the best overall choice for restaurant business loans because this lender offers restriction-free funds and 24-hour loan approvals combined with responsive customer service. Pros & Cons Pros Early payment discounts No minimum credit score requirement Fast financing Cons Interest rates and loan costs are not advertised Daily or weekly payments if you choose the revenue advance Overview Fora Financial is a direct lender offering working capital for small business owners, including restaurateurs and food truck owners. Its application process is simple, with a one-page application and a quick approval process. With a loan or merchant cash advance from Fora Financial, you can get $5,000 to $1.5 million for use within 72 hours after approval. The lender lets you pre-qualify for funds without affecting your credit score, and the one-page application is straightforward.  Both the loan and merchant cash advance comes with no restrictions on use with no collateral required. Fora Financial doesn’t rely solely on your credit score to make a determination. Instead, the lender looks at your restaurant’s revenue and years in business. The minimum requirements for funding are as follows: Six months in businessA minimum of $15,000 gross monthly sales Fora Financial provides flexible terms, giving you the option to choose a short-term, medium-term, or long-term loan. Short-term loans are up to 12 months. Medium-term loans are from 12 to 36 months. Long-term loans are three to 25 years. Or, if you opt for a merchant cash advance, you pay a percentage of your credit card transactions with no set terms.  Unfortunately, Fora Financial does not share information about interest rates or loan fees on their website. To get information on the cost of borrowing from them, you'll have to either begin the application process or contact customer service. Once you’ve paid off at least 60% of your loan, you may qualify for additional funding. Fora Financial has a department dedicated to loan renewals, making it easy to get more cash. Fora Financial generally receives great reviews and responds to positive and negative ones alike. Best for SBA Loans : SmartBiz  SmartBiz Minimum Credit Score: 650Loan Terms: 10 years or 25 (commercial real estate)Key Benefits: 90% of qualified applicants get an SBA loan Learn More Why We Chose It Since roughly 90% of qualified applications referred to banks by SmartBiz get funded, SmartBiz is our pick as the best for getting a U.S. Small Business Association (SBA) loan. Pros & Cons Pros Quicker process than a conventional SBA loan through a bank Competitive rates with many lender options Helpful customer support when applying for your loan Cons Strict government requirements A minimum of two years in business A personal guarantee and lien against your business are required Overview SmartBiz partners with a network of banks to help you secure a loan through the SBA. Although SBA loans can be complex, the SmartBiz platform simplifies the process and connects you with the right lender for your financial situation. Although SmartBiz specializes in SBA loans, you can also secure bank loans and alternative financing. After a five-minute pre-qualification process, you can select loan options, such as:  SBA 7(a): $30,000 to $350,000 for working capital, equipment purchases, or refinancing existing business debtSBA Commercial Real Estate: $500,000 to $5 million for buying or refinancing 51% owner-occupied commercial real estateBank term: $30,000 to $500,000 for debt refinancing, hiring employees, equipment, marketing, inventory, construction, and moreAlternative: You can connect with lenders to secure invoice financing loans, credit cards, or business lines of credit with varying rates SmartBiz offers a convenient sliding scale calculator and transparent fee structure, making it easy to see what you’ll pay before applying. Typical terms consist of: Interest rates for SBA loans: 11% to 12%Repayment terms: 10 years or 25 years (commercial real estate)Application fees: A one-time charge of up to $3,000SBA guarantee fee: Based on the loan amount, 0.00% to 3.75% Bank closing costs: Working capital loans cost $450 SBA loans usually take longer to process, but SmartBiz has optimized the process. Funds can arrive in your account as fast as seven days following approval. You can qualify for a loan if you’ve been in business for two years, earn enough monthly revenue to make payments, and don’t have any recent foreclosures or bankruptcies. You also must have at least a 650 credit score, among other requirements. Best for Restaurant Equipment Financing : Crest Capital  Crest Capital Required Credit Score: Not indicatedLoan Terms: 24 to 84 monthsKey Benefits: Buy new or used equipment from a business or private seller Learn More Why We Chose It Crest Capital allows borrowers to spend less on upfront expenses with no hidden costs and a four-hour turnaround time for equipment financing under $250,000, making it the best for restaurant equipment financing. Pros & Cons Pros Many loan and lease options available Will finance 100% of equipment costs plus soft expenses Fast approval and funding Cons Good credit required Not for startups Loans over $250,000 require more paperwork Overview Since 1989, Crest Capital has helped small to medium-sized businesses secure the equipment, vehicles, or software required to keep their company running. Unlike other lenders, Crest Capital fully funds 100% of your equipment costs plus covers soft fees, such as delivery and installation. As a national lender, Crest Capital offers several types of equipment loans and leases. Plus, you can add an unrestricted working capital loan to any equipment funds. Your options include: Equipment finance agreement (EFA): A fixed-rate equipment loanGuaranteed purchase agreement (PUT): Either a fixed-rate loan or a loan with a balloon payment$1 purchase agreement: A lease that works like a loan; when it ends, you pay $1 to buy your equipmentFirst amendment lease: You lease the equipment and, at predetermined points, you can renew or purchase the equipment10% purchase option: A fixed monthly payment, and at the end of the lease, you can buy the equipment for 10% of its original value, renew, or return the equipmentFair market value (FMV) option: A low monthly lease payment, and you can renew, purchase, return, or upgrade equipmentOperating lease: Equipment loans for items with strong aftermarket value You can choose various plans for all of the above options, such as a line of credit, step-up payments, deferred payments, or seasonal payments. You can access an online calculator by inputting your email address or get an instant eligibility check. Requirements and terms consist of: 24- to 84-month term length$5,000 to $500,000 financingUp to 25% of the loan can be soft costsMust be in business for at least two years The application process is simple, and the company allows the financing of used or new equipment. Furthermore, you can even purchase from a private party. Best for Surviving a Slowdown : Fundbox  Fundbox Required Credit Score: 600Loan Terms: 12 or 24 weeksKey Benefits: Secure your funds with only three months of invoicing history Learn More Why We Chose It Fundbox is the best for surviving a slowdown because it provides a flexible line of credit that you can access when you need it and only pay for what you use. Pros & Cons Pros No origination fees 600 minimum credit score No penalty for early payoff Cons Business lien required Only offers funds up to $150,000 Overview Fundbox has at times offered invoice financing and term loans. However, the company now focuses on lines of credit. If you anticipate needing funds to get through a recession or cover out-of-season expenses, a flexible line of credit from Fundbox can help. When business starts to slow, you may need funds to cover basic expenses until your revenue situation improves. However, you may not know how much money you’ll need and it can be risky to get a lump sum term loan that you can’t pay back. Fundbox offers simple borrower requirements, meaning even if you’re seeing a decrease in business, you can still qualify for a line of credit. Fundbox only requires “[three] months of transaction history in a business checking account.” Once approved, you can draw funds at any time and the money gets transferred into your account as soon as the next business day. You only pay interest on the amount drawn, and each time you pay it off, you have access to the full line of credit again.  Fundbox is currently offering lines of credit with terms of 12 or 24 weeks. The 12-week term has an interest rate starting at 4.66%, and the 24-week term has an interest rate starting at 8.99%. The company says that these rates can vary by customer and over time. With no restrictions on funds, you can use the money to survive a downturn and pay your loan off early without prepayment penalties. Best for Short-Term Loans : ARF Financial  ARF Financial Required Credit Score: 551Loan Terms: 12, 18, 24, or 36 monthsKey Benefits: Discounts for early repayment Learn More Why We Chose It ARF Financial allows borrowers to choose from four short-term loan options and receive funds within five days with no collateral required. Pros & Cons Pros Discounts for paying off your loan early Multiple loan options 12- to 36-month loan terms Cons High interest rates Weekly payments Loans based on a percentage of annual revenue Overview ARF Financial is a financial services company offering several unsecured loan options and flexible payment terms. Although ARF Financial lends to several industries, it focuses on food and beverage businesses. The ARF Financial experts work with you to find the terms for your needs. With ARF Financial, you can secure a loan for up to $1 million. The total loan amounts are based on a percentage of your annual sales, and the company works with people who have credit scores of at least 551. Examples of loan amounts include: 12-month terms: 6% to 11% of annual sales18-month terms: Up to 16.5% of annual sales24-month terms: Up to 22% of annual sales36-month terms: Up to 33% of annual sales You may be able to get a loan even if you’ve only been in business for a few months. ARF Financial funds businesses, such as: Single unit restaurantsMulti-unit restaurants, franchises, and quick serviceBars and tavernsCaterersBakeries and cafesSpecialty food shopsMall food outletsGourmet food stores Choose from loan terms of 12, 18, 24, or 36 months with lower interest rates for shorter loan terms. Interest rates start at 6%. Loan types include: Interest-only flex-pay loan: Interest-only payments are for up to one year, then you can pay off the principal or roll it over for up to two years. Flex pay loan: Defer up to 50% of your loan principal and get a renewable line of credit to use over six months. Working capital: A classic bank loan that can be used for a wide variety of purposes. Bridge loans: A bridge loan is a flexible line of credit that fills the gap in funds while you’re waiting on approval for a larger traditional or SBA loan. Best for Bad Credit : Credibly  Credibly Required Credit Score: 500Loan Terms: 6 to 15 months (working capital), 18 to 24 months (long-term)Key Benefits: Wide range of loan options Learn More Why We Chose It Even with below-average or poor credit, you can get approved for a loan with Credibly, and same-day funding is possible. Pros & Cons Pros Only need a credit score of 500 to qualify A range of loan options No hidden fees Cons High interest or invoice factor rates for poor credit Daily or weekly payments required Overview Since 2010, Credibly has loaned more than two billion dollars to over 30,000 small to medium-sized enterprises. If your credit score doesn’t qualify you for a traditional loan, Credibly can help you get the money you need. The company works with business owners with scores as low as 500. Most lenders require credit scores of 550 or higher to secure a loan. However, Credibly has minimal borrower requirements, meaning you only need a personal Fair Isaac Corporation (FICO) score of 500 to qualify. Moreover, the company considers the overall health of your business, so it doesn’t rely solely on your credit score.  However, a business line of credit requires a credit score of 650 and annual revenue of $240,000. Working capital loans are less stringent. You must be in business for six months and show a three-month average revenue of $15,000. Loan amounts can be up to $400,000, and most business owners get funding the same day. You can choose from different loan types, such as: Working capital loan: Up to $400,000 and terms of six to 15 monthsMerchant cash advance: Up to $400,000Business expansion loan: Up to $250,000 and 18- or 24-month loan termsBusiness line of credit: Up to $300,000 and varying loan terms Credibly charges a factor rate for working capital loans and merchant cash advances, starting at 1.11. Higher credit scores give you more favorable rates. You’ll also pay a one-time loan origination fee of 2.5% of the total loan amount that comes out of your loan balance.  As an alternative lender, Credibly offers other options through its partners, such as equipment loans or leases and long-term loans. Best for Quick Funding : Rapid Finance Rapid Finance Required Credit Score: Score not indicated, fair credit possibly acceptedLoan Terms: 3 to 60 monthsKey Benefits: Same-day funding with many loan options Learn More Why We Chose It With Rapid Finance, you can secure a small business loan and get funds in your account on the same day. Pros & Cons Pros Accepts some lower credit scores Same-day funding Several loan types available Cons Possibly more expensive than other loans No clear rate and fee schedule Three months of income history required Overview Rapid Finance is a financial services company that funds loans and works with other providers to offer several funding types. Although many loans from other providers often take a few days to deliver funds, Rapid Finance can get money into your account within hours of approval. Loan terms, interest rates, and factor rates are based on your credit score, the number of years in business, and monthly sales volume. You can choose from several loan options, such as: Small business loans: $5,001 to $1 million and three- to 60-month loan termsLine of credit: $5,001 to $250,000 and three- to 18-month termsBridge loan: $5,001 to $1 million and three- to 60-month payment termsSBA loans: $500 to $5.5 million and one- to 30-year termsInvoice factoring: $20,000 to $10 millionAsset-based loan: $50,000 to $10 million and six- to 36-month payment termsCommercial real estate: $75,000 to $2 million and five- to 20-year loan termsMerchant cash advance: $5,000 to $500,000 and flexible payment terms All loans offer payments on an automatic daily, weekly, or monthly basis. To apply for a loan, you must have a business banking account, and show three months of income information. Although Rapid Finance doesn’t offer rate information online, it receives high ratings and responds to every review. Best for Franchises : ApplePie Capital Apple Pie Capital Required Credit Score: Not listedLoan Terms: 5 to 10 yearsKey Benefits: Partner with a company dedicated to franchise funding Learn More Why We Chose It ApplePie Capital is a lending network that handles franchise companies exclusively. The provider partners with a group of various lenders, and doesn’t place restrictions on the funds, making the loans best for franchises. Pros & Cons Pros Long-term loans available Offers loans for refinancing and remodeling Financing available for first-time franchisees No personal collateral required Cons Only for franchise companies Personalized rate information with no online fee schedule Overview When ApplePie Capital was founded, it only offered its ApplePie Core loan. However, it now provides equipment financing, SBA loans, conventional funding, and refinancing options. ApplePie features: Five- to 10-year payment termsInterest-only grace periodNo prepayment penaltiesFixed and variable rate optionsA minimum of $100,000 for loans and $15,000 for equipment financing Since ApplePie works with many different lenders, the rates vary and are dependent on factors, such as what the funds are used for, credit history, and type of loan. The company helps both existing and first time franchise business owners obtain financing. Requirements may be more strict for first timers. When you start your application, you can type in the name of the franchise. If the franchise you want to buy doesn’t come up, you can email them to begin your application. Final Verdict Our top pick for best restaurant business loans is Fora Financial because of its food and beverage industry knowledge, fast funding, and straightforward application process. Moreover, the company considers many factors, such as years in business, to determine your rates and works with you to find the best funding solution. However, if your business is currently experiencing a slowdown or you need funding quickly, Fundbox or Rapid Finance may work better for your needs. Both companies offer relatively fast funding and reasonable repayment terms, with Fundbox allowing you to only pay for what you use. Compare the Best Restaurant Business Loans Company Minimum Credit Score Loan Terms Key Benefits Fora Financial Best Overall No minimum Short-term up to 12 months, medium-term 12 to 36 months, long-term 3 to 25 years Restriction-free funds and 24-hour loan approvals SmartBiz Best for SBA Loans 650 10 years or 25 years (commercial real estate) 90% of qualified applicants get an SBA loan Crest Capital Best for Restaurant Equipment Financing Not indicated 24 to 84 months Buy new or used equipment from a business or private seller Fundbox Best for Surviving a Slowdown 600 12 or 24 weeks Secure your funds with only three months of invoicing history ARF Financial Best for Short-Term Loans 551 12, 18, 24, or 36 months Discounts for early repayment Credibly Best for Bad Credit 500 6 to 15 months (working capital), 18 to 24 months (long-term) Wide range of loan options Rapid Finance Best for Quick Funding Not indicated, but fair credit likely accepted 3 to 60 months Same-day funding with many loan options ApplePie Capital Best for Franchises Not listed 5 to 10 years Partner with a company dedicated to franchise funding Types of Restaurant Business Loans Restaurant business loans can take many forms, and a lending partner can help you decide which option is best for your company. The different types of loans include:  Short-term loans: Pay off your loan in six to 36 months by making daily or weekly payments.Long-term loans: Secure funds and make payments for up to 30 years.Equipment loans: Get money to buy restaurant equipment, software, or delivery vehicles.Merchant advance: Agree to flexible terms with payments based on a fixed percentage of sales.Lines of credit: Only pay for what you use, and once you pay it off, you can access more funds.Small Business Administration loans: Get a government-backed loan with friendly payment terms.Invoice factoring: Get a loan based on unpaid invoices, and when you collect the money, the lender gets paid.Commercial real estate: Purchase property for your food and beverage business. Frequently Asked Questions What Are Restaurant Business Loans? Restaurant business loans are funds provided by a direct or alternative lender to companies in the food and beverage industry. Loans cover your working or operating capital needs. You can get money directly deposited into your account, open a line of credit, or use it to pay an equipment vendor. In exchange for a predetermined loan amount, you pay the lender daily, weekly, or monthly payments, including interest on your total loan amount.  What Can Restaurants Use Business Loans For? Restaurant business loans can pay for most expenses, except for refinancing debt or buying property. However, some lenders offer debt refinancing and commercial real estate loans. Use your restaurant business loan to:Pay employeesBuy inventoryRemodel Upgrade equipmentPurchase softwareMake repairsIncrease your marketing budgetPrint new menus What Credit Score Do You Need for a Restaurant Loan? The credit score you need to get a restaurant loan varies depending on what type of loan you're looking for and the lender. ApplePie Capital recommends a minimum credit score of 700 to get a franchise loan. However, for a regular restaurant or SBA loan, lenders often require a lower score, like SmartBiz which requires a score of 650. Even if you have poor credit, you can sometimes still get a restaurant business loan as long as your credit score is at least 500, though your interest rate will likely be higher. What Are the Top Three Expenses of the Restaurant Business? The top two expenses in the restaurant business are food and labor, since good food and quality service are the most important aspects of running a profitable restaurant. The third most expensive aspect varies. For some restaurants that create more complicated dishes, equipment can be a significant expense. For others in a high-cost area, rent may be more expensive. What Is the Average Overhead Cost for a Restaurant? Since restaurants can have significant differences in size, output and location, average overhead costs vary. However, the ideal average overhead percentage remains about the same. The Council of Smaller Enterprises recommends businesses aim for an overhead percentage of 35% or less. Methodology To determine the best restaurant business loans, we evaluated 30 direct and alternative lenders. We compared solutions by looking at business and credit requirements, loan types, and the minimum and maximum funding amounts. Furthermore, we examined the funding process, from what documents are required to how long it takes to get funds in your account. We also considered customer ratings and business use cases. EMS-FORSTER-PRODUCTIONS / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Fora Financial. "Small Business Loans." Fora Financial. "Frequently Asked Questions," Click "What Are the Basic Qualifications for a Revenue Advance or Small Business Loan?" Fora Financial. "Small Business Loans," Click "What Are the Different Types of Term Loans?" Fora Financial. "Small Business Loans." SmartBiz. "SBA Loan Approval." SmartBiz. "Bank Term Loans." SmartBiz. "SBA Loans." SmartBiz. "SBA Use of Funds." Small Business Administration. "SBA Information Notice." SmartBiz. "SBA Loan Rates and Fees." SmartBiz. "SBA Loan Approval." Crest Capital. "Financial Statements. Not Required." Crest Capital. "About Us." Crest Capital. "Financing on Your Terms." Crest Capital. "You Have Questions. We Have Answers." Fundbox. "Get a Business Line of Credit Up to $150K." Fundbox. "Who Is Eligible for Fundbox Financing." ARF Financial. "Lending Process." ARF Financial. "Loan Approvals." ARF Financial. "Business Loan Terms." ARF Financial. "Interest-Only Flex Pay Loan." ARF Financial. "Flex Pay Loans." Crunchbase. "Credibly." Credibly. "Small Business Loans." Credibly. "How to Secure a Business Loan With Bad Credit." Credibly. "Business Loans for Working Capital." Credibly. "Business Loans for Working Capital." Credibly. "Merchant Cash Advance for Small Business." Credibly. "Long-Term Business Loans." Credibly. "Small Business Line of Credit." Rapid Finance. "Small Business Financing Options That Can Benefit Businesses." Rapid Finance. "Small Business Loans for All Your Business Needs." ApplePie Capital. "Finance Your Franchise." ApplePie Capital. "How to Get a Franchise Loan Approved." SmartBiz. "SBA Loan Approval." Council of Smaller Enterprises. "Managing Overhead Costs to Improve Profitability." Related Articles The Best Small Business Loans for Bad Credit for May 2024 Best Startup Business Loans for May 2024 4 Steps to Getting a Small Business Loan Without Collateral Best Home Improvement Loans for 2024 Best Personal Loans for Fair Credit for 2024 Best Medical School Loans Related Terms What Is a No-Doc Business Loan, and Is One Right for Your Business? A no-doc business loan can be a quick way for business owners to secure financing that they may not be able to access through a traditional bank loan. more Emergency Loan: Types, Eligibility, Pros and Cons Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. more Future Advance: Meaning, Example, Revolving vs. Non-Revolving A future advance is a clause in a mortgage that provides for additional availability of funds under the loan contract without requiring another loan. more What It Means to Be Past Due on a Loan, Plus Consequences Past due is a loan payment that has not been made as of its due date. The borrower may be subject to late fees, unless there is a grace period. more Employee Loan: What It Is and Should You Get One? If you need to borrow money to cover unexpected costs or even something related to work, you may want to ask about employee loans. more 5 Cs of Credit: What They Are, How They’re Used, and Which Is Most Important The five Cs of credit are character, capacity, collateral, capital, and conditions. The five Cs of credit are important because lenders use them to set loan rates and terms. more

https://www.investopedia.com/best-payroll-software-5088638

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Based on our research, Gusto has the best payroll software due to its affordability, unlimited payroll runs, and more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> Payroll software automates every step in the payroll process for small to large businesses. It helps you manage employee payments by making it easy to set up direct deposits, withhold payroll taxes, and keep accurate records so you don’t get fined. These processes can be time-consuming when done manually, and it can be costly if you make a mistake. Failing to deposit payroll taxes appropriately can lead to penalties of as much as 15% of the deposit amount depending on how long it takes to correct the error.<span class="ql-inline-citation" data-cite="2"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> To help you choose the right payroll software for your business, we considered 15 different payroll service providers. For each, we evaluated cost, ease of use, important integrations, convenience, reporting features, and support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The Best Payroll Software for 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://gusto.pxf.io/c/2104074/1286304/15154" rel="nofollow noopener nocaes" target="_blank"> Gusto</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Reporting:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://paychex.sjv.io/c/2104074/1550440/16636" rel="nofollow noskim noopener nocaes" target="_blank"> Paychex Flex</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Easiest to Set Up:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_evergreen_2022_Payroll_US" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> QuickBooks Payroll</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Customer Service:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-workful?cid=632db6cfac5eb" rel="nofollow noskim noopener nocaes" target="_blank"> Workful</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Small Businesses:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://onpay.tpchkr.net/c/2104074/854988/11008" rel="nofollow noskim noopener nocaes" target="_blank"> OnPay</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Large Companies:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=243&amp;aff_id=1028" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> ADP</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Free Option:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-payroll4free?cid=632db6cfac5eb" rel="nofollow noskim noopener nocaes" target="_blank"> Payroll4Free</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Integrations:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://appwiki.nl/link/brand/eYoUIyYrRNJ7Bp09xud3MyGlf4wIn2E8" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Rippling</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="false" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> The Best Payroll Software for 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-The Best Payroll Software for 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> The Best Payroll Software for 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Gusto" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Gusto" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-gusto" rel="nocaes"> <span class="link__wrapper">Gusto</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Paychex Flex" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Paychex Flex" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-reporting-paychex-flex" rel="nocaes"> <span class="link__wrapper">Paychex Flex</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-QuickBooks Payroll" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-QuickBooks Payroll" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-easiest-to-set-up-quickbooks-payroll" rel="nocaes"> <span class="link__wrapper">QuickBooks Payroll</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Workful" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Workful" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-customer-service-workful" rel="nocaes"> <span class="link__wrapper">Workful</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-OnPay" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-OnPay" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-businesses-onpay" rel="nocaes"> <span class="link__wrapper">OnPay</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-ADP" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-ADP" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-large-companies-adp" rel="nocaes"> <span class="link__wrapper">ADP</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Payroll4Free" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Payroll4Free" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-free-option-payroll4free" rel="nocaes"> <span class="link__wrapper">Payroll4Free</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Rippling" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-7"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Rippling" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-integrations-rippling" rel="nocaes"> <span class="link__wrapper">Rippling</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (5)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Pros &amp; Cons" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros--cons-of-payroll-software" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Pros &amp; Cons</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-payroll-software" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">FAQs</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-pick-the-best-payroll-software" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-gusto"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Gusto</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 300px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Gusto" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/mGUSha8DGgkengogWyUxUUa9Vi4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Gusto-d36101fad2934b4094c3b510a76cc8b6.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Gusto" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/mGUSha8DGgkengogWyUxUUa9Vi4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Gusto-d36101fad2934b4094c3b510a76cc8b6.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Gusto</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Gusto" data-retailer-type="skimlinks" data-tracking-container="true" href="https://gusto.pxf.io/c/2104074/1286304/15154" id="button_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> Gusto offers three thoughtful tiers for small to midsize companies that need payroll with a few helpings of human resources (HR) features, making it the best overall choice. Each plan includes full-service automated payroll suitable for almost any business, depending on needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-5"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Affordable, but good value</p></li> <li><p>Unlimited payroll runs</p></li> <li><p>Paid time off (PTO) tracking available</p></li> <li><p>Full-service payroll available in all states</p></li> <li><p>Basic reports included at all tiers</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Next day direct deposit available only in the Complete and Concierge plans</p></li> <li><p>Dedicated support only for Concierge subscribers</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Gusto is similar to other payroll software solutions in that it offers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">direct deposit</a> or checks to pay your employees. It also tracks and files federal, state, and local taxes automatically. What sets Gusto apart from the other options is that it offers a better plan for each tier you go up. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> Rather than removing direct deposit for the low-priced plan, Gusto increases the convenience of direct deposit the more expensive your plan. For example, direct deposit takes up to four days to clear for the lowest plan, but the high-tier plans get next-day direct deposit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> The Core plan from Gusto costs $40 per month, and $6 per employee per month, making it one of the most affordable choices for a full-service payroll plan. The Plus plan is $80 per month, but the cost per employee is $12, and you’ll be able to offer next-day direct deposit. You'll need to contact the company if you want to learn about its Premium packages, which offer dedicated support and compliance alerts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-reporting-paychex-flex"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Reporting</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Paychex Flex</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-10" style="--imgWidth: 72px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Paychex" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/URY6l2X7q93dBqCUhya-PoPEdPQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/PaychexFlex-a9debda0c97b4f028aeebb2a2f979bf7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Paychex" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/URY6l2X7q93dBqCUhya-PoPEdPQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/PaychexFlex-a9debda0c97b4f028aeebb2a2f979bf7.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Paychex</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-11"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Paychex Flex" data-retailer-type="other" data-tracking-container="true" href="https://paychex.sjv.io/c/2104074/1550440/16636" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> Paychex Flex offers more than 160 reports for you to get a clear look at wages, taxes, turnover, and more. Paychex is our best reporting option because it checks almost all the boxes for what you want in payroll software regarding reports and data. It also automatically files your payroll taxes, ensures compliance, and includes integrations with important programs you also use, such as accounting and benefits apps. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-15"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>24/7 support</p></li> <li><p>Easy to use</p></li> <li><p>HR add-on options</p></li> <li><p>Robust reporting feature</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Hidden fees for setup &amp; EOY tax docs</p></li> <li><p>Mixed reviews from users regarding support</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> There’s a lot to like about Paychex. The payroll software makes it easy to set up and run payroll, automates the submission of federal, state, and local payroll taxes, and offers plenty of upgrade options, which you may need as your business grows. Still, the basic reporting you get from Paychex could be worth the monthly fee alone, giving it the edge in this category. Plus, you’ll be able to add any other data field you’d like, thanks to custom fields, which is rare for small business online payroll services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> While the Paychex Flex Essentials plan is $39 per month and $5 per employee, it’s difficult to say how much Paychex will cost you for the more comprehensive plans—Paychex Flex Select and Paychex Flex Pro—unless you go through the process of getting a custom quote. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> One of the most important aspects of a good online payroll solution is whether it integrates with software you already use. Paychex does integrate with QuickBooks and Xero <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679">accounting software</a>, plus many health insurance and benefits apps, time tracking and attendance software, and HR software. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-easiest-to-set-up-quickbooks-payroll"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Easiest to Set Up</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> QuickBooks Payroll</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-20" style="--imgWidth: 629px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="QuickBooks" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/OvrWDYaOloRq8LgGIAkPowTTH5U=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-logo1-1db3f575132b4c98929c8664e9dfb016.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="QuickBooks" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/OvrWDYaOloRq8LgGIAkPowTTH5U=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-logo1-1db3f575132b4c98929c8664e9dfb016.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> QuickBooks</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-21"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with QuickBooks Payroll" data-retailer-type="other" data-tracking-container="true" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_evergreen_2022_Payroll_US" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> If you’re already using QuickBooks for accounting, then QuickBooks Payroll is our easiest to set up option, as everything will be automated, and it’s going to be an intuitive program for any QuickBooks user. You’re unlikely to need to contact support for help because the tutorial and knowledge base are so thorough. Even if that’s not working for you, a quick search online will send you to a multitude of walkthroughs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-25"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Easy setup and intuitive interface</p></li> <li><p>Seamless integration with QuickBooks accounting software</p></li> <li><p>Fast direct deposit options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Not a good value for the cost</p></li> <li><p>Time track on the go feature not available in lowest-tier plan</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> QuickBooks earns our nod for the easiest setup because its user interface is so intuitive for anyone familiar with QuickBooks. In addition to customer service, there are ample resources online to get anyone on board with their payroll services. QuickBooks does a good job of making payroll simple for anyone, regardless of experience. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> Although <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp">QuickBooks</a> offers excellent features, you'll pay for them. The lowest-priced plan starts at $45 per month, plus $5 per person per month. The Premium plan costs $75 per month, plus $8 per person per month, but it also expands its features to include HR support and a payroll setup review from an expert. The Elite plan from QuickBooks costs $125 per month, plus $10 per employee per month, and you'll get 24/7 support, plus tax penalty protection. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-customer-service-workful"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Customer Service</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Workful</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Workful" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/IAlGkmMWHpEYp3jqyx6qX5xnmUQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Workful-41d0548358ea433c9e72c7d10338d6cb.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Workful" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/IAlGkmMWHpEYp3jqyx6qX5xnmUQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Workful-41d0548358ea433c9e72c7d10338d6cb.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>Workful</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-30"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Workful" data-retailer-type="other" data-tracking-container="true" href="https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-workful?cid=632db6cfac5eb" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> Workful is one of the newer online payroll services available, and it’s already making a name for itself with its top-notch customer support, which is why it’s our best customer service option. The geolocation time-clock tracking is easy enough to set up and ensures employees clock in and out from wherever you’ve set as appropriate. Also, employees can submit expenses through the app to get reimbursed with the next payroll run. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-34"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Affordable</p></li> <li><p>Easy to use</p></li> <li><p>Includes employee expense tracking</p></li> <li><p>Offers geolocation time-clock tracking</p></li> <li><p>Includes document storage</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Limited reporting features</p></li> <li><p>Setup seems clunky</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> Workful is an affordable and easy-to-use application but is not without its restrictions. For example, it doesn’t do automatic tax filing for you. But, it gets our nod for best customer service because it provides fast guidance with easy-to-understand directions for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/make-money-in-business.asp">small business</a> owner. It costs only $25 per month, plus $5 per team member per month. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> Workful is one of the easiest-to-use online payroll services available. The left-side main menu is intuitive, and the dashboard is clean. Setup is easy enough, with a tutorial that walks you through establishing your services. Once the time-clock is set up, it’s hands-off work for you. Employees simply use the app to clock in and out. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> When it comes to integrations, Workful doesn’t seem to play well with others. You can integrate QuickBooks Online, but that’s it. Workful is trying to be a single software solution, which is why it offers built-in time tracking, document storage, and HR options. However, if you’re happy with your time-tracking solution, use a different accounting program, or need Indeed or Zapier integrations, Workful isn’t the right payroll software for you. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-small-businesses-onpay"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Small Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> OnPay</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-39" style="--imgWidth: 473px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="OnPay" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/ZJIdeiUsv1hgDXk8tdSmo9pKoLw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/OnPay-e85bea7d34e740bf80be955635b9c973.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="OnPay" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/ZJIdeiUsv1hgDXk8tdSmo9pKoLw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/OnPay-e85bea7d34e740bf80be955635b9c973.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> OnPay</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-40"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with OnPay" data-retailer-type="other" data-tracking-container="true" href="https://onpay.tpchkr.net/c/2104074/854988/11008" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> OnPay offers an easy-to-use, affordable online payroll solution that’s ideal for small businesses. There are no hidden fees, which is important for a small business on a budget. The full-service payroll automates calculations and files your federal, state, and local payroll taxes. You’ll still have to run and approve payroll each time. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-44"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No hidden fees</p></li> <li><p>Easy to use</p></li> <li><p>Good value for the cost</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No same-day or next-day direct deposit</p></li> <li><p>No automatic payroll submission</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> Setting up payroll the first time in a new program can be time-consuming, but OnPay makes it easier with its setup wizard. Follow the steps and ensure your information is accurate, and you should be fine. If you have data from another payroll service that you want to import into OnPay, you can get help, and OnPay guarantees accuracy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> At $40 per month and $6 per person per month, OnPay is a little more expensive than others, such as Workful and Payroll4Free. However, you get a lot more for the price, which makes it our top choice for small business owners trying to simplify payroll and human resources.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> In addition to the full-service automated payroll you get from OnPay, you’ll also get filing for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/w2form.asp">W-2</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/082514/purpose-1099-forms.asp">1099 workers</a> at no extra cost. There are also plenty of HR features to help you hire new employees, including offer letters, e-signing, automated onboarding, and document storage—features typically offered as add-ons or in top tiers from other services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-large-companies-adp"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Large Companies</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> ADP</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-49" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="ADP" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/eHBNeQ3j04S-muyniqazTU5OBAo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ADP-d4a7a78786914b34b63366f703a8046b.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="ADP" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/eHBNeQ3j04S-muyniqazTU5OBAo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ADP-d4a7a78786914b34b63366f703a8046b.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> ADP</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with ADP" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=243&amp;aff_id=1028" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> One of the most well-known names in payroll and HR is ADP. The brand recognition and years of experience make it ideal for large companies or businesses that plan on growing pretty fast. The lowest-priced plan includes full-service payroll, direct deposit, reporting, and a self-service employee portal. More complete features and HR services come with higher-priced plans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-54"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Scalable with several plan options</p></li> <li><p>Robust reporting, including customization</p></li> <li><p>Lots of HR add-ons</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Pricing isn’t transparent</p></li> <li><p>Possibly too many features for small businesses</p></li> <li><p>Several fees, including for setup</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> Consider <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/042416/adp-who-are-adps-main-competitors.asp">ADP’s main competitors</a>, and you’ll see why larger businesses typically use it. ADP always has been more of a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/professional-employer-organization-definition-4766977">professional employer organization (PEO)</a>, but it has evolved to offer a payroll service that’s more suitable for small businesses. It’s a good idea to choose a payroll service that can grow with your business, if only so you can avoid migrating data to a different service in the future. ADP makes that possible with its ADP RUN service, which is best for businesses with fewer than 50 employees. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Unfortunately, it isn’t easy to compare the cost of ADP’s plans to other services because ADP doesn’t publish its plans’ pricing. You’ll have to fill out forms to get a custom quote for your business, which will be based on your needs and the number of employees your business has. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> We received a variety of quotes and setup fees for a 10-person business, which fell between $150 to $200 per month, making it an expensive choice compared to all the software on this list. Setup fees ranged from $25 to $200, but reps often offered to waive the fee if we signed up immediately. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-best-free-option-payroll4free"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Free Option</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Payroll4Free</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-59" style="--imgWidth: 600px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Payroll4Free" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/KrYtJfZl6d2khvfakTq8LAmOhI4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/payroll4free-f5cea3aa889d4adb997bc36443c40db0.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-6" width="1500"/> <noscript> <img alt="Payroll4Free" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/KrYtJfZl6d2khvfakTq8LAmOhI4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/payroll4free-f5cea3aa889d4adb997bc36443c40db0.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-6"> <span class="figure-article-caption-owner"><p> Payroll4Free</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-60"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-6"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Payroll4Free" data-retailer-type="other" data-tracking-container="true" href="https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-payroll4free?cid=632db6cfac5eb" id="button_1-0-6" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> Payroll4Free is the best free payroll service you can find that’s truly free—as long as you’re willing to do a bit of manual work. You won’t be able to file payroll taxes or pay your employees via direct deposit unless you’re willing to fork out a low payment. If you have a business with fewer than 25 employees, this would be a step up from a pen-and-paper method of doing payroll. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-64"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free to use</p></li> <li><p>Inexpensive to file taxes and pay via direct deposit</p></li> <li><p>Pay W-2 or 1099 workers</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Limited features</p></li> <li><p>Setup is totally manual</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> Payroll4Free is the only free software that allows all the administrative components needed to run a payroll. Essentially, Payroll4Free lets you input hours for payroll for your business, leaving many administrative tasks up to you. It’ll calculate things for you, though. Setup is manual, but a tool helps you enter the right information in the right places. This leaves room for error, but that could be said for many payroll software tools. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> There are no fees to use Payroll4Free unless you have more than 25 employees or you want Payroll4Free to file your payroll taxes for you. Payroll tax filing costs $25 per month as a flat fee. If you want to pay your employees via direct deposit, that will be another $25 per month. Otherwise, funds will be deposited into your account so you can manually pay your workers by check, though you may want to consider paying for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-check-printing-software-5025098">check printing software</a>. Even if you choose to pay for these services, you’ll still pay less than most other services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-best-for-integrations-rippling"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Integrations</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Rippling</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-68" style="--imgWidth: 446px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Rippling" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/B460fz-r_cUjzHTQFffZu6tX0jI=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Rippling-bcfcb55363014e3b9fbabbd0f8e96220.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-7" width="1500"/> <noscript> <img alt="Rippling" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/B460fz-r_cUjzHTQFffZu6tX0jI=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Rippling-bcfcb55363014e3b9fbabbd0f8e96220.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-7"> <span class="figure-article-caption-owner"><p>Rippling</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-69"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-7"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="with Rippling" data-retailer-type="other" data-tracking-container="true" href="https://appwiki.nl/link/brand/eYoUIyYrRNJ7Bp09xud3MyGlf4wIn2E8" id="button_1-0-7" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> Rippling is HR software that includes payroll as an add-on feature, but even if you sign up just for the payroll function, you’ll find it affordable and more useful than other options, thanks to its robust integration with other software. All payroll software is made more helpful by accounting and time and attendance software integrations, and Rippling does that and much more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-73"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Affordable for small businesses</p></li> <li><p>Pay employees anywhere in the world</p></li> <li><p>Integrate with more than 400 apps</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Pricing is not readily available on the website</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> Rippling earns its place in this list because it easily integrates almost any app you already use. Being able to automatically sync all the data needed to run payroll makes it much easier and faster. Sure, most payroll software lets you run payroll as often as you need, but it’s important to make it a quick process, too. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> You’ll have to contact Rippling to get a custom quote, but the cost may include a base fee to use the platform, and then $8 per month per employee for payroll. You'll need to request a free quote to see your particular pricing. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> We chose Gusto as the best option for payroll software. It offers multiple tiers depending on your needs and is one of the most affordable options on our list. Even its lowest tier offers direct deposit, but the speed of deposits increases as you move up in tiers. So, while its nice to have such a feature with the lowest tier, you do need to commit to its best package for next-day direct deposits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-pros--cons-of-payroll-software"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Pros &amp; Cons of Payroll Software </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_4-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Automation</p></li> <li><p>Compliance</p></li> <li><p>Cost savings</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Extra fees</p></li> <li><p>Learning curve</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-subheading__text"> Pros Explained<br/> </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> <li><strong>Automation:</strong> Software can automate the detailed and time-consuming process of submitting payroll.</li><li><strong>Compliance:</strong> Part of the automation process involves checks to make sure everything complies with IRS regulations.</li><li><strong>Cost savings:</strong> The right software can save time and reduce labor costs.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-6"> <span class="mntl-sc-block-subheading__text"> Cons Explained<br/> </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> <li><strong>Extra fees:</strong> Some of the best features, such as next-day direct deposit, cost extra.</li><li><strong>Learning curve:</strong> Setting up the software sometimes can be time-consuming and is not always intuitive.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-8"> <span class="heading-toc" id="toc-what-is-payroll-software"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Payroll Software?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Payroll software is a tool that calculates how much an employee earns based on hours worked and wages set. It also sets aside the appropriate amount for payroll taxes, including the required federal taxes, plus state and local taxes.</p><p>Running payroll manually leaves a lot of room for error, which can lead to hefty fines from the IRS. This is why so many businesses prefer to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outsourcing.asp">outsource</a> payroll, but that can get expensive. Payroll software is the in-between solution that’s affordable but still helps businesses maintain compliance, so they can avoid penalties and lawsuits.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-9"> <span class="heading-toc" id="toc-who-should-use-payroll-software"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Should Use Payroll Software?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Any business employing workers, whether full-time, part-time, or by contract, should consider using payroll software. After all, submitting <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/taxes/08/business-payroll-tax.asp">payroll taxes is required</a>, so make it easier on yourself with payroll software. Automating payroll can save you time, prevent human error, and ensure everyone gets paid the right amount and on time. Depending on the size of your business, you may want to have a dedicated person running your payroll software.</p><p>Although payroll software automates calculations, runs payroll for full-time employees, and files payroll taxes, there’s still administrative work to do. Depending on the size of your business, you may want someone to manage onboarding new employees, offboarding exiting employees, and running off-cycle payrolls as needed.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-10"> <span class="heading-toc" id="toc-what-does-payroll-software-cost"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does Payroll Software Cost?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Most payroll software has moved to cloud-based solutions, so they’re by and large <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/software-as-a-service-saas.asp">software-as-a-service (SaaS)</a> companies. You’ll typically pay a monthly base fee, much like a subscription, which also gives you access to support, and you’ll benefit from regular updates to the software. You can find free options, such as Payroll4Free, but you won’t get the automation of a paid service.</p><p>The average cost of payroll software is about $30 per month for the base fee, and then around $4 to $8 per employee per month. Some of the most expensive plans start at $150 per month, plus $12 per person per month.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-how-we-pick-the-best-payroll-software"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> How We Pick the Best Payroll Software </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> We explored 15 different payroll services before choosing the top eight listed here. One of the most important things to consider for any business is cost, which is why that was heavily considered for each option. We made our decisions due to features like direct deposit and reporting. We also sought options with support to help business owners address questions they have with setting up and running payroll. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Best Payroll Software" class="primary-image__image mntl-primary-image--blurry" height="2345" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/QN9map5ycVLp45OTNDrolmilYPg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg" srcset="https://www.investopedia.com/thmb/xI6rCrAZUAUaLzKOkwfMCWQQaJc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="3519"/> <noscript> <img alt="Best Payroll Software" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="2345" sizes="750px" src="https://www.investopedia.com/thmb/QN9map5ycVLp45OTNDrolmilYPg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg" srcset="https://www.investopedia.com/thmb/xI6rCrAZUAUaLzKOkwfMCWQQaJc=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg 750w" width="3519"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>tattywelshie / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/payments/failure-to-deposit-penalty">Failure to Deposit Penalty</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5069679" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679" id="mntl-card-list-items_1-0"> <div class="card__media" data-tag="Small Business"> <img alt="A man with a close-cropped beard seated at a desk writes on a notepad. 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Based on our research, Gusto has the best payroll software due to its affordability, unlimited payroll runs, and more. Payroll software automates every step in the payroll process for small to large businesses. It helps you manage employee payments by making it easy to set up direct deposits, withhold payroll taxes, and keep accurate records so you don’t get fined. These processes can be time-consuming when done manually, and it can be costly if you make a mistake. Failing to deposit payroll taxes appropriately can lead to penalties of as much as 15% of the deposit amount depending on how long it takes to correct the error. To help you choose the right payroll software for your business, we considered 15 different payroll service providers. For each, we evaluated cost, ease of use, important integrations, convenience, reporting features, and support. ## The Best Payroll Software for 2024 * **Best Overall:** [Gusto](https://gusto.pxf.io/c/2104074/1286304/15154) * **Best Reporting:** [Paychex Flex](https://paychex.sjv.io/c/2104074/1550440/16636) * **Easiest to Set Up:** [QuickBooks Payroll](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_evergreen_2022_Payroll_US) * **Best Customer Service:** [Workful](https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-workful?cid=632db6cfac5eb) * **Best for Small Businesses:** [OnPay](https://onpay.tpchkr.net/c/2104074/854988/11008) * **Best for Large Companies:** [ADP](http://businesscom.go2cloud.org/aff_c?offer_id=243&aff_id=1028) * **Best Free Option:** [Payroll4Free](https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-payroll4free?cid=632db6cfac5eb) * **Best for Integrations:** [Rippling](https://appwiki.nl/link/brand/eYoUIyYrRNJ7Bp09xud3MyGlf4wIn2E8) The Best Payroll Software for 2024 Expand The Best Payroll Software for 2024 * [Our Top Picks](#summary-list) * [Gusto](#toc-best-overall-gusto) * [Paychex Flex](#toc-best-reporting-paychex-flex) * [QuickBooks Payroll](#toc-easiest-to-set-up-quickbooks-payroll) * [Workful](#toc-best-customer-service-workful) * [OnPay](#toc-best-for-small-businesses-onpay) * [ADP](#toc-best-for-large-companies-adp) * [Payroll4Free](#toc-best-free-option-payroll4free) * [Rippling](#toc-best-for-integrations-rippling) * See More (5) * [The Bottom Line](#toc-the-bottom-line) * [Pros & Cons](#toc-pros--cons-of-payroll-software) * [FAQs](#toc-what-is-payroll-software) * [Methodology](#toc-how-we-pick-the-best-payroll-software) ### Best Overall : Gusto --- ![Gusto]() :fill(white):max_bytes(150000):strip_icc()/Gusto-d36101fad2934b4094c3b510a76cc8b6.png) Gusto [Sign Up Now](https://gusto.pxf.io/c/2104074/1286304/15154) Why We Chose It Gusto offers three thoughtful tiers for small to midsize companies that need payroll with a few helpings of human resources (HR) features, making it the best overall choice. Each plan includes full-service automated payroll suitable for almost any business, depending on needs. Pros & Cons Pros * Affordable, but good value * Unlimited payroll runs * Paid time off (PTO) tracking available * Full-service payroll available in all states * Basic reports included at all tiers Cons * Next day direct deposit available only in the Complete and Concierge plans * Dedicated support only for Concierge subscribers Overview Gusto is similar to other payroll software solutions in that it offers [direct deposit](https://www.investopedia.com/terms/d/directdeposit.asp) or checks to pay your employees. It also tracks and files federal, state, and local taxes automatically. What sets Gusto apart from the other options is that it offers a better plan for each tier you go up. Rather than removing direct deposit for the low-priced plan, Gusto increases the convenience of direct deposit the more expensive your plan. For example, direct deposit takes up to four days to clear for the lowest plan, but the high-tier plans get next-day direct deposit. The Core plan from Gusto costs $40 per month, and $6 per employee per month, making it one of the most affordable choices for a full-service payroll plan. The Plus plan is $80 per month, but the cost per employee is $12, and you’ll be able to offer next-day direct deposit. You'll need to contact the company if you want to learn about its Premium packages, which offer dedicated support and compliance alerts. ### Best Reporting : Paychex Flex --- ![Paychex]() :fill(white):max_bytes(150000):strip_icc()/PaychexFlex-a9debda0c97b4f028aeebb2a2f979bf7.jpg) Paychex [Sign Up Now](https://paychex.sjv.io/c/2104074/1550440/16636) Why We Chose It Paychex Flex offers more than 160 reports for you to get a clear look at wages, taxes, turnover, and more. Paychex is our best reporting option because it checks almost all the boxes for what you want in payroll software regarding reports and data. It also automatically files your payroll taxes, ensures compliance, and includes integrations with important programs you also use, such as accounting and benefits apps. Pros & Cons Pros * 24/7 support * Easy to use * HR add-on options * Robust reporting feature Cons * Hidden fees for setup & EOY tax docs * Mixed reviews from users regarding support Overview There’s a lot to like about Paychex. The payroll software makes it easy to set up and run payroll, automates the submission of federal, state, and local payroll taxes, and offers plenty of upgrade options, which you may need as your business grows. Still, the basic reporting you get from Paychex could be worth the monthly fee alone, giving it the edge in this category. Plus, you’ll be able to add any other data field you’d like, thanks to custom fields, which is rare for small business online payroll services. While the Paychex Flex Essentials plan is $39 per month and $5 per employee, it’s difficult to say how much Paychex will cost you for the more comprehensive plans—Paychex Flex Select and Paychex Flex Pro—unless you go through the process of getting a custom quote. One of the most important aspects of a good online payroll solution is whether it integrates with software you already use. Paychex does integrate with QuickBooks and Xero [accounting software](https://www.investopedia.com/best-accounting-software-for-small-business-5069679), plus many health insurance and benefits apps, time tracking and attendance software, and HR software. ### Easiest to Set Up : QuickBooks Payroll --- ![QuickBooks]() :fill(white):max_bytes(150000):strip_icc()/quickbooks-logo1-1db3f575132b4c98929c8664e9dfb016.png)  QuickBooks [Sign Up Now](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_evergreen_2022_Payroll_US) Why We Chose It If you’re already using QuickBooks for accounting, then QuickBooks Payroll is our easiest to set up option, as everything will be automated, and it’s going to be an intuitive program for any QuickBooks user. You’re unlikely to need to contact support for help because the tutorial and knowledge base are so thorough. Even if that’s not working for you, a quick search online will send you to a multitude of walkthroughs. Pros & Cons Pros * Easy setup and intuitive interface * Seamless integration with QuickBooks accounting software * Fast direct deposit options Cons * Not a good value for the cost * Time track on the go feature not available in lowest-tier plan Overview QuickBooks earns our nod for the easiest setup because its user interface is so intuitive for anyone familiar with QuickBooks. In addition to customer service, there are ample resources online to get anyone on board with their payroll services. QuickBooks does a good job of making payroll simple for anyone, regardless of experience. Although [QuickBooks](https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp) offers excellent features, you'll pay for them. The lowest-priced plan starts at $45 per month, plus $5 per person per month. The Premium plan costs $75 per month, plus $8 per person per month, but it also expands its features to include HR support and a payroll setup review from an expert. The Elite plan from QuickBooks costs $125 per month, plus $10 per employee per month, and you'll get 24/7 support, plus tax penalty protection. ### Best Customer Service : Workful --- ![Workful]() :fill(white):max_bytes(150000):strip_icc()/Workful-41d0548358ea433c9e72c7d10338d6cb.jpg) Workful [Sign Up Now](https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-workful?cid=632db6cfac5eb) Why We Chose It Workful is one of the newer online payroll services available, and it’s already making a name for itself with its top-notch customer support, which is why it’s our best customer service option. The geolocation time-clock tracking is easy enough to set up and ensures employees clock in and out from wherever you’ve set as appropriate. Also, employees can submit expenses through the app to get reimbursed with the next payroll run. Pros & Cons Pros * Affordable * Easy to use * Includes employee expense tracking * Offers geolocation time-clock tracking * Includes document storage Cons * Limited reporting features * Setup seems clunky Overview Workful is an affordable and easy-to-use application but is not without its restrictions. For example, it doesn’t do automatic tax filing for you. But, it gets our nod for best customer service because it provides fast guidance with easy-to-understand directions for a [small business](https://www.investopedia.com/articles/pf/08/make-money-in-business.asp) owner. It costs only $25 per month, plus $5 per team member per month. Workful is one of the easiest-to-use online payroll services available. The left-side main menu is intuitive, and the dashboard is clean. Setup is easy enough, with a tutorial that walks you through establishing your services. Once the time-clock is set up, it’s hands-off work for you. Employees simply use the app to clock in and out. When it comes to integrations, Workful doesn’t seem to play well with others. You can integrate QuickBooks Online, but that’s it. Workful is trying to be a single software solution, which is why it offers built-in time tracking, document storage, and HR options. However, if you’re happy with your time-tracking solution, use a different accounting program, or need Indeed or Zapier integrations, Workful isn’t the right payroll software for you. ### Best for Small Businesses : OnPay --- ![OnPay]() :fill(white):max_bytes(150000):strip_icc()/OnPay-e85bea7d34e740bf80be955635b9c973.jpg)  OnPay [Sign Up Now](https://onpay.tpchkr.net/c/2104074/854988/11008) Why We Chose It OnPay offers an easy-to-use, affordable online payroll solution that’s ideal for small businesses. There are no hidden fees, which is important for a small business on a budget. The full-service payroll automates calculations and files your federal, state, and local payroll taxes. You’ll still have to run and approve payroll each time. Pros & Cons Pros * No hidden fees * Easy to use * Good value for the cost Cons * No same-day or next-day direct deposit * No automatic payroll submission Overview Setting up payroll the first time in a new program can be time-consuming, but OnPay makes it easier with its setup wizard. Follow the steps and ensure your information is accurate, and you should be fine. If you have data from another payroll service that you want to import into OnPay, you can get help, and OnPay guarantees accuracy. At $40 per month and $6 per person per month, OnPay is a little more expensive than others, such as Workful and Payroll4Free. However, you get a lot more for the price, which makes it our top choice for small business owners trying to simplify payroll and human resources.  In addition to the full-service automated payroll you get from OnPay, you’ll also get filing for [W-2](https://www.investopedia.com/terms/w/w2form.asp) and [1099 workers](https://www.investopedia.com/articles/personal-finance/082514/purpose-1099-forms.asp) at no extra cost. There are also plenty of HR features to help you hire new employees, including offer letters, e-signing, automated onboarding, and document storage—features typically offered as add-ons or in top tiers from other services. ### Best for Large Companies : ADP --- ![ADP]() :fill(white):max_bytes(150000):strip_icc()/ADP-d4a7a78786914b34b63366f703a8046b.png)  ADP [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=243&aff_id=1028) Why We Chose It One of the most well-known names in payroll and HR is ADP. The brand recognition and years of experience make it ideal for large companies or businesses that plan on growing pretty fast. The lowest-priced plan includes full-service payroll, direct deposit, reporting, and a self-service employee portal. More complete features and HR services come with higher-priced plans. Pros & Cons Pros * Scalable with several plan options * Robust reporting, including customization * Lots of HR add-ons Cons * Pricing isn’t transparent * Possibly too many features for small businesses * Several fees, including for setup Overview Consider [ADP’s main competitors](https://www.investopedia.com/articles/professionals/042416/adp-who-are-adps-main-competitors.asp), and you’ll see why larger businesses typically use it. ADP always has been more of a [professional employer organization (PEO)](https://www.investopedia.com/professional-employer-organization-definition-4766977), but it has evolved to offer a payroll service that’s more suitable for small businesses. It’s a good idea to choose a payroll service that can grow with your business, if only so you can avoid migrating data to a different service in the future. ADP makes that possible with its ADP RUN service, which is best for businesses with fewer than 50 employees. Unfortunately, it isn’t easy to compare the cost of ADP’s plans to other services because ADP doesn’t publish its plans’ pricing. You’ll have to fill out forms to get a custom quote for your business, which will be based on your needs and the number of employees your business has. We received a variety of quotes and setup fees for a 10-person business, which fell between $150 to $200 per month, making it an expensive choice compared to all the software on this list. Setup fees ranged from $25 to $200, but reps often offered to waive the fee if we signed up immediately. ### Best Free Option : Payroll4Free --- ![Payroll4Free]() :fill(white):max_bytes(150000):strip_icc()/payroll4free-f5cea3aa889d4adb997bc36443c40db0.jpg)  Payroll4Free [Sign Up Now](https://compare.expertmarket.com/partnerships/payroll-software/dynamic/brand-payroll4free?cid=632db6cfac5eb) Why We Chose It Payroll4Free is the best free payroll service you can find that’s truly free—as long as you’re willing to do a bit of manual work. You won’t be able to file payroll taxes or pay your employees via direct deposit unless you’re willing to fork out a low payment. If you have a business with fewer than 25 employees, this would be a step up from a pen-and-paper method of doing payroll. Pros & Cons Pros * Free to use * Inexpensive to file taxes and pay via direct deposit * Pay W-2 or 1099 workers Cons * Limited features * Setup is totally manual Overview Payroll4Free is the only free software that allows all the administrative components needed to run a payroll. Essentially, Payroll4Free lets you input hours for payroll for your business, leaving many administrative tasks up to you. It’ll calculate things for you, though. Setup is manual, but a tool helps you enter the right information in the right places. This leaves room for error, but that could be said for many payroll software tools. There are no fees to use Payroll4Free unless you have more than 25 employees or you want Payroll4Free to file your payroll taxes for you. Payroll tax filing costs $25 per month as a flat fee. If you want to pay your employees via direct deposit, that will be another $25 per month. Otherwise, funds will be deposited into your account so you can manually pay your workers by check, though you may want to consider paying for [check printing software](https://www.investopedia.com/best-check-printing-software-5025098). Even if you choose to pay for these services, you’ll still pay less than most other services. ### Best for Integrations : Rippling --- ![Rippling]() :fill(white):max_bytes(150000):strip_icc()/Rippling-bcfcb55363014e3b9fbabbd0f8e96220.jpg) Rippling [Sign Up Now](https://appwiki.nl/link/brand/eYoUIyYrRNJ7Bp09xud3MyGlf4wIn2E8) Why We Chose It Rippling is HR software that includes payroll as an add-on feature, but even if you sign up just for the payroll function, you’ll find it affordable and more useful than other options, thanks to its robust integration with other software. All payroll software is made more helpful by accounting and time and attendance software integrations, and Rippling does that and much more. Pros & Cons Pros * Affordable for small businesses * Pay employees anywhere in the world * Integrate with more than 400 apps Cons * Pricing is not readily available on the website Overview Rippling earns its place in this list because it easily integrates almost any app you already use. Being able to automatically sync all the data needed to run payroll makes it much easier and faster. Sure, most payroll software lets you run payroll as often as you need, but it’s important to make it a quick process, too. You’ll have to contact Rippling to get a custom quote, but the cost may include a base fee to use the platform, and then $8 per month per employee for payroll. You'll need to request a free quote to see your particular pricing. ## The Bottom Line We chose Gusto as the best option for payroll software. It offers multiple tiers depending on your needs and is one of the most affordable options on our list. Even its lowest tier offers direct deposit, but the speed of deposits increases as you move up in tiers. So, while its nice to have such a feature with the lowest tier, you do need to commit to its best package for next-day direct deposits. ## Pros & Cons of Payroll Software Pros * Automation * Compliance * Cost savings Cons * Extra fees * Learning curve ### Pros Explained * **Automation:** Software can automate the detailed and time-consuming process of submitting payroll. * **Compliance:** Part of the automation process involves checks to make sure everything complies with IRS regulations. * **Cost savings:** The right software can save time and reduce labor costs. ### Cons Explained * **Extra fees:** Some of the best features, such as next-day direct deposit, cost extra. * **Learning curve:** Setting up the software sometimes can be time-consuming and is not always intuitive. ## What Is Payroll Software? Payroll software is a tool that calculates how much an employee earns based on hours worked and wages set. It also sets aside the appropriate amount for payroll taxes, including the required federal taxes, plus state and local taxes. Running payroll manually leaves a lot of room for error, which can lead to hefty fines from the IRS. This is why so many businesses prefer to [outsource](https://www.investopedia.com/terms/o/outsourcing.asp) payroll, but that can get expensive. Payroll software is the in-between solution that’s affordable but still helps businesses maintain compliance, so they can avoid penalties and lawsuits. ## Who Should Use Payroll Software? Any business employing workers, whether full-time, part-time, or by contract, should consider using payroll software. After all, submitting [payroll taxes is required](https://www.investopedia.com/articles/taxes/08/business-payroll-tax.asp), so make it easier on yourself with payroll software. Automating payroll can save you time, prevent human error, and ensure everyone gets paid the right amount and on time. Depending on the size of your business, you may want to have a dedicated person running your payroll software. Although payroll software automates calculations, runs payroll for full-time employees, and files payroll taxes, there’s still administrative work to do. Depending on the size of your business, you may want someone to manage onboarding new employees, offboarding exiting employees, and running off-cycle payrolls as needed. ## What Does Payroll Software Cost? Most payroll software has moved to cloud-based solutions, so they’re by and large [software-as-a-service (SaaS)](https://www.investopedia.com/terms/s/software-as-a-service-saas.asp) companies. You’ll typically pay a monthly base fee, much like a subscription, which also gives you access to support, and you’ll benefit from regular updates to the software. You can find free options, such as Payroll4Free, but you won’t get the automation of a paid service. The average cost of payroll software is about $30 per month for the base fee, and then around $4 to $8 per employee per month. Some of the most expensive plans start at $150 per month, plus $12 per person per month. ## How We Pick the Best Payroll Software We explored 15 different payroll services before choosing the top eight listed here. One of the most important things to consider for any business is cost, which is why that was heavily considered for each option. We made our decisions due to features like direct deposit and reporting. We also sought options with support to help business owners address questions they have with setting up and running payroll. :max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg) :max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg) tattywelshie / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. IRS. "[Failure to Deposit Penalty](https://www.irs.gov/payments/failure-to-deposit-penalty)." Related Articles [![A man with a close-cropped beard seated at a desk writes on a notepad. 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Read about payroll accounting here. [more](https://www.investopedia.com/terms/p/payroll.asp) [What Is a Bloomberg Terminal? Functions, Costs, and Alternatives](https://www.investopedia.com/terms/b/bloomberg_terminal.asp) A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. [more](https://www.investopedia.com/terms/b/bloomberg_terminal.asp) [Enterprise Resource Planning (ERP): Meaning, Components, and Examples](https://www.investopedia.com/terms/e/erp.asp) Enterprise resource planning (ERP) is software used by a company to manage key parts of operations, including accounting and resource management. [more](https://www.investopedia.com/terms/e/erp.asp) [Emergency Loan: Types, Eligibility, Pros and Cons](https://www.investopedia.com/emergency-loan-types-eligibility-pros-and-cons-8637206) Emergency loans are a type of personal loan that provides fast access to cash. 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Based on our research, Gusto has the best payroll software due to its affordability, unlimited payroll runs, and more. Payroll software automates every step in the payroll process for small to large businesses. It helps you manage employee payments by making it easy to set up direct deposits, withhold payroll taxes, and keep accurate records so you don’t get fined. These processes can be time-consuming when done manually, and it can be costly if you make a mistake. Failing to deposit payroll taxes appropriately can lead to penalties of as much as 15% of the deposit amount depending on how long it takes to correct the error. To help you choose the right payroll software for your business, we considered 15 different payroll service providers. For each, we evaluated cost, ease of use, important integrations, convenience, reporting features, and support. The Best Payroll Software for 2024 Best Overall: Gusto Best Reporting: Paychex Flex Easiest to Set Up: QuickBooks Payroll Best Customer Service: Workful Best for Small Businesses: OnPay Best for Large Companies: ADP Best Free Option: Payroll4Free Best for Integrations: Rippling The Best Payroll Software for 2024 Expand The Best Payroll Software for 2024 Our Top Picks Gusto Paychex Flex QuickBooks Payroll Workful OnPay ADP Payroll4Free Rippling See More (5) The Bottom Line Pros & Cons FAQs Methodology Best Overall : Gusto Gusto Sign Up Now Why We Chose It Gusto offers three thoughtful tiers for small to midsize companies that need payroll with a few helpings of human resources (HR) features, making it the best overall choice. Each plan includes full-service automated payroll suitable for almost any business, depending on needs. Pros & Cons Pros Affordable, but good value Unlimited payroll runs Paid time off (PTO) tracking available Full-service payroll available in all states Basic reports included at all tiers Cons Next day direct deposit available only in the Complete and Concierge plans Dedicated support only for Concierge subscribers Overview Gusto is similar to other payroll software solutions in that it offers direct deposit or checks to pay your employees. It also tracks and files federal, state, and local taxes automatically. What sets Gusto apart from the other options is that it offers a better plan for each tier you go up. Rather than removing direct deposit for the low-priced plan, Gusto increases the convenience of direct deposit the more expensive your plan. For example, direct deposit takes up to four days to clear for the lowest plan, but the high-tier plans get next-day direct deposit. The Core plan from Gusto costs $40 per month, and $6 per employee per month, making it one of the most affordable choices for a full-service payroll plan. The Plus plan is $80 per month, but the cost per employee is $12, and you’ll be able to offer next-day direct deposit. You'll need to contact the company if you want to learn about its Premium packages, which offer dedicated support and compliance alerts. Best Reporting : Paychex Flex Paychex Sign Up Now Why We Chose It Paychex Flex offers more than 160 reports for you to get a clear look at wages, taxes, turnover, and more. Paychex is our best reporting option because it checks almost all the boxes for what you want in payroll software regarding reports and data. It also automatically files your payroll taxes, ensures compliance, and includes integrations with important programs you also use, such as accounting and benefits apps. Pros & Cons Pros 24/7 support Easy to use HR add-on options Robust reporting feature Cons Hidden fees for setup & EOY tax docs Mixed reviews from users regarding support Overview There’s a lot to like about Paychex. The payroll software makes it easy to set up and run payroll, automates the submission of federal, state, and local payroll taxes, and offers plenty of upgrade options, which you may need as your business grows. Still, the basic reporting you get from Paychex could be worth the monthly fee alone, giving it the edge in this category. Plus, you’ll be able to add any other data field you’d like, thanks to custom fields, which is rare for small business online payroll services. While the Paychex Flex Essentials plan is $39 per month and $5 per employee, it’s difficult to say how much Paychex will cost you for the more comprehensive plans—Paychex Flex Select and Paychex Flex Pro—unless you go through the process of getting a custom quote. One of the most important aspects of a good online payroll solution is whether it integrates with software you already use. Paychex does integrate with QuickBooks and Xero accounting software, plus many health insurance and benefits apps, time tracking and attendance software, and HR software. Easiest to Set Up : QuickBooks Payroll  QuickBooks Sign Up Now Why We Chose It If you’re already using QuickBooks for accounting, then QuickBooks Payroll is our easiest to set up option, as everything will be automated, and it’s going to be an intuitive program for any QuickBooks user. You’re unlikely to need to contact support for help because the tutorial and knowledge base are so thorough. Even if that’s not working for you, a quick search online will send you to a multitude of walkthroughs. Pros & Cons Pros Easy setup and intuitive interface Seamless integration with QuickBooks accounting software Fast direct deposit options Cons Not a good value for the cost Time track on the go feature not available in lowest-tier plan Overview QuickBooks earns our nod for the easiest setup because its user interface is so intuitive for anyone familiar with QuickBooks. In addition to customer service, there are ample resources online to get anyone on board with their payroll services. QuickBooks does a good job of making payroll simple for anyone, regardless of experience. Although QuickBooks offers excellent features, you'll pay for them. The lowest-priced plan starts at $45 per month, plus $5 per person per month. The Premium plan costs $75 per month, plus $8 per person per month, but it also expands its features to include HR support and a payroll setup review from an expert. The Elite plan from QuickBooks costs $125 per month, plus $10 per employee per month, and you'll get 24/7 support, plus tax penalty protection. Best Customer Service : Workful Workful Sign Up Now Why We Chose It Workful is one of the newer online payroll services available, and it’s already making a name for itself with its top-notch customer support, which is why it’s our best customer service option. The geolocation time-clock tracking is easy enough to set up and ensures employees clock in and out from wherever you’ve set as appropriate. Also, employees can submit expenses through the app to get reimbursed with the next payroll run. Pros & Cons Pros Affordable Easy to use Includes employee expense tracking Offers geolocation time-clock tracking Includes document storage Cons Limited reporting features Setup seems clunky Overview Workful is an affordable and easy-to-use application but is not without its restrictions. For example, it doesn’t do automatic tax filing for you. But, it gets our nod for best customer service because it provides fast guidance with easy-to-understand directions for a small business owner. It costs only $25 per month, plus $5 per team member per month. Workful is one of the easiest-to-use online payroll services available. The left-side main menu is intuitive, and the dashboard is clean. Setup is easy enough, with a tutorial that walks you through establishing your services. Once the time-clock is set up, it’s hands-off work for you. Employees simply use the app to clock in and out. When it comes to integrations, Workful doesn’t seem to play well with others. You can integrate QuickBooks Online, but that’s it. Workful is trying to be a single software solution, which is why it offers built-in time tracking, document storage, and HR options. However, if you’re happy with your time-tracking solution, use a different accounting program, or need Indeed or Zapier integrations, Workful isn’t the right payroll software for you. Best for Small Businesses : OnPay  OnPay Sign Up Now Why We Chose It OnPay offers an easy-to-use, affordable online payroll solution that’s ideal for small businesses. There are no hidden fees, which is important for a small business on a budget. The full-service payroll automates calculations and files your federal, state, and local payroll taxes. You’ll still have to run and approve payroll each time. Pros & Cons Pros No hidden fees Easy to use Good value for the cost Cons No same-day or next-day direct deposit No automatic payroll submission Overview Setting up payroll the first time in a new program can be time-consuming, but OnPay makes it easier with its setup wizard. Follow the steps and ensure your information is accurate, and you should be fine. If you have data from another payroll service that you want to import into OnPay, you can get help, and OnPay guarantees accuracy. At $40 per month and $6 per person per month, OnPay is a little more expensive than others, such as Workful and Payroll4Free. However, you get a lot more for the price, which makes it our top choice for small business owners trying to simplify payroll and human resources.  In addition to the full-service automated payroll you get from OnPay, you’ll also get filing for W-2 and 1099 workers at no extra cost. There are also plenty of HR features to help you hire new employees, including offer letters, e-signing, automated onboarding, and document storage—features typically offered as add-ons or in top tiers from other services. Best for Large Companies : ADP  ADP Sign Up Now Why We Chose It One of the most well-known names in payroll and HR is ADP. The brand recognition and years of experience make it ideal for large companies or businesses that plan on growing pretty fast. The lowest-priced plan includes full-service payroll, direct deposit, reporting, and a self-service employee portal. More complete features and HR services come with higher-priced plans. Pros & Cons Pros Scalable with several plan options Robust reporting, including customization Lots of HR add-ons Cons Pricing isn’t transparent Possibly too many features for small businesses Several fees, including for setup Overview Consider ADP’s main competitors, and you’ll see why larger businesses typically use it. ADP always has been more of a professional employer organization (PEO), but it has evolved to offer a payroll service that’s more suitable for small businesses. It’s a good idea to choose a payroll service that can grow with your business, if only so you can avoid migrating data to a different service in the future. ADP makes that possible with its ADP RUN service, which is best for businesses with fewer than 50 employees. Unfortunately, it isn’t easy to compare the cost of ADP’s plans to other services because ADP doesn’t publish its plans’ pricing. You’ll have to fill out forms to get a custom quote for your business, which will be based on your needs and the number of employees your business has. We received a variety of quotes and setup fees for a 10-person business, which fell between $150 to $200 per month, making it an expensive choice compared to all the software on this list. Setup fees ranged from $25 to $200, but reps often offered to waive the fee if we signed up immediately. Best Free Option : Payroll4Free  Payroll4Free Sign Up Now Why We Chose It Payroll4Free is the best free payroll service you can find that’s truly free—as long as you’re willing to do a bit of manual work. You won’t be able to file payroll taxes or pay your employees via direct deposit unless you’re willing to fork out a low payment. If you have a business with fewer than 25 employees, this would be a step up from a pen-and-paper method of doing payroll. Pros & Cons Pros Free to use Inexpensive to file taxes and pay via direct deposit Pay W-2 or 1099 workers Cons Limited features Setup is totally manual Overview Payroll4Free is the only free software that allows all the administrative components needed to run a payroll. Essentially, Payroll4Free lets you input hours for payroll for your business, leaving many administrative tasks up to you. It’ll calculate things for you, though. Setup is manual, but a tool helps you enter the right information in the right places. This leaves room for error, but that could be said for many payroll software tools. There are no fees to use Payroll4Free unless you have more than 25 employees or you want Payroll4Free to file your payroll taxes for you. Payroll tax filing costs $25 per month as a flat fee. If you want to pay your employees via direct deposit, that will be another $25 per month. Otherwise, funds will be deposited into your account so you can manually pay your workers by check, though you may want to consider paying for check printing software. Even if you choose to pay for these services, you’ll still pay less than most other services. Best for Integrations : Rippling Rippling Sign Up Now Why We Chose It Rippling is HR software that includes payroll as an add-on feature, but even if you sign up just for the payroll function, you’ll find it affordable and more useful than other options, thanks to its robust integration with other software. All payroll software is made more helpful by accounting and time and attendance software integrations, and Rippling does that and much more. Pros & Cons Pros Affordable for small businesses Pay employees anywhere in the world Integrate with more than 400 apps Cons Pricing is not readily available on the website Overview Rippling earns its place in this list because it easily integrates almost any app you already use. Being able to automatically sync all the data needed to run payroll makes it much easier and faster. Sure, most payroll software lets you run payroll as often as you need, but it’s important to make it a quick process, too. You’ll have to contact Rippling to get a custom quote, but the cost may include a base fee to use the platform, and then $8 per month per employee for payroll. You'll need to request a free quote to see your particular pricing. The Bottom Line We chose Gusto as the best option for payroll software. It offers multiple tiers depending on your needs and is one of the most affordable options on our list. Even its lowest tier offers direct deposit, but the speed of deposits increases as you move up in tiers. So, while its nice to have such a feature with the lowest tier, you do need to commit to its best package for next-day direct deposits. Pros & Cons of Payroll Software Pros Automation Compliance Cost savings Cons Extra fees Learning curve Pros Explained Automation: Software can automate the detailed and time-consuming process of submitting payroll.Compliance: Part of the automation process involves checks to make sure everything complies with IRS regulations.Cost savings: The right software can save time and reduce labor costs. Cons Explained Extra fees: Some of the best features, such as next-day direct deposit, cost extra.Learning curve: Setting up the software sometimes can be time-consuming and is not always intuitive. What Is Payroll Software? Payroll software is a tool that calculates how much an employee earns based on hours worked and wages set. It also sets aside the appropriate amount for payroll taxes, including the required federal taxes, plus state and local taxes.Running payroll manually leaves a lot of room for error, which can lead to hefty fines from the IRS. This is why so many businesses prefer to outsource payroll, but that can get expensive. Payroll software is the in-between solution that’s affordable but still helps businesses maintain compliance, so they can avoid penalties and lawsuits. Who Should Use Payroll Software? Any business employing workers, whether full-time, part-time, or by contract, should consider using payroll software. After all, submitting payroll taxes is required, so make it easier on yourself with payroll software. Automating payroll can save you time, prevent human error, and ensure everyone gets paid the right amount and on time. Depending on the size of your business, you may want to have a dedicated person running your payroll software.Although payroll software automates calculations, runs payroll for full-time employees, and files payroll taxes, there’s still administrative work to do. Depending on the size of your business, you may want someone to manage onboarding new employees, offboarding exiting employees, and running off-cycle payrolls as needed. What Does Payroll Software Cost? Most payroll software has moved to cloud-based solutions, so they’re by and large software-as-a-service (SaaS) companies. You’ll typically pay a monthly base fee, much like a subscription, which also gives you access to support, and you’ll benefit from regular updates to the software. You can find free options, such as Payroll4Free, but you won’t get the automation of a paid service.The average cost of payroll software is about $30 per month for the base fee, and then around $4 to $8 per employee per month. Some of the most expensive plans start at $150 per month, plus $12 per person per month. How We Pick the Best Payroll Software We explored 15 different payroll services before choosing the top eight listed here. One of the most important things to consider for any business is cost, which is why that was heavily considered for each option. We made our decisions due to features like direct deposit and reporting. We also sought options with support to help business owners address questions they have with setting up and running payroll. tattywelshie / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. IRS. "Failure to Deposit Penalty." Related Articles Best Accounting Software for Small Businesses for May 2024 Best Accounting Software Best PEO Services of May 2024 Best Accounting Software for Nonprofits for May 2024 Best Credit Card Processing Companies Best Free Business Accounts for May 2024 Related Terms What Is Payroll, With Step-by-Step Calculation of Payroll Taxes Payroll is the compensation a business must pay to its employees for a set period or on a given date. Read about payroll accounting here. more What Is a Bloomberg Terminal? Functions, Costs, and Alternatives A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. more Enterprise Resource Planning (ERP): Meaning, Components, and Examples Enterprise resource planning (ERP) is software used by a company to manage key parts of operations, including accounting and resource management. more Emergency Loan: Types, Eligibility, Pros and Cons Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. more Lockbox Banking: Definition, How It Works, Risks, and Cost Lockbox banking is a service provided by banks to companies for the receipt of payment from customers. more What Is Personal Finance Management (PFM), How Is It Used? Personal financial management is the software that powers personal finance and many mobile banking apps. more

https://www.investopedia.com/how-do-business-loans-work-7550170

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> A business loan is a type of financing that is used by businesses. Companies can get business loans from a bank, an online lender, or a credit union. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The borrowed funds are made available as either a lump-sum payment or a line of credit. Businesses must then repay their lender according to the terms of the loan, which dictate the length of the repayment term and the interest rate charged. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A business loan is a loan taken out by a business to pay for business expenses such as equipment purchases, to cover operating expenses, or to expand into new markets.</li><li>There are different types of business loans, each suitable for a different purpose and a different type of company.</li><li>Business loans often have lower interest rates and more generous repayment terms than personal loans.</li><li>Almost any business can apply for a business loan, but a lender may require extensive documentation during the application process.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-do-business-loans-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How Do Business Loans Work? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A business loan works similarly to a personal loan, though there are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-loan-personal-loan-difference-7485839">important differences</a> between these two loan types. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The first step in applying for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-business-loan-7480931">business loan</a> is to find and meet with a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">lender</a>. A lender will assess what scale of financing it can offer, as well as the other terms of the loan. Any business can apply for a business loan, and for this reason, the terms of business loans <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-small-business-loans-5079093">vary widely</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-subheading__text"> Negotiating Power </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Bigger, more established companies have more negotiating power and can typically get the most favorable borrowing rates. Small businesses operating in volatile markets have less bargaining power. So they might not be offered as favorable a deal on a business loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Secured and Unsecured Loans </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Some business loans are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/secured-loans-5076025">secured loans</a>, which require a company to provide <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a> (an asset) that can be repossessed if it fails to repay the loan. Real estate, equipment, cash, or investments can be used as collateral. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Secured loans can have lower <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a>. They can provide smaller businesses that have less <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-history.asp">credit history</a> access to needed capital. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Other business loans are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecuredloan.asp">unsecured</a>, meaning that they don’t require collateral. Getting an unsecured loan depends on the size and age of the business, relationship history with the lender, and other underwriting factors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Loan Terms </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Once a loan's terms are agreed upon, the lender makes funds available, either as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lump-sum-payment.asp">lump-sum payment</a> or a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lineofcredit.asp">line of credit</a>. The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/loan-terms-5075341">loan terms</a> define how much you have to repay, how frequently you must make <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayments</a>, and how much <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> you must pay. If you make all payments on time, the loan is then closed. If you do not, financial penalties may apply. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-common-uses-for-a-business-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Common Uses for a Business Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> When you apply for a business loan, typically you'll have to disclose what you plan to use the money for and how you plan to repay it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> You can use a business loan for almost any kind of business expense. However, you can’t use it for personal expenses. For instance, you can’t use your business loan to buy residential property or a personal vehicle. Doing so will break the terms of your loan agreement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Business loans are frequently used for: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-loans-for-startups-7509414">Startup costs</a></li> <li>Commercial real estate purchases and/or remodeling</li> <li>Cash flow for everyday expenses</li> <li>Debt consolidation or refinancing</li> <li>Equipment purchases</li> <li>Inventory purchases</li> <li>Business acquisitions</li> <li>Business expansion</li> <li>Business franchising</li> <li>Marketing and advertising</li> <li>Refinancing </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You can sometimes use one business loan to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/refinance.asp">pay off</a> another business loan. This may make financial sense if by refinancing, you get a better interest rate than that charged for your original loan.</p></div></div></div> <span class="heading-toc" id="toc-business-loans-vs-personal-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Business Loans vs. Personal Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> While business loans and personal loans are similar in many ways, there are several important differences between them: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>Personal loans are usually unsecured, whereas a business loan often requires collateral and may require you to spend the funds in a particular way.</li> <li>Business loans generally offer longer repayment terms (up to 25 years for a U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> loan), and you can generally borrow more than on a personal loan.<span class="ql-inline-citation" data-cite="3"></span></li> <li>Business loans also typically have lower interest rates than personal loans. Right now, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personal-interest.asp">average rate on a personal loan</a> is more than 12%. Traditional banks can offer business loans with single-digit interest rates.<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="7"></span></li> <li>Business loans can be more difficult to qualify for because your lender will check your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-credit-score.asp">business credit score</a> and credit history. If that alone doesn't qualify you, you might have to provide a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personal-guarantee.asp">personal guarantee</a>, as well. That means that if your company can't repay the loan, you'll be obligated to do so.</li> <li>Personal loans generally have a faster application process than business loans. Most personal loan lenders now offer a <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prequalification.asp">pre-qualification</a> process, which allows you to see if you’re eligible without completing a full application. If you want a business loan, it might take weeks before you have your funds.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-factors-considered-for-a-business-loan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Factors Considered for a Business Loan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Almost any business can apply for a business loan but each must meet specific criteria to be approved. Most lenders will consider a number of key factors such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <li><strong>Credit score</strong>: Lenders may consider your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">personal credit score</a>, your business credit score, or both. The higher your score, the more likely you are to be approved, and the better the loan terms you are offered.<br/></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashflow.asp"><strong>Cash flow</strong></a>: Lenders will want to see how much money your business takes and how you spend it.<br/></li> <li><strong>Time in business</strong>: Lenders prefer to lend to businesses with a proven track record, and most won’t lend to businesses that are less than two years old.<br/></li> <li><strong>Debt</strong>: If you already have <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/debt-4427751">business debts</a>, you may find it more difficult to get a business loan.<br/></li> <li><strong>Industry</strong>: Lenders want to minimize risk, so they are hesitant to lend to businesses that operate in volatile markets. Many lenders will also refuse to lend to businesses related to gambling, weapons, cryptocurrency, and marijuana.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Business loans are used for a wide variety of purposes. Depending on the lender, your business, and what the loan is for, you may be asked for additional documentation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-types-of-business-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> Types of Business Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> There are various types of business loans, each suitable for a different purpose. The most common types of business loans are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/termloan.asp"><strong>Term loans</strong></a>: These are the simplest type of business loan, where you will receive a lump sum and pay it back over a number of years.<br/></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp"><strong>SBA loans</strong></a>: These are loans from the SBA that generally have low rates and long repayment periods.<span class="ql-inline-citation" data-cite="3"></span><br/></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workingcapitalloan.asp"><strong>Working capital loans</strong></a>: These loans are used to pay for <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/operating_expense.asp">operating expenses</a> to keep businesses solvent.<br/></li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-equipment-financing-companies-5083500"><strong>Equipment loans</strong></a>: These loans are used to purchase specific equipment that a business needs to operate.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> In addition, there are more unusual business loan types: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/invoice-financing.asp"><strong>Invoice factoring or invoice financing loans</strong></a>:<strong> </strong>These involve selling unpaid invoices to a third party in exchange for a fee.</li> <li><strong>Real estate business loans</strong>: These are used to buy real estate for a company; generally, the real estate becomes collateral for the loan.</li> <li><strong>Microloans</strong>: These are loans designed for small businesses that involve an amount of less than $50,000. They typically require a personal guarantee.<span class="ql-inline-citation" data-cite="6"></span></li> <li><strong>Merchant cash advance</strong>: This is a lump-sum loan that is repaid with a percentage of future credit card sales.</li> <li><strong>Franchise loans</strong>: These are loans specifically for the purpose of buying a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/franchise.asp">franchise</a>.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_57-0"><span class="heading-toc" id="toc-can-i-use-a-personal-loan-for-my-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Use a Personal Loan for My Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-personal-loans-4773300">personal loans</a> can be used to fund a new or existing business. However, you should check to be sure that a lender doesn’t impose any restrictions on business use.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_59-0"><span class="heading-toc" id="toc-can-you-have-more-than-one-business-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Have More Than One Business Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, you can, as long as you meet the criteria for an additional business loan. However, having multiple loans can get expensive and complicated.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_61-0"><span class="heading-toc" id="toc-what-happens-if-my-business-cannot-pay-back-a-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens If My Business Cannot Pay Back a Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Each loan has different repayment terms, but late repayments generally lead to financial penalties. If you continue to miss payments, then your lender may seize your collateral.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_63-0"><span class="heading-toc" id="toc-are-business-loans-regulated"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Business Loans Regulated?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Historically, business loans have been less regulated than personal loans. This may be changing as some U.S. states take a greater interest in implementing stricter disclosure rules for business loans.<span class="ql-inline-citation" data-cite="8"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> A business loan is a type of financing used by businesses. Typically, a bank or other financial institution will lend money to a business. That money must be paid back over a defined term with interest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> There are different types of business loans, and they can be used for a wide range of business purposes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> If you're thinking about a business loan, bear in mind that practicing good financial management over time can help your business establish a favorable <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/establish-business-credit-7972523">business credit score</a>. That can help you when it's time to get a loan. </p></div>

A business loan is a type of financing that is used by businesses. Companies can get business loans from a bank, an online lender, or a credit union. The borrowed funds are made available as either a lump-sum payment or a line of credit. Businesses must then repay their lender according to the terms of the loan, which dictate the length of the repayment term and the interest rate charged. ### Key Takeaways * A business loan is a loan taken out by a business to pay for business expenses such as equipment purchases, to cover operating expenses, or to expand into new markets. * There are different types of business loans, each suitable for a different purpose and a different type of company. * Business loans often have lower interest rates and more generous repayment terms than personal loans. * Almost any business can apply for a business loan, but a lender may require extensive documentation during the application process. ## How Do Business Loans Work? A business loan works similarly to a personal loan, though there are [important differences](https://www.investopedia.com/business-loan-personal-loan-difference-7485839) between these two loan types. The first step in applying for a [business loan](https://www.investopedia.com/how-to-get-a-business-loan-7480931) is to find and meet with a [lender](https://www.investopedia.com/terms/l/lender.asp). A lender will assess what scale of financing it can offer, as well as the other terms of the loan. Any business can apply for a business loan, and for this reason, the terms of business loans [vary widely](https://www.investopedia.com/best-small-business-loans-5079093). ### Negotiating Power Bigger, more established companies have more negotiating power and can typically get the most favorable borrowing rates. Small businesses operating in volatile markets have less bargaining power. So they might not be offered as favorable a deal on a business loan. ### Secured and Unsecured Loans Some business loans are [secured loans](https://www.investopedia.com/secured-loans-5076025), which require a company to provide [collateral](https://www.investopedia.com/terms/c/collateral.asp) (an asset) that can be repossessed if it fails to repay the loan. Real estate, equipment, cash, or investments can be used as collateral. Secured loans can have lower [interest rates](https://www.investopedia.com/terms/i/interestrate.asp). They can provide smaller businesses that have less [credit history](https://www.investopedia.com/terms/c/credit-history.asp) access to needed capital. Other business loans are [unsecured](https://www.investopedia.com/terms/u/unsecuredloan.asp), meaning that they don’t require collateral. Getting an unsecured loan depends on the size and age of the business, relationship history with the lender, and other underwriting factors. ### Loan Terms Once a loan's terms are agreed upon, the lender makes funds available, either as a [lump-sum payment](https://www.investopedia.com/terms/l/lump-sum-payment.asp) or a [line of credit](https://www.investopedia.com/terms/l/lineofcredit.asp). The [loan terms](https://www.investopedia.com/loan-terms-5075341) define how much you have to repay, how frequently you must make [repayments](https://www.investopedia.com/terms/r/repayment.asp), and how much [interest](https://www.investopedia.com/terms/i/interest.asp) you must pay. If you make all payments on time, the loan is then closed. If you do not, financial penalties may apply. ## Common Uses for a Business Loan When you apply for a business loan, typically you'll have to disclose what you plan to use the money for and how you plan to repay it. You can use a business loan for almost any kind of business expense. However, you can’t use it for personal expenses. For instance, you can’t use your business loan to buy residential property or a personal vehicle. Doing so will break the terms of your loan agreement. Business loans are frequently used for: * [Startup costs](https://www.investopedia.com/best-sba-loans-for-startups-7509414) * Commercial real estate purchases and/or remodeling * Cash flow for everyday expenses * Debt consolidation or refinancing * Equipment purchases * Inventory purchases * Business acquisitions * Business expansion * Business franchising * Marketing and advertising * Refinancing ### You can sometimes use one business loan to [pay off](https://www.investopedia.com/terms/r/refinance.asp) another business loan. This may make financial sense if by refinancing, you get a better interest rate than that charged for your original loan. ## Business Loans vs. Personal Loans While business loans and personal loans are similar in many ways, there are several important differences between them: * Personal loans are usually unsecured, whereas a business loan often requires collateral and may require you to spend the funds in a particular way. * Business loans generally offer longer repayment terms (up to 25 years for a U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) loan), and you can generally borrow more than on a personal loan. * Business loans also typically have lower interest rates than personal loans. Right now, the [average rate on a personal loan](https://www.investopedia.com/terms/p/personal-interest.asp) is more than 12%. Traditional banks can offer business loans with single-digit interest rates. * Business loans can be more difficult to qualify for because your lender will check your [business credit score](https://www.investopedia.com/terms/b/business-credit-score.asp) and credit history. If that alone doesn't qualify you, you might have to provide a [personal guarantee](https://www.investopedia.com/terms/p/personal-guarantee.asp), as well. That means that if your company can't repay the loan, you'll be obligated to do so. * Personal loans generally have a faster application process than business loans. Most personal loan lenders now offer a [pre-qualification](https://www.investopedia.com/terms/p/prequalification.asp) process, which allows you to see if you’re eligible without completing a full application. If you want a business loan, it might take weeks before you have your funds. ## Factors Considered for a Business Loan Almost any business can apply for a business loan but each must meet specific criteria to be approved. Most lenders will consider a number of key factors such as: * **Credit score**: Lenders may consider your [personal credit score](https://www.investopedia.com/terms/c/credit_score.asp), your business credit score, or both. The higher your score, the more likely you are to be approved, and the better the loan terms you are offered. * [**Cash flow**](https://www.investopedia.com/terms/c/cashflow.asp): Lenders will want to see how much money your business takes and how you spend it. * **Time in business**: Lenders prefer to lend to businesses with a proven track record, and most won’t lend to businesses that are less than two years old. * **Debt**: If you already have [business debts](https://www.investopedia.com/debt-4427751), you may find it more difficult to get a business loan. * **Industry**: Lenders want to minimize risk, so they are hesitant to lend to businesses that operate in volatile markets. Many lenders will also refuse to lend to businesses related to gambling, weapons, cryptocurrency, and marijuana. Business loans are used for a wide variety of purposes. Depending on the lender, your business, and what the loan is for, you may be asked for additional documentation. ## Types of Business Loans There are various types of business loans, each suitable for a different purpose. The most common types of business loans are: * [**Term loans**](https://www.investopedia.com/terms/t/termloan.asp): These are the simplest type of business loan, where you will receive a lump sum and pay it back over a number of years. * [**SBA loans**](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp): These are loans from the SBA that generally have low rates and long repayment periods. * [**Working capital loans**](https://www.investopedia.com/terms/w/workingcapitalloan.asp): These loans are used to pay for [operating expenses](https://www.investopedia.com/terms/o/operating_expense.asp) to keep businesses solvent. * [**Equipment loans**](https://www.investopedia.com/best-equipment-financing-companies-5083500): These loans are used to purchase specific equipment that a business needs to operate. In addition, there are more unusual business loan types: * [**Invoice factoring or invoice financing loans**](https://www.investopedia.com/terms/i/invoice-financing.asp):These involve selling unpaid invoices to a third party in exchange for a fee. * **Real estate business loans**: These are used to buy real estate for a company; generally, the real estate becomes collateral for the loan. * **Microloans**: These are loans designed for small businesses that involve an amount of less than $50,000. They typically require a personal guarantee. * **Merchant cash advance**: This is a lump-sum loan that is repaid with a percentage of future credit card sales. * **Franchise loans**: These are loans specifically for the purpose of buying a [franchise](https://www.investopedia.com/terms/f/franchise.asp). ## Can I Use a Personal Loan for My Business? Some [personal loans](https://www.investopedia.com/best-personal-loans-4773300) can be used to fund a new or existing business. However, you should check to be sure that a lender doesn’t impose any restrictions on business use. ## Can You Have More Than One Business Loan? Yes, you can, as long as you meet the criteria for an additional business loan. However, having multiple loans can get expensive and complicated. ## What Happens If My Business Cannot Pay Back a Loan? Each loan has different repayment terms, but late repayments generally lead to financial penalties. If you continue to miss payments, then your lender may seize your collateral. ## Are Business Loans Regulated? Historically, business loans have been less regulated than personal loans. This may be changing as some U.S. states take a greater interest in implementing stricter disclosure rules for business loans. ## The Bottom Line A business loan is a type of financing used by businesses. Typically, a bank or other financial institution will lend money to a business. That money must be paid back over a defined term with interest. There are different types of business loans, and they can be used for a wide range of business purposes. If you're thinking about a business loan, bear in mind that practicing good financial management over time can help your business establish a favorable [business credit score](https://www.investopedia.com/establish-business-credit-7972523). That can help you when it's time to get a loan.

A business loan is a type of financing that is used by businesses. Companies can get business loans from a bank, an online lender, or a credit union. The borrowed funds are made available as either a lump-sum payment or a line of credit. Businesses must then repay their lender according to the terms of the loan, which dictate the length of the repayment term and the interest rate charged. Key Takeaways A business loan is a loan taken out by a business to pay for business expenses such as equipment purchases, to cover operating expenses, or to expand into new markets.There are different types of business loans, each suitable for a different purpose and a different type of company.Business loans often have lower interest rates and more generous repayment terms than personal loans.Almost any business can apply for a business loan, but a lender may require extensive documentation during the application process. How Do Business Loans Work? A business loan works similarly to a personal loan, though there are important differences between these two loan types. The first step in applying for a business loan is to find and meet with a lender. A lender will assess what scale of financing it can offer, as well as the other terms of the loan. Any business can apply for a business loan, and for this reason, the terms of business loans vary widely. Negotiating Power Bigger, more established companies have more negotiating power and can typically get the most favorable borrowing rates. Small businesses operating in volatile markets have less bargaining power. So they might not be offered as favorable a deal on a business loan. Secured and Unsecured Loans Some business loans are secured loans, which require a company to provide collateral (an asset) that can be repossessed if it fails to repay the loan. Real estate, equipment, cash, or investments can be used as collateral. Secured loans can have lower interest rates. They can provide smaller businesses that have less credit history access to needed capital. Other business loans are unsecured, meaning that they don’t require collateral. Getting an unsecured loan depends on the size and age of the business, relationship history with the lender, and other underwriting factors. Loan Terms Once a loan's terms are agreed upon, the lender makes funds available, either as a lump-sum payment or a line of credit. The loan terms define how much you have to repay, how frequently you must make repayments, and how much interest you must pay. If you make all payments on time, the loan is then closed. If you do not, financial penalties may apply. Common Uses for a Business Loan When you apply for a business loan, typically you'll have to disclose what you plan to use the money for and how you plan to repay it. You can use a business loan for almost any kind of business expense. However, you can’t use it for personal expenses. For instance, you can’t use your business loan to buy residential property or a personal vehicle. Doing so will break the terms of your loan agreement. Business loans are frequently used for: Startup costs Commercial real estate purchases and/or remodeling Cash flow for everyday expenses Debt consolidation or refinancing Equipment purchases Inventory purchases Business acquisitions Business expansion Business franchising Marketing and advertising Refinancing  You can sometimes use one business loan to pay off another business loan. This may make financial sense if by refinancing, you get a better interest rate than that charged for your original loan. Business Loans vs. Personal Loans While business loans and personal loans are similar in many ways, there are several important differences between them: Personal loans are usually unsecured, whereas a business loan often requires collateral and may require you to spend the funds in a particular way. Business loans generally offer longer repayment terms (up to 25 years for a U.S. Small Business Administration (SBA) loan), and you can generally borrow more than on a personal loan. Business loans also typically have lower interest rates than personal loans. Right now, the average rate on a personal loan is more than 12%. Traditional banks can offer business loans with single-digit interest rates. Business loans can be more difficult to qualify for because your lender will check your business credit score and credit history. If that alone doesn't qualify you, you might have to provide a personal guarantee, as well. That means that if your company can't repay the loan, you'll be obligated to do so. Personal loans generally have a faster application process than business loans. Most personal loan lenders now offer a pre-qualification process, which allows you to see if you’re eligible without completing a full application. If you want a business loan, it might take weeks before you have your funds. Factors Considered for a Business Loan Almost any business can apply for a business loan but each must meet specific criteria to be approved. Most lenders will consider a number of key factors such as: Credit score: Lenders may consider your personal credit score, your business credit score, or both. The higher your score, the more likely you are to be approved, and the better the loan terms you are offered. Cash flow: Lenders will want to see how much money your business takes and how you spend it. Time in business: Lenders prefer to lend to businesses with a proven track record, and most won’t lend to businesses that are less than two years old. Debt: If you already have business debts, you may find it more difficult to get a business loan. Industry: Lenders want to minimize risk, so they are hesitant to lend to businesses that operate in volatile markets. Many lenders will also refuse to lend to businesses related to gambling, weapons, cryptocurrency, and marijuana. Business loans are used for a wide variety of purposes. Depending on the lender, your business, and what the loan is for, you may be asked for additional documentation. Types of Business Loans There are various types of business loans, each suitable for a different purpose. The most common types of business loans are: Term loans: These are the simplest type of business loan, where you will receive a lump sum and pay it back over a number of years. SBA loans: These are loans from the SBA that generally have low rates and long repayment periods. Working capital loans: These loans are used to pay for operating expenses to keep businesses solvent. Equipment loans: These loans are used to purchase specific equipment that a business needs to operate. In addition, there are more unusual business loan types: Invoice factoring or invoice financing loans: These involve selling unpaid invoices to a third party in exchange for a fee. Real estate business loans: These are used to buy real estate for a company; generally, the real estate becomes collateral for the loan. Microloans: These are loans designed for small businesses that involve an amount of less than $50,000. They typically require a personal guarantee. Merchant cash advance: This is a lump-sum loan that is repaid with a percentage of future credit card sales. Franchise loans: These are loans specifically for the purpose of buying a franchise. Can I Use a Personal Loan for My Business? Some personal loans can be used to fund a new or existing business. However, you should check to be sure that a lender doesn’t impose any restrictions on business use. Can You Have More Than One Business Loan? Yes, you can, as long as you meet the criteria for an additional business loan. However, having multiple loans can get expensive and complicated. What Happens If My Business Cannot Pay Back a Loan? Each loan has different repayment terms, but late repayments generally lead to financial penalties. If you continue to miss payments, then your lender may seize your collateral. Are Business Loans Regulated? Historically, business loans have been less regulated than personal loans. This may be changing as some U.S. states take a greater interest in implementing stricter disclosure rules for business loans. The Bottom Line A business loan is a type of financing used by businesses. Typically, a bank or other financial institution will lend money to a business. That money must be paid back over a defined term with interest. There are different types of business loans, and they can be used for a wide range of business purposes. If you're thinking about a business loan, bear in mind that practicing good financial management over time can help your business establish a favorable business credit score. That can help you when it's time to get a loan.

https://www.investopedia.com/professional-employer-organization-definition-4766977

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-professional-employer-organization-peo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Professional Employer Organization (PEO)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A professional employer organization (PEO)—sometimes referred to as an employee leasing company—is a human resources company that is contracted by small companies to take over certain administrative functions, such as payroll, taxes, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp">employee benefits</a>. The PEO, in effect, becomes a co-employer, an arrangement that allows it to combine the employees of several companies in order to offer those companies lower costs, reduced paperwork, and increased efficiency, as well as better retirement, healthcare, and workers’ compensation packages for their employees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A PEO is a human resources company contracted by small and medium businesses to perform certain business functions and provide improved employee benefits.</li><li>The average client of a PEO is a small business with 19 employees; companies with fewer than 10 employees probably won’t benefit from using a PEO.</li><li>PEO pricing is typically based on a percentage of total payroll or number of employees.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-peo-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How a PEO Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> More than 800 PEOs in the U.S. provide a variety of services to between 156,000 and 180,000 small and medium-sized companies employing 2.7 to 3.4 million people. As a co-employer, the PEO becomes the legal and tax-related employer for the employees of all client companies. This allows the PEO to negotiate more expansive and less expensive benefits, workers’ comp, and unemployment insurance rates while offering state-of-the-art administrative services. The average client of a PEO, according to the National Association of Professional Employer Organizations (NAPEO), is a small business with 19 employees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">2.7 to 3.4 million</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The number of employees covered by a professional employer organization in the U.S.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Some of the duties performed by PEOs in the U.S. include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <li>Payroll, including automated deposits and one-time payments to both full and part-time employees as well as vendors</li> <li>Employee benefits, ranging from medical, dental, vision, workers’ comp claims, and 401(k) plans</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/compliance-program.asp">Compliance</a> functions related to payroll taxes, employee tax forms, and Internal Revenue Service (IRS) forms and reports</li> <li>Access to experts in all areas covered by the PEO</li> <li>Workplace <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/050715/what-are-some-examples-risk-management-techniques.asp">risk management</a> and safety</li> <li>Customized employee handbooks</li> <li>Recruitment and pre-employment screening</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-important-additional-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Important Additional Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> To better understand the role of a PEO in business, it’s important to know the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li>Most PEOs won’t partner with a company that has fewer than 10 employees. The optimum number of employees is 16 to 80.</li> <li>PEOs typically price services based on a percentage of total company payroll or on the number of employees.</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-peo-services-5088881">Contracting with a PEO</a> means handing over some or all administrative responsibilities.</li> <li>Contract length and structure varies by PEO. Canceling a contract may involve paying a fee.</li> <li>Services offered vary by PEO, and not all PEOs offer all services to all companies.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_20-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_21-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>PEOs are not the same as temporary employment agencies.</p></div></div></div> <span class="heading-toc" id="toc-professional-employer-organization-vs-temp-agency"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Professional Employer Organization vs. Temp Agency </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Some people confuse PEOs with temporary employment, or “temp,” agencies. The two are quite different, even though some services offered appear to be similar. Temp agencies recruit employees and assign them to businesses on a short-term basis to help with overload or special projects or on an “as needed” basis. PEOs, as noted above, are co-employers and take on several administrative functions for clients. </p></div>

## What Is a Professional Employer Organization (PEO)? A professional employer organization (PEO)—sometimes referred to as an employee leasing company—is a human resources company that is contracted by small companies to take over certain administrative functions, such as payroll, taxes, and [employee benefits](https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp). The PEO, in effect, becomes a co-employer, an arrangement that allows it to combine the employees of several companies in order to offer those companies lower costs, reduced paperwork, and increased efficiency, as well as better retirement, healthcare, and workers’ compensation packages for their employees. ### Key Takeaways * A PEO is a human resources company contracted by small and medium businesses to perform certain business functions and provide improved employee benefits. * The average client of a PEO is a small business with 19 employees; companies with fewer than 10 employees probably won’t benefit from using a PEO. * PEO pricing is typically based on a percentage of total payroll or number of employees. ## How a PEO Works More than 800 PEOs in the U.S. provide a variety of services to between 156,000 and 180,000 small and medium-sized companies employing 2.7 to 3.4 million people. As a co-employer, the PEO becomes the legal and tax-related employer for the employees of all client companies. This allows the PEO to negotiate more expansive and less expensive benefits, workers’ comp, and unemployment insurance rates while offering state-of-the-art administrative services. The average client of a PEO, according to the National Association of Professional Employer Organizations (NAPEO), is a small business with 19 employees. ### 2.7 to 3.4 million The number of employees covered by a professional employer organization in the U.S. Some of the duties performed by PEOs in the U.S. include: * Payroll, including automated deposits and one-time payments to both full and part-time employees as well as vendors * Employee benefits, ranging from medical, dental, vision, workers’ comp claims, and 401(k) plans * [Compliance](https://www.investopedia.com/terms/c/compliance-program.asp) functions related to payroll taxes, employee tax forms, and Internal Revenue Service (IRS) forms and reports * Access to experts in all areas covered by the PEO * Workplace [risk management](https://www.investopedia.com/ask/answers/050715/what-are-some-examples-risk-management-techniques.asp) and safety * Customized employee handbooks * Recruitment and pre-employment screening ## Important Additional Considerations To better understand the role of a PEO in business, it’s important to know the following: * Most PEOs won’t partner with a company that has fewer than 10 employees. The optimum number of employees is 16 to 80. * PEOs typically price services based on a percentage of total company payroll or on the number of employees. * [Contracting with a PEO](https://www.investopedia.com/best-peo-services-5088881) means handing over some or all administrative responsibilities. * Contract length and structure varies by PEO. Canceling a contract may involve paying a fee. * Services offered vary by PEO, and not all PEOs offer all services to all companies. ### PEOs are not the same as temporary employment agencies. ## Professional Employer Organization vs. Temp Agency Some people confuse PEOs with temporary employment, or “temp,” agencies. The two are quite different, even though some services offered appear to be similar. Temp agencies recruit employees and assign them to businesses on a short-term basis to help with overload or special projects or on an “as needed” basis. PEOs, as noted above, are co-employers and take on several administrative functions for clients.

What Is a Professional Employer Organization (PEO)? A professional employer organization (PEO)—sometimes referred to as an employee leasing company—is a human resources company that is contracted by small companies to take over certain administrative functions, such as payroll, taxes, and employee benefits. The PEO, in effect, becomes a co-employer, an arrangement that allows it to combine the employees of several companies in order to offer those companies lower costs, reduced paperwork, and increased efficiency, as well as better retirement, healthcare, and workers’ compensation packages for their employees. Key Takeaways A PEO is a human resources company contracted by small and medium businesses to perform certain business functions and provide improved employee benefits.The average client of a PEO is a small business with 19 employees; companies with fewer than 10 employees probably won’t benefit from using a PEO.PEO pricing is typically based on a percentage of total payroll or number of employees. How a PEO Works More than 800 PEOs in the U.S. provide a variety of services to between 156,000 and 180,000 small and medium-sized companies employing 2.7 to 3.4 million people. As a co-employer, the PEO becomes the legal and tax-related employer for the employees of all client companies. This allows the PEO to negotiate more expansive and less expensive benefits, workers’ comp, and unemployment insurance rates while offering state-of-the-art administrative services. The average client of a PEO, according to the National Association of Professional Employer Organizations (NAPEO), is a small business with 19 employees. 2.7 to 3.4 million The number of employees covered by a professional employer organization in the U.S. Some of the duties performed by PEOs in the U.S. include: Payroll, including automated deposits and one-time payments to both full and part-time employees as well as vendors Employee benefits, ranging from medical, dental, vision, workers’ comp claims, and 401(k) plans Compliance functions related to payroll taxes, employee tax forms, and Internal Revenue Service (IRS) forms and reports Access to experts in all areas covered by the PEO Workplace risk management and safety Customized employee handbooks Recruitment and pre-employment screening Important Additional Considerations To better understand the role of a PEO in business, it’s important to know the following: Most PEOs won’t partner with a company that has fewer than 10 employees. The optimum number of employees is 16 to 80. PEOs typically price services based on a percentage of total company payroll or on the number of employees. Contracting with a PEO means handing over some or all administrative responsibilities. Contract length and structure varies by PEO. Canceling a contract may involve paying a fee. Services offered vary by PEO, and not all PEOs offer all services to all companies. PEOs are not the same as temporary employment agencies. Professional Employer Organization vs. Temp Agency Some people confuse PEOs with temporary employment, or “temp,” agencies. The two are quite different, even though some services offered appear to be similar. Temp agencies recruit employees and assign them to businesses on a short-term basis to help with overload or special projects or on an “as needed” basis. PEOs, as noted above, are co-employers and take on several administrative functions for clients.

https://www.investopedia.com/how-to-get-women-small-business-grant-7963621

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> For women entrepreneurs, women’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">small business grants</a> are one potential funding option for starting or growing a business. These grants are offered by public and private institutions alike, meaning many opportunities are out there. However, since there’s no one place to look for them, this also means that information about women’s small business grants can be a bit difficult to track down. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Here’s everything you need to know about getting a women’s small business grant: what they are, who is eligible, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287">how to apply</a>, what documentation you might need, some tips for the application process, and where to start the search for grant funding.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Women’s small business grants are offered by educational institutions, nonprofits, private companies, and all levels of government for the purposes of funding women entrepreneurs across many different fields and industries.</li><li>A business grant is a type of funding that usually does not have to be paid back, but is also classified by the Internal Revenue Service (IRS) as taxable business income.</li><li>Applying for a grant requires the applicant to meet the eligibility criteria for the grant, complete the required forms, and often submit a proposal and other documentation.</li><li>Grant funding opportunities can be quite competitive, so to have the best chance of success, applicants should take advantage of any and all available resources provided by the grant organization and allow themselves plenty of time to prepare their application.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-womens-small-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is a Women’s Small Business Grant? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A women’s small business grant is a form of business capital for women entrepreneurs. Unlike a loan, a grant is more like a financial gift to a business from the grantor or granting organization.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> It’s important to note the following about grant funding: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>Grants are generally considered to be a form of taxable business income by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a>.<span class="ql-inline-citation" data-cite="1"></span></li> <li>Grant money does not generally need to be paid back unless the terms of the grant are violated for some reason.<span class="ql-inline-citation" data-cite="2"></span></li> <li>Competition for grant funding tends to be intense, as many people apply for these opportunities.</li> <li>Grants are usually created for a specific purpose, so they usually have detailed and specific eligibility criteria to ensure the funding is used as intended.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-who-is-eligible-for-womens-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Who Is Eligible for Women’s Small Business Grants? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Women’s small business grants are intended to support women entrepreneurs in reaching their business goals. Because grant funding is offered by a diverse range of private and public institutions and organizations, the purpose and eligibility of each specific grant will vary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The eligibility criteria for a particular grant might include considerations such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>Nature and size of the business (e.g., industry and number of employees)</li> <li>Intention of the grant funding (e.g., to support women innovators in the food and beverage industry)</li> <li>Annual <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> of the business (e.g., under $2 million)</li> <li>Age of the business owner or applicant (e.g., over 21 years of age)</li> <li>Age of the business (e.g., been in operation from one to five years)</li> <li>Identity of the owner, founder, or staff (e.g., majority of employees self-identify as women)</li> <li>Residency status and registered business location (e.g., U.S.-based)<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="3"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-application-process-for-womens-small-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Application Process for Women’s Small Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The application process for a women’s small business grant will vary according to the opportunity, but in general, it might include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <li><strong>Registration or information provision</strong>: The applicant might create an account or fill out details about themselves and/or their business to confirm eligibility. (Government grants in particular may require a specific registration step with the agency offering the grant.)</li><li><strong>Grant selection</strong>: In situations where an organization has a range of grants to choose from, the applicant selects the grant or grants they wish to apply for. </li><li><strong>Application</strong>: The business owner submits their required documentation for the grant.</li><li><strong>Review</strong>: The grantor reviews all applications and confirms the results to all applicants.<span class="ql-inline-citation" data-cite="5"></span></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-required-documentation-for-a-womens-small-business-grant-application"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Required Documentation for a Women’s Small Business Grant Application </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Since there are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-grants-for-women-8417262">a wide range of grants available</a> to fund women-owned small businesses, the documents required for the application will depend on the specifics of the grant opportunity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Generally, women’s small business grant applications will require the following documents as part of the application: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <li>Information about the applicant and/or their business</li><li>Personal and/or business identification numbers or other official documents</li><li>Financial documents</li><li>Application forms</li><li>A detailed abstract, project plan, or proposal</li><li>A budget detailing how the grant funding will be used</li><li>The applicant’s CV or resume</li><li>Professional or personal references<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-tips-for-a-successful-womens-small-business-grant-application"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Tips for a Successful Women’s Small Business Grant Application </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> To have the highest chance of success in securing grant funding, setting aside adequate time to write the proposal, as well as gathering all the required information ahead of time, are advisable before making any application. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Grant opportunities are often highly competitive, so applicants should ensure that they meet all of the eligibility criteria as well as be highly specific on all the details of what the funding will be used for. Since grantors review a high volume of proposals, it’s important for the application to be both clear and concise.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Many organizations offer grant-writing assistance and resources, some even around their own grant opportunity. It’s always a good idea to check if the grantor will be organizing any workshops or webinars related to the grant and to attend these sessions if possible, to glean further information about the application process. Grantors may also offer previous examples of successful grant applications for applicants’ reference. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Some grant opportunities are recurring. Keeping track of announcement dates and application deadlines and setting reminders for them can be helpful prompts to dedicate time to applying for a particular opportunity.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-finding-potential-womens-small-business-grant-sources"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Finding Potential Women’s Small Business Grant Sources </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The following sources provide lists of grant opportunities and/or resources around grant applications: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.grants.gov/">Grants.gov</a> is a comprehensive source for federal government grant opportunities and can be filtered by eligibility for “small businesses.”<span class="ql-inline-citation" data-cite="9"></span></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.ifundwomen.com/">IFundWomen</a> maintains a universal grant application database that matches eligibility criteria with businesses, as well as lists grant opportunities on its site.<span class="ql-inline-citation" data-cite="10"></span></li> <li>The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.wbenc.org/">Women’s Business Enterprise National Council</a> offers programs and opportunities in support of women entrepreneurs, including grants.<span class="ql-inline-citation" data-cite="11"></span></li> <li>The <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://awbc.org/">Association of Women’s Business Centers (AWBC)</a> provides resources on the topic of women’s entrepreneurship and posts grant opportunities on its site.<span class="ql-inline-citation" data-cite="12"></span></li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://www.grantsforwomen.org/" rel="nofollow">Grants for Women</a> provides information, opportunities, and application tips for a range of grant types for women.<span class="ql-inline-citation" data-cite="13"></span></li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="externalLink" href="https://helloalice.com/" rel="nofollow">Hello Alice</a> is a free online platform that aims to assist small businesses in launching and growing. The site regularly lists grant and other funding opportunities.<span class="ql-inline-citation" data-cite="14"></span></li> <li>The <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="externalLink" href="https://ambergrantsforwomen.com/">Amber Grant Foundation</a> by WomensNet was founded in 1998 to memorialize the entrepreneurial spirit of Amber Wigdahl, and awards a variety of grants on a monthly and annual basis.<span class="ql-inline-citation" data-cite="15"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-what-is-a-womens-small-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Women’s Small Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A women’s small business grant is a form of funding available to women entrepreneurs. Unlike a loan, a grant does not need to be paid back (unless the terms of the grant are violated).<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-what-is-the-application-process-for-a-womens-small-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Application Process for a Women’s Small Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The application process for a women’s small business grant will depend on the specific opportunity, as each grant has a dedicated purpose and set of criteria. Generally, the application process might require taking a registration step, submitting a proposal, and/or filling out an application form for review. Grants offered by the government tend to have a more in-depth application process.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-who-is-eligible-for-a-womens-small-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Is Eligible for a Women’s Small Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Since women’s small business grants intend to support women-owned businesses, the eligibility criteria will likely require verifying that the business is owned or run by someone who identifies as a woman. There may be additional criteria, depending on the intention of the grant.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-does-the-government-offer-grants-for-women-owned-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does the Government Offer Grants for Women-Owned Businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, the government provides grant opportunities to support women in business at the local, state, and federal levels. However, it should be noted that the federal government only provides grants for the purposes of research and development, or management and technical assistance, but not for starting or growing a business.<span class="ql-inline-citation" data-cite="16"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Private and public institutions alike currently offer many grant opportunities to women entrepreneurs, to address systemic and historic inequities in funding. Women seeking funding for their business may look to grants as an alternative to taking out a loan, but they should be aware that these opportunities are highly competitive and that the applications are often time-intensive. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> As such, to increase the chances of success, all of the eligibility criteria for the grant must be met, and the application must be specific, thoughtful, and detailed.<br/> </p></div>

For women entrepreneurs, women’s [small business grants](https://www.investopedia.com/terms/g/grant.asp) are one potential funding option for starting or growing a business. These grants are offered by public and private institutions alike, meaning many opportunities are out there. However, since there’s no one place to look for them, this also means that information about women’s small business grants can be a bit difficult to track down. Here’s everything you need to know about getting a women’s small business grant: what they are, who is eligible, [how to apply](https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287), what documentation you might need, some tips for the application process, and where to start the search for grant funding. ### Key Takeaways * Women’s small business grants are offered by educational institutions, nonprofits, private companies, and all levels of government for the purposes of funding women entrepreneurs across many different fields and industries. * A business grant is a type of funding that usually does not have to be paid back, but is also classified by the Internal Revenue Service (IRS) as taxable business income. * Applying for a grant requires the applicant to meet the eligibility criteria for the grant, complete the required forms, and often submit a proposal and other documentation. * Grant funding opportunities can be quite competitive, so to have the best chance of success, applicants should take advantage of any and all available resources provided by the grant organization and allow themselves plenty of time to prepare their application. ## What Is a Women’s Small Business Grant? A women’s small business grant is a form of business capital for women entrepreneurs. Unlike a loan, a grant is more like a financial gift to a business from the grantor or granting organization.  It’s important to note the following about grant funding: * Grants are generally considered to be a form of taxable business income by the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp). * Grant money does not generally need to be paid back unless the terms of the grant are violated for some reason. * Competition for grant funding tends to be intense, as many people apply for these opportunities. * Grants are usually created for a specific purpose, so they usually have detailed and specific eligibility criteria to ensure the funding is used as intended. ## Who Is Eligible for Women’s Small Business Grants? Women’s small business grants are intended to support women entrepreneurs in reaching their business goals. Because grant funding is offered by a diverse range of private and public institutions and organizations, the purpose and eligibility of each specific grant will vary. The eligibility criteria for a particular grant might include considerations such as: * Nature and size of the business (e.g., industry and number of employees) * Intention of the grant funding (e.g., to support women innovators in the food and beverage industry) * Annual [revenue](https://www.investopedia.com/terms/r/revenue.asp) of the business (e.g., under $2 million) * Age of the business owner or applicant (e.g., over 21 years of age) * Age of the business (e.g., been in operation from one to five years) * Identity of the owner, founder, or staff (e.g., majority of employees self-identify as women) * Residency status and registered business location (e.g., U.S.-based) ## Application Process for Women’s Small Business Grants The application process for a women’s small business grant will vary according to the opportunity, but in general, it might include the following: 1. **Registration or information provision**: The applicant might create an account or fill out details about themselves and/or their business to confirm eligibility. (Government grants in particular may require a specific registration step with the agency offering the grant.) 2. **Grant selection**: In situations where an organization has a range of grants to choose from, the applicant selects the grant or grants they wish to apply for. 3. **Application**: The business owner submits their required documentation for the grant. 4. **Review**: The grantor reviews all applications and confirms the results to all applicants. ## Required Documentation for a Women’s Small Business Grant Application Since there are [a wide range of grants available](https://www.investopedia.com/small-business-grants-for-women-8417262) to fund women-owned small businesses, the documents required for the application will depend on the specifics of the grant opportunity. Generally, women’s small business grant applications will require the following documents as part of the application: * Information about the applicant and/or their business * Personal and/or business identification numbers or other official documents * Financial documents * Application forms * A detailed abstract, project plan, or proposal * A budget detailing how the grant funding will be used * The applicant’s CV or resume * Professional or personal references ## Tips for a Successful Women’s Small Business Grant Application To have the highest chance of success in securing grant funding, setting aside adequate time to write the proposal, as well as gathering all the required information ahead of time, are advisable before making any application. Grant opportunities are often highly competitive, so applicants should ensure that they meet all of the eligibility criteria as well as be highly specific on all the details of what the funding will be used for. Since grantors review a high volume of proposals, it’s important for the application to be both clear and concise. Many organizations offer grant-writing assistance and resources, some even around their own grant opportunity. It’s always a good idea to check if the grantor will be organizing any workshops or webinars related to the grant and to attend these sessions if possible, to glean further information about the application process. Grantors may also offer previous examples of successful grant applications for applicants’ reference. Some grant opportunities are recurring. Keeping track of announcement dates and application deadlines and setting reminders for them can be helpful prompts to dedicate time to applying for a particular opportunity. ## Finding Potential Women’s Small Business Grant Sources The following sources provide lists of grant opportunities and/or resources around grant applications: * [Grants.gov](https://www.grants.gov/) is a comprehensive source for federal government grant opportunities and can be filtered by eligibility for “small businesses.” * [IFundWomen](https://www.ifundwomen.com/) maintains a universal grant application database that matches eligibility criteria with businesses, as well as lists grant opportunities on its site. * The [Women’s Business Enterprise National Council](https://www.wbenc.org/) offers programs and opportunities in support of women entrepreneurs, including grants. * The [Association of Women’s Business Centers (AWBC)](https://awbc.org/) provides resources on the topic of women’s entrepreneurship and posts grant opportunities on its site. * [Grants for Women](https://www.grantsforwomen.org/) provides information, opportunities, and application tips for a range of grant types for women. * [Hello Alice](https://helloalice.com/) is a free online platform that aims to assist small businesses in launching and growing. The site regularly lists grant and other funding opportunities. * The [Amber Grant Foundation](https://ambergrantsforwomen.com/) by WomensNet was founded in 1998 to memorialize the entrepreneurial spirit of Amber Wigdahl, and awards a variety of grants on a monthly and annual basis. ## What Is a Women’s Small Business Grant? A women’s small business grant is a form of funding available to women entrepreneurs. Unlike a loan, a grant does not need to be paid back (unless the terms of the grant are violated). ## What Is the Application Process for a Women’s Small Business Grant? The application process for a women’s small business grant will depend on the specific opportunity, as each grant has a dedicated purpose and set of criteria. Generally, the application process might require taking a registration step, submitting a proposal, and/or filling out an application form for review. Grants offered by the government tend to have a more in-depth application process. ## Who Is Eligible for a Women’s Small Business Grant? Since women’s small business grants intend to support women-owned businesses, the eligibility criteria will likely require verifying that the business is owned or run by someone who identifies as a woman. There may be additional criteria, depending on the intention of the grant. ## Does the Government Offer Grants for Women-Owned Businesses? Yes, the government provides grant opportunities to support women in business at the local, state, and federal levels. However, it should be noted that the federal government only provides grants for the purposes of research and development, or management and technical assistance, but not for starting or growing a business. ## The Bottom Line Private and public institutions alike currently offer many grant opportunities to women entrepreneurs, to address systemic and historic inequities in funding. Women seeking funding for their business may look to grants as an alternative to taking out a loan, but they should be aware that these opportunities are highly competitive and that the applications are often time-intensive. As such, to increase the chances of success, all of the eligibility criteria for the grant must be met, and the application must be specific, thoughtful, and detailed.

For women entrepreneurs, women’s small business grants are one potential funding option for starting or growing a business. These grants are offered by public and private institutions alike, meaning many opportunities are out there. However, since there’s no one place to look for them, this also means that information about women’s small business grants can be a bit difficult to track down. Here’s everything you need to know about getting a women’s small business grant: what they are, who is eligible, how to apply, what documentation you might need, some tips for the application process, and where to start the search for grant funding. Key Takeaways Women’s small business grants are offered by educational institutions, nonprofits, private companies, and all levels of government for the purposes of funding women entrepreneurs across many different fields and industries.A business grant is a type of funding that usually does not have to be paid back, but is also classified by the Internal Revenue Service (IRS) as taxable business income.Applying for a grant requires the applicant to meet the eligibility criteria for the grant, complete the required forms, and often submit a proposal and other documentation.Grant funding opportunities can be quite competitive, so to have the best chance of success, applicants should take advantage of any and all available resources provided by the grant organization and allow themselves plenty of time to prepare their application. What Is a Women’s Small Business Grant? A women’s small business grant is a form of business capital for women entrepreneurs. Unlike a loan, a grant is more like a financial gift to a business from the grantor or granting organization.  It’s important to note the following about grant funding: Grants are generally considered to be a form of taxable business income by the Internal Revenue Service (IRS). Grant money does not generally need to be paid back unless the terms of the grant are violated for some reason. Competition for grant funding tends to be intense, as many people apply for these opportunities. Grants are usually created for a specific purpose, so they usually have detailed and specific eligibility criteria to ensure the funding is used as intended. Who Is Eligible for Women’s Small Business Grants? Women’s small business grants are intended to support women entrepreneurs in reaching their business goals. Because grant funding is offered by a diverse range of private and public institutions and organizations, the purpose and eligibility of each specific grant will vary. The eligibility criteria for a particular grant might include considerations such as: Nature and size of the business (e.g., industry and number of employees) Intention of the grant funding (e.g., to support women innovators in the food and beverage industry) Annual revenue of the business (e.g., under $2 million) Age of the business owner or applicant (e.g., over 21 years of age) Age of the business (e.g., been in operation from one to five years) Identity of the owner, founder, or staff (e.g., majority of employees self-identify as women) Residency status and registered business location (e.g., U.S.-based) Application Process for Women’s Small Business Grants The application process for a women’s small business grant will vary according to the opportunity, but in general, it might include the following: Registration or information provision: The applicant might create an account or fill out details about themselves and/or their business to confirm eligibility. (Government grants in particular may require a specific registration step with the agency offering the grant.)Grant selection: In situations where an organization has a range of grants to choose from, the applicant selects the grant or grants they wish to apply for. Application: The business owner submits their required documentation for the grant.Review: The grantor reviews all applications and confirms the results to all applicants. Required Documentation for a Women’s Small Business Grant Application Since there are a wide range of grants available to fund women-owned small businesses, the documents required for the application will depend on the specifics of the grant opportunity. Generally, women’s small business grant applications will require the following documents as part of the application: Information about the applicant and/or their businessPersonal and/or business identification numbers or other official documentsFinancial documentsApplication formsA detailed abstract, project plan, or proposalA budget detailing how the grant funding will be usedThe applicant’s CV or resumeProfessional or personal references Tips for a Successful Women’s Small Business Grant Application To have the highest chance of success in securing grant funding, setting aside adequate time to write the proposal, as well as gathering all the required information ahead of time, are advisable before making any application. Grant opportunities are often highly competitive, so applicants should ensure that they meet all of the eligibility criteria as well as be highly specific on all the details of what the funding will be used for. Since grantors review a high volume of proposals, it’s important for the application to be both clear and concise. Many organizations offer grant-writing assistance and resources, some even around their own grant opportunity. It’s always a good idea to check if the grantor will be organizing any workshops or webinars related to the grant and to attend these sessions if possible, to glean further information about the application process. Grantors may also offer previous examples of successful grant applications for applicants’ reference. Some grant opportunities are recurring. Keeping track of announcement dates and application deadlines and setting reminders for them can be helpful prompts to dedicate time to applying for a particular opportunity. Finding Potential Women’s Small Business Grant Sources The following sources provide lists of grant opportunities and/or resources around grant applications: Grants.gov is a comprehensive source for federal government grant opportunities and can be filtered by eligibility for “small businesses.” IFundWomen maintains a universal grant application database that matches eligibility criteria with businesses, as well as lists grant opportunities on its site. The Women’s Business Enterprise National Council offers programs and opportunities in support of women entrepreneurs, including grants. The Association of Women’s Business Centers (AWBC) provides resources on the topic of women’s entrepreneurship and posts grant opportunities on its site. Grants for Women provides information, opportunities, and application tips for a range of grant types for women. Hello Alice is a free online platform that aims to assist small businesses in launching and growing. The site regularly lists grant and other funding opportunities. The Amber Grant Foundation by WomensNet was founded in 1998 to memorialize the entrepreneurial spirit of Amber Wigdahl, and awards a variety of grants on a monthly and annual basis. What Is a Women’s Small Business Grant? A women’s small business grant is a form of funding available to women entrepreneurs. Unlike a loan, a grant does not need to be paid back (unless the terms of the grant are violated). What Is the Application Process for a Women’s Small Business Grant? The application process for a women’s small business grant will depend on the specific opportunity, as each grant has a dedicated purpose and set of criteria. Generally, the application process might require taking a registration step, submitting a proposal, and/or filling out an application form for review. Grants offered by the government tend to have a more in-depth application process. Who Is Eligible for a Women’s Small Business Grant? Since women’s small business grants intend to support women-owned businesses, the eligibility criteria will likely require verifying that the business is owned or run by someone who identifies as a woman. There may be additional criteria, depending on the intention of the grant. Does the Government Offer Grants for Women-Owned Businesses? Yes, the government provides grant opportunities to support women in business at the local, state, and federal levels. However, it should be noted that the federal government only provides grants for the purposes of research and development, or management and technical assistance, but not for starting or growing a business. The Bottom Line Private and public institutions alike currently offer many grant opportunities to women entrepreneurs, to address systemic and historic inequities in funding. Women seeking funding for their business may look to grants as an alternative to taking out a loan, but they should be aware that these opportunities are highly competitive and that the applications are often time-intensive. As such, to increase the chances of success, all of the eligibility criteria for the grant must be met, and the application must be specific, thoughtful, and detailed.

https://www.investopedia.com/ask/answers/difference-between-premoney-and-postmoney/

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Pre-money and post-money are valuation measures of companies. Both are crucial in determining how much a company is worth. The difference between pre-money and post-money is timing. Pre-money valuation does not include external, or recent external, funding, while post-money does. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Pre-money and post-money are both ways of valuing companies.</li><li>The difference between them is the timing of the valuation.</li><li>Pre-money valuation is the value of a company before any external funding, or before the latest round of funding. </li><li>Post-money valuation includes outside financing or the latest capital injection. </li><li>When discussing the valuation of a company, it is important to specify which type of valuation it is to give an accurate picture of the company's financial situation.</li></ul></div></div></div> <span class="heading-toc" id="toc-pre-money-valuation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Pre-Money Valuation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Pre-money is best described as how much a startup might be worth before it begins to receive any investments into the company.<span class="ql-inline-citation" data-cite="1"></span> This valuation doesn't just give investors an idea of the current value of the business, but it also provides the value of each issued share. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <span class="heading-toc" id="toc-post-money-valuation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Post-Money Valuation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> On the other hand, post-money refers to how much the company is worth after it receives investment money.<span class="ql-inline-citation" data-cite="2"></span> Post-money valuation includes outside financing or the latest capital injection. It is important to know which is being referred to, as they are critical concepts in the valuation of any company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-why-pre-money-vs-post-money-matters"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Why Pre-Money vs. Post-Money Matters </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Let's explain the difference using an example. Suppose an investor is looking to invest in a tech startup. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/entrepreneur.asp">entrepreneur</a> and the investor both agree the company is worth $1 million and the investor will put in $250,000. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The ownership percentages will depend on whether this is a $1 million pre-money or post-money valuation. If the $1 million valuations are pre-money, the company is valued at $1 million before the investment and after investment will be valued at $1.25 million. If the $1 million valuation takes into consideration the $250,000 investment, it is referred to as post-money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_16-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:27.3%;"> <img alt="Pre-Money vs. Post-Money Valuation" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/l_KZDo92sFe4gMxud3KnJLQ6enU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/l_KZDo92sFe4gMxud3KnJLQ6enU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg" data-srcset="https://www.investopedia.com/thmb/hIxK6S6o50ftx7Pi90OTZwpLr-M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg 750w" data-tracking-container="true" height="1710" id="mntl-sc-block-image_1-0" width="6251"/> <noscript> <img alt="Pre-Money vs. Post-Money Valuation" class="img--noscript universal-image__image" height="1710" sizes="750px" src="https://www.investopedia.com/thmb/l_KZDo92sFe4gMxud3KnJLQ6enU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg" srcset="https://www.investopedia.com/thmb/hIxK6S6o50ftx7Pi90OTZwpLr-M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg 750w" width="6251"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Sabrina Jiang</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> As you can see, the valuation method used can affect the ownership percentages in a big way. This is due to the amount of value being placed on the company before investing. If a company is valued at $1 million, it is worth more if the valuation is pre-money than if it is post-money because the pre-money valuation does not include the $250,000 invested. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_19-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_20-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>While the difference between a pre-money and post-money valuation may only impact the entrepreneur's ownership by only a small percentage, this can represent millions of dollars if the company goes <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/public.asp">public</a>.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> In some cases, it's very hard to determine what the company is actually worth, and valuation becomes a subject of negotiation between the entrepreneur and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapitalist.asp">venture capitalist</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-calculating-post-money-valuation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Calculating Post-Money Valuation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> It's very easy to determine the post-money valuation. To do so, use this formula: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li><strong>Post-money valuation</strong> = Investment dollar amount ÷ percent investor receives</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> So if an investment is worth $3 million nets an investor 10%, the post-money valuation would be $30 million: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li>$3 million ÷ 10% = $30 million</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> But keep one thing in mind. This doesn't mean the company is valued at $30 million before getting a $3 million investment. Why? That's easy. That's because the balance sheet only shows an increase of $3 million worth of cash, increasing its value by that same amount. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The difference between pre-money and post-money gets very important in situations where an entrepreneur has a good idea but few assets.</p></div></div></div> <span class="heading-toc" id="toc-calculating-pre-money-valuation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Calculating Pre-Money Valuation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Remember, the pre-money valuation of a company comes before it receives any funding. But this figure does give investors a picture of what the company would be valued at today. Calculating the pre-money valuation isn't difficult. But it does require one extra step—and that's only after you figure out the post-money valuation. Here's how you do it: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li><strong>Pre-money valuation</strong> = Post-money valuation - investment amount</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Let's use the example from above to demonstrate the pre-money valuation. In this case, the pre-money valuation is $27 million. That's because we subtract the investment amount from the post-money valuation. Using the formula above we calculate it as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li>$30 million - $3 million = $27 million</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Knowing the pre-money valuation of a company makes it easier to determine its per-share value. To do this, you'll need to do the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>Per-share value</strong> = Pre-money valuation ÷ total number of outstanding shares</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-what-is-a-startup-valuation"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Startup Valuation?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The valuation of a startup is an assessment of the value of the company. It is determined by a number of factors, including the team behind the company, their network, what stage of development the company is in, whether it has a proof-of-concept, and any sales already made.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-why-does-valuation-matter"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Does Valuation Matter?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Valuation provides insight to investors regarding how the company will be able to grow in order to meet customers' needs and reach new business milestones. A company with a higher valuation often will be more attractive to investors and receive more attention. Valuation also determines what ownership investors will have in exchange for putting their money into the business.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-is-post-money-or-pre-money-valuation-better"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Post-Money or Pre-Money Valuation Better?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Neither type of valuation is inherently better than the other. A post-money valuation is often simpler for investors. However, pre-money valuations are more commonly used.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> A company's valuation is a determination of what it is worth. Pre-money is the valuation before any outside investments. Post-money is what the company is worth after the company receives outside investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> The valuation of a company should always specify which type of valuation. This not only gives an accurate picture of the company's financial situation, but it also impacts ownership in the company. The percentage that is owned by outside investors will depend on whether the company's valuation was set before or after they invested their money. </p></div>

Pre-money and post-money are valuation measures of companies. Both are crucial in determining how much a company is worth. The difference between pre-money and post-money is timing. Pre-money valuation does not include external, or recent external, funding, while post-money does. ### Key Takeaways * Pre-money and post-money are both ways of valuing companies. * The difference between them is the timing of the valuation. * Pre-money valuation is the value of a company before any external funding, or before the latest round of funding. * Post-money valuation includes outside financing or the latest capital injection. * When discussing the valuation of a company, it is important to specify which type of valuation it is to give an accurate picture of the company's financial situation. ## Pre-Money Valuation Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Pre-money is best described as how much a startup might be worth before it begins to receive any investments into the company. This valuation doesn't just give investors an idea of the current value of the business, but it also provides the value of each issued share. ## Post-Money Valuation On the other hand, post-money refers to how much the company is worth after it receives investment money. Post-money valuation includes outside financing or the latest capital injection. It is important to know which is being referred to, as they are critical concepts in the valuation of any company. ## Why Pre-Money vs. Post-Money Matters Let's explain the difference using an example. Suppose an investor is looking to invest in a tech startup. The [entrepreneur](https://www.investopedia.com/terms/e/entrepreneur.asp) and the investor both agree the company is worth $1 million and the investor will put in $250,000. The ownership percentages will depend on whether this is a $1 million pre-money or post-money valuation. If the $1 million valuations are pre-money, the company is valued at $1 million before the investment and after investment will be valued at $1.25 million. If the $1 million valuation takes into consideration the $250,000 investment, it is referred to as post-money. ![Pre-Money vs. Post-Money Valuation]() :max_bytes(150000):strip_icc()/dotdash_Final_Pre_Money_vs_Post_Money_Whats_the_Difference_Sep_2020-01-1cbfad4529204bc8a9170f036cb0c133.jpg) Investopedia / Sabrina Jiang As you can see, the valuation method used can affect the ownership percentages in a big way. This is due to the amount of value being placed on the company before investing. If a company is valued at $1 million, it is worth more if the valuation is pre-money than if it is post-money because the pre-money valuation does not include the $250,000 invested. ### While the difference between a pre-money and post-money valuation may only impact the entrepreneur's ownership by only a small percentage, this can represent millions of dollars if the company goes [public](https://www.investopedia.com/terms/p/public.asp). In some cases, it's very hard to determine what the company is actually worth, and valuation becomes a subject of negotiation between the entrepreneur and the [venture capitalist](https://www.investopedia.com/terms/v/venturecapitalist.asp). ## Calculating Post-Money Valuation It's very easy to determine the post-money valuation. To do so, use this formula: * **Post-money valuation** = Investment dollar amount ÷ percent investor receives So if an investment is worth $3 million nets an investor 10%, the post-money valuation would be $30 million: * $3 million ÷ 10% = $30 million But keep one thing in mind. This doesn't mean the company is valued at $30 million before getting a $3 million investment. Why? That's easy. That's because the balance sheet only shows an increase of $3 million worth of cash, increasing its value by that same amount. ### The difference between pre-money and post-money gets very important in situations where an entrepreneur has a good idea but few assets. ## Calculating Pre-Money Valuation Remember, the pre-money valuation of a company comes before it receives any funding. But this figure does give investors a picture of what the company would be valued at today. Calculating the pre-money valuation isn't difficult. But it does require one extra step—and that's only after you figure out the post-money valuation. Here's how you do it: * **Pre-money valuation** = Post-money valuation - investment amount Let's use the example from above to demonstrate the pre-money valuation. In this case, the pre-money valuation is $27 million. That's because we subtract the investment amount from the post-money valuation. Using the formula above we calculate it as: * $30 million - $3 million = $27 million Knowing the pre-money valuation of a company makes it easier to determine its per-share value. To do this, you'll need to do the following: * **Per-share value** = Pre-money valuation ÷ total number of outstanding shares ## What Is a Startup Valuation? The valuation of a startup is an assessment of the value of the company. It is determined by a number of factors, including the team behind the company, their network, what stage of development the company is in, whether it has a proof-of-concept, and any sales already made. ## Why Does Valuation Matter? Valuation provides insight to investors regarding how the company will be able to grow in order to meet customers' needs and reach new business milestones. A company with a higher valuation often will be more attractive to investors and receive more attention. Valuation also determines what ownership investors will have in exchange for putting their money into the business. ## Is Post-Money or Pre-Money Valuation Better? Neither type of valuation is inherently better than the other. A post-money valuation is often simpler for investors. However, pre-money valuations are more commonly used. ## The Bottom Line A company's valuation is a determination of what it is worth. Pre-money is the valuation before any outside investments. Post-money is what the company is worth after the company receives outside investments. The valuation of a company should always specify which type of valuation. This not only gives an accurate picture of the company's financial situation, but it also impacts ownership in the company. The percentage that is owned by outside investors will depend on whether the company's valuation was set before or after they invested their money.

Pre-money and post-money are valuation measures of companies. Both are crucial in determining how much a company is worth. The difference between pre-money and post-money is timing. Pre-money valuation does not include external, or recent external, funding, while post-money does. Key Takeaways Pre-money and post-money are both ways of valuing companies.The difference between them is the timing of the valuation.Pre-money valuation is the value of a company before any external funding, or before the latest round of funding. Post-money valuation includes outside financing or the latest capital injection. When discussing the valuation of a company, it is important to specify which type of valuation it is to give an accurate picture of the company's financial situation. Pre-Money Valuation Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Pre-money is best described as how much a startup might be worth before it begins to receive any investments into the company. This valuation doesn't just give investors an idea of the current value of the business, but it also provides the value of each issued share. Post-Money Valuation On the other hand, post-money refers to how much the company is worth after it receives investment money. Post-money valuation includes outside financing or the latest capital injection. It is important to know which is being referred to, as they are critical concepts in the valuation of any company. Why Pre-Money vs. Post-Money Matters Let's explain the difference using an example. Suppose an investor is looking to invest in a tech startup. The entrepreneur and the investor both agree the company is worth $1 million and the investor will put in $250,000. The ownership percentages will depend on whether this is a $1 million pre-money or post-money valuation. If the $1 million valuations are pre-money, the company is valued at $1 million before the investment and after investment will be valued at $1.25 million. If the $1 million valuation takes into consideration the $250,000 investment, it is referred to as post-money. Investopedia / Sabrina Jiang As you can see, the valuation method used can affect the ownership percentages in a big way. This is due to the amount of value being placed on the company before investing. If a company is valued at $1 million, it is worth more if the valuation is pre-money than if it is post-money because the pre-money valuation does not include the $250,000 invested. While the difference between a pre-money and post-money valuation may only impact the entrepreneur's ownership by only a small percentage, this can represent millions of dollars if the company goes public. In some cases, it's very hard to determine what the company is actually worth, and valuation becomes a subject of negotiation between the entrepreneur and the venture capitalist. Calculating Post-Money Valuation It's very easy to determine the post-money valuation. To do so, use this formula: Post-money valuation = Investment dollar amount ÷ percent investor receives So if an investment is worth $3 million nets an investor 10%, the post-money valuation would be $30 million: $3 million ÷ 10% = $30 million But keep one thing in mind. This doesn't mean the company is valued at $30 million before getting a $3 million investment. Why? That's easy. That's because the balance sheet only shows an increase of $3 million worth of cash, increasing its value by that same amount. The difference between pre-money and post-money gets very important in situations where an entrepreneur has a good idea but few assets. Calculating Pre-Money Valuation Remember, the pre-money valuation of a company comes before it receives any funding. But this figure does give investors a picture of what the company would be valued at today. Calculating the pre-money valuation isn't difficult. But it does require one extra step—and that's only after you figure out the post-money valuation. Here's how you do it: Pre-money valuation = Post-money valuation - investment amount Let's use the example from above to demonstrate the pre-money valuation. In this case, the pre-money valuation is $27 million. That's because we subtract the investment amount from the post-money valuation. Using the formula above we calculate it as: $30 million - $3 million = $27 million Knowing the pre-money valuation of a company makes it easier to determine its per-share value. To do this, you'll need to do the following: Per-share value = Pre-money valuation ÷ total number of outstanding shares What Is a Startup Valuation? The valuation of a startup is an assessment of the value of the company. It is determined by a number of factors, including the team behind the company, their network, what stage of development the company is in, whether it has a proof-of-concept, and any sales already made. Why Does Valuation Matter? Valuation provides insight to investors regarding how the company will be able to grow in order to meet customers' needs and reach new business milestones. A company with a higher valuation often will be more attractive to investors and receive more attention. Valuation also determines what ownership investors will have in exchange for putting their money into the business. Is Post-Money or Pre-Money Valuation Better? Neither type of valuation is inherently better than the other. A post-money valuation is often simpler for investors. However, pre-money valuations are more commonly used. The Bottom Line A company's valuation is a determination of what it is worth. Pre-money is the valuation before any outside investments. Post-money is what the company is worth after the company receives outside investments. The valuation of a company should always specify which type of valuation. This not only gives an accurate picture of the company's financial situation, but it also impacts ownership in the company. The percentage that is owned by outside investors will depend on whether the company's valuation was set before or after they invested their money.

https://www.investopedia.com/terms/w/walmart-effect.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-walmart-effect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Walmart Effect? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Walmart Effect is a term used to refer to the economic impact felt by local businesses when a large company like Walmart (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt">WMT</a>) opens a location in the area. The Walmart Effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for competitors' employees. Many local businesses oppose the introduction of Walmart stores into their territories for these reasons. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Walmart Effect is the effect that Walmart has been known to have on the communities in which it builds locations. </li><li>The presence of a Walmart store can hurt the business of smaller companies and lower wages for local workers.</li><li>Much of the Walmart Effect can be attributed to Walmart’s immense buying power. </li><li>The Walmart Effect can also affect suppliers, who must drive their production costs down in order to afford to sell to Walmart. </li><li>Although the term was used in the 90s, “Walmart Effect” became ubiquitous with the release of a Charles Fishman book by the same name.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-the-walmart-effect-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How the Walmart Effect Works  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The Walmart Effect also has its positive benefits; it can curb <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a> and help to keep employee productivity at an optimum level. The chain of stores can also save consumers billions of dollars but may also reduce wages and competition in an area. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The Walmart Effect has been shown to not only affect competing companies and suppliers but consumers as well.</p></div></div></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-the-walmart-effect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of the Walmart Effect </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Walmart's insistence on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/insights/050116/walmart-stock-analyzing-5-key-suppliers-wmt.asp">procuring products at lower prices from suppliers</a> means that suppliers must find ways to make their products for less money, or else they could be forced to take losses if they choose to sell through Walmart.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The exposure of selling merchandise through Walmart may increase <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/customer.asp">consumers</a>’ awareness of a product; however, the cost of delivering that product to market may be pushed back upon the supplier. This can compel them to seek out lower-cost alternatives to manufacture their product, which could lead to the use of overseas operations or less expensive materials in the production of their goods. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-requirements-for-the-walmart"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Requirements for the Walmart </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The Walmart Effect is driven by the scale and scope of Walmart’s buying power. The company has over 4,700 stores in the U.S., including almost 600 Sam’s Club stores.<span class="ql-inline-citation" data-cite="1"></span> It’s the largest employer in the U.S. As a retailer of this size, it can dictate the price it pays to wholesalers at a magnitude many other companies cannot.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As a result, Walmart has the capacity to sell its merchandise at lower prices, compared with other businesses in the markets in which it operates. This can have an effect that goes beyond the retail market and into manufacturing and production. In addition to its buying power, Walmart has historically controlled its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/remuneration.asp">compensation</a> to employees in such a way that rival companies might feel pressured to reduce salaries or cut benefits to their workers in response. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Once a Walmart location opens, the lower prices, concentration, and selection of merchandise in its stores tend to draw consumers away from local retailers. With less <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foot-traffic.asp">foot traffic</a> and declining <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retail-sales.asp">sales</a>, local retailers see their profits fall, forcing them to make cost-cutting decisions. Such strategies, however, may not be enough to keep such businesses open as Walmart continues to operate profitably while local retailers' losses mount. In time, Walmart might choose to relocate its store to another location, but the impact of its initial arrival may continue to last well afterward. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The term Walmart Effect was first used in the 1990s, but Charles Fishman wrote a book entitled “The Wal-Mart Effect” in 2006 which details how economies are affected by Walmart.<span class="ql-inline-citation" data-cite="2"></span> Fishman goes beyond the advantages and disadvantages for local businesses but also includes how Walmart can positively and negatively impact consumers. </p></div>

## What Is the Walmart Effect? The Walmart Effect is a term used to refer to the economic impact felt by local businesses when a large company like Walmart ([WMT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt)) opens a location in the area. The Walmart Effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for competitors' employees. Many local businesses oppose the introduction of Walmart stores into their territories for these reasons. ### Key Takeaways * The Walmart Effect is the effect that Walmart has been known to have on the communities in which it builds locations. * The presence of a Walmart store can hurt the business of smaller companies and lower wages for local workers. * Much of the Walmart Effect can be attributed to Walmart’s immense buying power. * The Walmart Effect can also affect suppliers, who must drive their production costs down in order to afford to sell to Walmart. * Although the term was used in the 90s, “Walmart Effect” became ubiquitous with the release of a Charles Fishman book by the same name. ## How the Walmart Effect Works The Walmart Effect also has its positive benefits; it can curb [inflation](https://www.investopedia.com/terms/i/inflation.asp) and help to keep employee productivity at an optimum level. The chain of stores can also save consumers billions of dollars but may also reduce wages and competition in an area. ### The Walmart Effect has been shown to not only affect competing companies and suppliers but consumers as well. ## Advantages and Disadvantages of the Walmart Effect Walmart's insistence on [procuring products at lower prices from suppliers](https://www.investopedia.com/articles/insights/050116/walmart-stock-analyzing-5-key-suppliers-wmt.asp) means that suppliers must find ways to make their products for less money, or else they could be forced to take losses if they choose to sell through Walmart.  The exposure of selling merchandise through Walmart may increase [consumers](https://www.investopedia.com/terms/c/customer.asp)’ awareness of a product; however, the cost of delivering that product to market may be pushed back upon the supplier. This can compel them to seek out lower-cost alternatives to manufacture their product, which could lead to the use of overseas operations or less expensive materials in the production of their goods. ## Requirements for the Walmart The Walmart Effect is driven by the scale and scope of Walmart’s buying power. The company has over 4,700 stores in the U.S., including almost 600 Sam’s Club stores. It’s the largest employer in the U.S. As a retailer of this size, it can dictate the price it pays to wholesalers at a magnitude many other companies cannot.  As a result, Walmart has the capacity to sell its merchandise at lower prices, compared with other businesses in the markets in which it operates. This can have an effect that goes beyond the retail market and into manufacturing and production. In addition to its buying power, Walmart has historically controlled its [compensation](https://www.investopedia.com/terms/r/remuneration.asp) to employees in such a way that rival companies might feel pressured to reduce salaries or cut benefits to their workers in response. Once a Walmart location opens, the lower prices, concentration, and selection of merchandise in its stores tend to draw consumers away from local retailers. With less [foot traffic](https://www.investopedia.com/terms/f/foot-traffic.asp) and declining [sales](https://www.investopedia.com/terms/r/retail-sales.asp), local retailers see their profits fall, forcing them to make cost-cutting decisions. Such strategies, however, may not be enough to keep such businesses open as Walmart continues to operate profitably while local retailers' losses mount. In time, Walmart might choose to relocate its store to another location, but the impact of its initial arrival may continue to last well afterward. The term Walmart Effect was first used in the 1990s, but Charles Fishman wrote a book entitled “The Wal-Mart Effect” in 2006 which details how economies are affected by Walmart. Fishman goes beyond the advantages and disadvantages for local businesses but also includes how Walmart can positively and negatively impact consumers.

What Is the Walmart Effect? The Walmart Effect is a term used to refer to the economic impact felt by local businesses when a large company like Walmart (WMT) opens a location in the area. The Walmart Effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for competitors' employees. Many local businesses oppose the introduction of Walmart stores into their territories for these reasons. Key Takeaways The Walmart Effect is the effect that Walmart has been known to have on the communities in which it builds locations. The presence of a Walmart store can hurt the business of smaller companies and lower wages for local workers.Much of the Walmart Effect can be attributed to Walmart’s immense buying power. The Walmart Effect can also affect suppliers, who must drive their production costs down in order to afford to sell to Walmart. Although the term was used in the 90s, “Walmart Effect” became ubiquitous with the release of a Charles Fishman book by the same name. How the Walmart Effect Works  The Walmart Effect also has its positive benefits; it can curb inflation and help to keep employee productivity at an optimum level. The chain of stores can also save consumers billions of dollars but may also reduce wages and competition in an area. The Walmart Effect has been shown to not only affect competing companies and suppliers but consumers as well. Advantages and Disadvantages of the Walmart Effect Walmart's insistence on procuring products at lower prices from suppliers means that suppliers must find ways to make their products for less money, or else they could be forced to take losses if they choose to sell through Walmart.  The exposure of selling merchandise through Walmart may increase consumers’ awareness of a product; however, the cost of delivering that product to market may be pushed back upon the supplier. This can compel them to seek out lower-cost alternatives to manufacture their product, which could lead to the use of overseas operations or less expensive materials in the production of their goods. Requirements for the Walmart The Walmart Effect is driven by the scale and scope of Walmart’s buying power. The company has over 4,700 stores in the U.S., including almost 600 Sam’s Club stores. It’s the largest employer in the U.S. As a retailer of this size, it can dictate the price it pays to wholesalers at a magnitude many other companies cannot.  As a result, Walmart has the capacity to sell its merchandise at lower prices, compared with other businesses in the markets in which it operates. This can have an effect that goes beyond the retail market and into manufacturing and production. In addition to its buying power, Walmart has historically controlled its compensation to employees in such a way that rival companies might feel pressured to reduce salaries or cut benefits to their workers in response. Once a Walmart location opens, the lower prices, concentration, and selection of merchandise in its stores tend to draw consumers away from local retailers. With less foot traffic and declining sales, local retailers see their profits fall, forcing them to make cost-cutting decisions. Such strategies, however, may not be enough to keep such businesses open as Walmart continues to operate profitably while local retailers' losses mount. In time, Walmart might choose to relocate its store to another location, but the impact of its initial arrival may continue to last well afterward. The term Walmart Effect was first used in the 1990s, but Charles Fishman wrote a book entitled “The Wal-Mart Effect” in 2006 which details how economies are affected by Walmart. Fishman goes beyond the advantages and disadvantages for local businesses but also includes how Walmart can positively and negatively impact consumers.

https://www.investopedia.com/terms/m/momandpop.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-mom-and-pop-establishment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Mom-and-Pop Establishment? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> “Mom-and-pop” is a colloquial term used to describe a small, family-owned, or independent business.<span class="ql-inline-citation" data-cite="3"></span> Mom-and-pop stores are often operations that struggle to compete with more substantial establishments, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/big_box_retailer.asp">big-box retailers</a>, which generally boast more buying power than smaller players. In the last few years “shop local” and “shop small” have been used as slogans in marketing campaigns to support these smaller establishments.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="4"></span> The term “mom-and-pop” can also refer to inexperienced investors who casually play the market.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The popularity of mom-and-pop stores is on the rise, thanks in part to shoppers seeking boutique services or products.</li><li>Traditional mom-and-pop businesses, such as bookstores and pharmacies, have found it financially difficult to compete with large chain stores and online behemoths like Amazon.<br/></li><li>Mom-and-pop businesses benefit from local consumers who choose to pump their money into their communities to promote local economic growth.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-mom-and-pop-entities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Mom-and-Pop Entities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Mom-and-pop stores historically were local family-owned-and-operated general stores or drugstores. Today, mom-and-pop establishments are synonymous with various different types of businesses, including restaurants, bookstores, automotive repair shops, and insurance agencies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> In many ways mom-and-pop businesses stand at a steep disadvantage to large corporations, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ecommerce.asp">e-commerce</a> companies, technology platforms, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/franchise.asp">franchise</a> businesses, which enjoy bigger <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economiesofscale.asp">economies of scale</a>, greater access to capital for investments, larger advertising budgets, higher brand awareness, and greater access to talent pools for hiring. This collectively gives <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gazellecompany.asp">larger players an edge over mom-and-pop businesses</a>, which frequently lose ground and find themselves driven out of business when forced to compete. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Fortunately, there are signs of hope for mom-and-pop stores. More than ever before, consumers are demanding more-personalized products and services. When shoppers ask, “Where can I find a mom-and-pop shop near me?,” they don’t need to look any further than the internet. Small businesses can expand their target audience and broaden their geographical reach through the use of e-commerce and social media.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Mom-and-pop shops also benefit from a phenomenon known as “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-saturday-5085723">Small Business Saturday</a>,” which was founded by American Express in 2010 and is cosponsored by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">U.S. Small Business Administration (SBA)</a>. The idea was to encourage shopping locally on the Saturday following Thanksgiving, and it appears to have worked. U.S. consumers spent an estimated $17.9 billion at independent retailers and restaurants on Small Business Saturday in 2022.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> This shopping holiday was established in response to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blackfriday.asp">Black Friday</a>, when large retailers offer enticing discounts to consumers on the day after Thanksgiving. Mom-and-pop business owners tend to have a vested interest in the community, its citizens, and the local economy. Consequently, they offer highly interactive and personalized services that large corporations cannot replicate. For this reason mom-and-pop stores often win increased <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brand-loyalty.asp">brand loyalty</a> among consumers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Mom-and-pop drugstores are typically owned and operated by the same family for generations, where the druggist or pharmacist would also be the proprietor of the store.</p></div></div></div> <span class="heading-toc" id="toc-mom-and-pop-investors-vs-mom-and-pop-establishments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Mom-and-Pop Investors vs. Mom-and-Pop Establishments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> “Mom-and-pop” is also used to refer to inexperienced investors who minimally invest in the stock market. Despite limited capital commitments, mom-and-pop investors often count on significant returns on their trades in order to supplement their income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> However, many mom-and-pop investors are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/07/mean_reversion_martingale.asp">unfamiliar with market research</a> and so react impulsively to market changes and fluctuations. They rashly dump their positions rather than riding out rough patches. Some mom-and-pop investors combat their inexperience by hiring brokers to facilitate trades or using one of the many online trading platforms to place their investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>National Mom and Pop Business Owners Day is March 29.<span class="ql-inline-citation" data-cite="13"></span> The holiday was founded by Rick and Margie Segel in 1939 as a way to honor the hat shop started by their parents that year.<span class="ql-inline-citation" data-cite="9"></span></p><p><br/></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_26-0"><span class="heading-toc" id="toc-what-is-a-mom-and-pop-store"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Mom-and-Pop Store?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A mom-and-pop store is a small, often family-owned-and-operated business that maximizes its profits by providing personalized, interactive services for its customers, curating its inventory to fit a local need. Examples include bookstores, grocery stores, delicatessens, bakeries, restaurants, auto repair shops, insurance agencies, gift shops, ice cream emporiums, butcher shops, clothing boutiques, drug stores, card shops, and more.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_28-0"><span class="heading-toc" id="toc-what-does-it-cost-to-open-a-mom-and-pop-store"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does It Cost to Open a Mom-and-Pop Store?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There is no one set cost to open a mom-and-pop store. However, the online management platform BlueCart says that it takes somewhere between $25,000 and $50,000 to open a small mom-and-pop grocery store.<span class="ql-inline-citation" data-cite="11"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_30-0"><span class="heading-toc" id="toc-how-many-mom-and-pop-stores-are-there-in-the-us"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Mom-and-Pop Stores Are There in the U.S.?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>According to the U.S. Census Bureau, there were 7,936,977 small business establishments in the United States in 2019, with a small business establishment being defined as one that employs fewer than 500 people and operates at a single location.<span class="ql-inline-citation" data-cite="10"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Small businesses are an important part of the U.S. economy, and mom-and-pop stores are a bedrock subset of them. They inspire brand loyalty and, if successful, develop a devoted local clientele. When the term is applied to financial investors, it means people with limited knowledge of the stock market who nevertheless invest in small amounts as a way to boost their income.<br/> </p></div>

## What Is a Mom-and-Pop Establishment? “Mom-and-pop” is a colloquial term used to describe a small, family-owned, or independent business. Mom-and-pop stores are often operations that struggle to compete with more substantial establishments, such as [big-box retailers](https://www.investopedia.com/terms/b/big_box_retailer.asp), which generally boast more buying power than smaller players. In the last few years “shop local” and “shop small” have been used as slogans in marketing campaigns to support these smaller establishments. The term “mom-and-pop” can also refer to inexperienced investors who casually play the market. ### Key Takeaways * The popularity of mom-and-pop stores is on the rise, thanks in part to shoppers seeking boutique services or products. * Traditional mom-and-pop businesses, such as bookstores and pharmacies, have found it financially difficult to compete with large chain stores and online behemoths like Amazon. * Mom-and-pop businesses benefit from local consumers who choose to pump their money into their communities to promote local economic growth. ## Understanding Mom-and-Pop Entities Mom-and-pop stores historically were local family-owned-and-operated general stores or drugstores. Today, mom-and-pop establishments are synonymous with various different types of businesses, including restaurants, bookstores, automotive repair shops, and insurance agencies. In many ways mom-and-pop businesses stand at a steep disadvantage to large corporations, [e-commerce](https://www.investopedia.com/terms/e/ecommerce.asp) companies, technology platforms, and [franchise](https://www.investopedia.com/terms/f/franchise.asp) businesses, which enjoy bigger [economies of scale](https://www.investopedia.com/terms/e/economiesofscale.asp), greater access to capital for investments, larger advertising budgets, higher brand awareness, and greater access to talent pools for hiring. This collectively gives [larger players an edge over mom-and-pop businesses](https://www.investopedia.com/terms/g/gazellecompany.asp), which frequently lose ground and find themselves driven out of business when forced to compete. Fortunately, there are signs of hope for mom-and-pop stores. More than ever before, consumers are demanding more-personalized products and services. When shoppers ask, “Where can I find a mom-and-pop shop near me?,” they don’t need to look any further than the internet. Small businesses can expand their target audience and broaden their geographical reach through the use of e-commerce and social media. Mom-and-pop shops also benefit from a phenomenon known as “[Small Business Saturday](https://www.investopedia.com/small-business-saturday-5085723),” which was founded by American Express in 2010 and is cosponsored by the [U.S. Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp). The idea was to encourage shopping locally on the Saturday following Thanksgiving, and it appears to have worked. U.S. consumers spent an estimated $17.9 billion at independent retailers and restaurants on Small Business Saturday in 2022. This shopping holiday was established in response to [Black Friday](https://www.investopedia.com/terms/b/blackfriday.asp), when large retailers offer enticing discounts to consumers on the day after Thanksgiving. Mom-and-pop business owners tend to have a vested interest in the community, its citizens, and the local economy. Consequently, they offer highly interactive and personalized services that large corporations cannot replicate. For this reason mom-and-pop stores often win increased [brand loyalty](https://www.investopedia.com/terms/b/brand-loyalty.asp) among consumers. ### Mom-and-pop drugstores are typically owned and operated by the same family for generations, where the druggist or pharmacist would also be the proprietor of the store. ## Mom-and-Pop Investors vs. Mom-and-Pop Establishments “Mom-and-pop” is also used to refer to inexperienced investors who minimally invest in the stock market. Despite limited capital commitments, mom-and-pop investors often count on significant returns on their trades in order to supplement their income. However, many mom-and-pop investors are [unfamiliar with market research](https://www.investopedia.com/articles/07/mean_reversion_martingale.asp) and so react impulsively to market changes and fluctuations. They rashly dump their positions rather than riding out rough patches. Some mom-and-pop investors combat their inexperience by hiring brokers to facilitate trades or using one of the many online trading platforms to place their investments. ### National Mom and Pop Business Owners Day is March 29. The holiday was founded by Rick and Margie Segel in 1939 as a way to honor the hat shop started by their parents that year. ## What Is a Mom-and-Pop Store? A mom-and-pop store is a small, often family-owned-and-operated business that maximizes its profits by providing personalized, interactive services for its customers, curating its inventory to fit a local need. Examples include bookstores, grocery stores, delicatessens, bakeries, restaurants, auto repair shops, insurance agencies, gift shops, ice cream emporiums, butcher shops, clothing boutiques, drug stores, card shops, and more. ## What Does It Cost to Open a Mom-and-Pop Store? There is no one set cost to open a mom-and-pop store. However, the online management platform BlueCart says that it takes somewhere between $25,000 and $50,000 to open a small mom-and-pop grocery store. ## How Many Mom-and-Pop Stores Are There in the U.S.? According to the U.S. Census Bureau, there were 7,936,977 small business establishments in the United States in 2019, with a small business establishment being defined as one that employs fewer than 500 people and operates at a single location. ## The Bottom Line Small businesses are an important part of the U.S. economy, and mom-and-pop stores are a bedrock subset of them. They inspire brand loyalty and, if successful, develop a devoted local clientele. When the term is applied to financial investors, it means people with limited knowledge of the stock market who nevertheless invest in small amounts as a way to boost their income.

What Is a Mom-and-Pop Establishment? “Mom-and-pop” is a colloquial term used to describe a small, family-owned, or independent business. Mom-and-pop stores are often operations that struggle to compete with more substantial establishments, such as big-box retailers, which generally boast more buying power than smaller players. In the last few years “shop local” and “shop small” have been used as slogans in marketing campaigns to support these smaller establishments. The term “mom-and-pop” can also refer to inexperienced investors who casually play the market. Key Takeaways The popularity of mom-and-pop stores is on the rise, thanks in part to shoppers seeking boutique services or products.Traditional mom-and-pop businesses, such as bookstores and pharmacies, have found it financially difficult to compete with large chain stores and online behemoths like Amazon.Mom-and-pop businesses benefit from local consumers who choose to pump their money into their communities to promote local economic growth. Understanding Mom-and-Pop Entities Mom-and-pop stores historically were local family-owned-and-operated general stores or drugstores. Today, mom-and-pop establishments are synonymous with various different types of businesses, including restaurants, bookstores, automotive repair shops, and insurance agencies. In many ways mom-and-pop businesses stand at a steep disadvantage to large corporations, e-commerce companies, technology platforms, and franchise businesses, which enjoy bigger economies of scale, greater access to capital for investments, larger advertising budgets, higher brand awareness, and greater access to talent pools for hiring. This collectively gives larger players an edge over mom-and-pop businesses, which frequently lose ground and find themselves driven out of business when forced to compete. Fortunately, there are signs of hope for mom-and-pop stores. More than ever before, consumers are demanding more-personalized products and services. When shoppers ask, “Where can I find a mom-and-pop shop near me?,” they don’t need to look any further than the internet. Small businesses can expand their target audience and broaden their geographical reach through the use of e-commerce and social media. Mom-and-pop shops also benefit from a phenomenon known as “Small Business Saturday,” which was founded by American Express in 2010 and is cosponsored by the U.S. Small Business Administration (SBA). The idea was to encourage shopping locally on the Saturday following Thanksgiving, and it appears to have worked. U.S. consumers spent an estimated $17.9 billion at independent retailers and restaurants on Small Business Saturday in 2022. This shopping holiday was established in response to Black Friday, when large retailers offer enticing discounts to consumers on the day after Thanksgiving. Mom-and-pop business owners tend to have a vested interest in the community, its citizens, and the local economy. Consequently, they offer highly interactive and personalized services that large corporations cannot replicate. For this reason mom-and-pop stores often win increased brand loyalty among consumers. Mom-and-pop drugstores are typically owned and operated by the same family for generations, where the druggist or pharmacist would also be the proprietor of the store. Mom-and-Pop Investors vs. Mom-and-Pop Establishments “Mom-and-pop” is also used to refer to inexperienced investors who minimally invest in the stock market. Despite limited capital commitments, mom-and-pop investors often count on significant returns on their trades in order to supplement their income. However, many mom-and-pop investors are unfamiliar with market research and so react impulsively to market changes and fluctuations. They rashly dump their positions rather than riding out rough patches. Some mom-and-pop investors combat their inexperience by hiring brokers to facilitate trades or using one of the many online trading platforms to place their investments. National Mom and Pop Business Owners Day is March 29. The holiday was founded by Rick and Margie Segel in 1939 as a way to honor the hat shop started by their parents that year. What Is a Mom-and-Pop Store? A mom-and-pop store is a small, often family-owned-and-operated business that maximizes its profits by providing personalized, interactive services for its customers, curating its inventory to fit a local need. Examples include bookstores, grocery stores, delicatessens, bakeries, restaurants, auto repair shops, insurance agencies, gift shops, ice cream emporiums, butcher shops, clothing boutiques, drug stores, card shops, and more. What Does It Cost to Open a Mom-and-Pop Store? There is no one set cost to open a mom-and-pop store. However, the online management platform BlueCart says that it takes somewhere between $25,000 and $50,000 to open a small mom-and-pop grocery store. How Many Mom-and-Pop Stores Are There in the U.S.? According to the U.S. Census Bureau, there were 7,936,977 small business establishments in the United States in 2019, with a small business establishment being defined as one that employs fewer than 500 people and operates at a single location. The Bottom Line Small businesses are an important part of the U.S. economy, and mom-and-pop stores are a bedrock subset of them. They inspire brand loyalty and, if successful, develop a devoted local clientele. When the term is applied to financial investors, it means people with limited knowledge of the stock market who nevertheless invest in small amounts as a way to boost their income.

https://www.investopedia.com/terms/e/externaleconomiesofscale.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-external-economies-of-scale"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are External Economies of Scale? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> External economies of scale occur outside of an individual company but within the same industry. Remember that in economics, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insights/what-are-economies-of-scale/" rel="noopener noreferrer">economies of scale</a> mean that the more units a business produces, the less it costs to produce each unit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <em>External</em> economies of scale describe similar conditions, only for an entire industry instead of a company. For example, if a city creates a better transportation network to service a particular industry, then all companies in that industry will benefit from the new transportation network, and experience decreased production costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> As an industry grows larger or becomes clustered in one location—as with, say, the banking and financial services in New York or London—than the average costs of doing business within that industry over the long run become lower, and we have external economies of scale. With external economies, costs also may fall because of increased specialization, better training of workers, faster innovation, or shared supplier relationships. These factors are typically referred to as positive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/externality.asp" rel="noopener noreferrer">externalities</a>; industry-level negative externalities are called external <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/060115/what-difference-between-external-economies-and-external-diseconomies.asp" rel="noopener noreferrer">diseconomies</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>External economies of scale are business-enhancing factors that occur outside a company but within the same industry.</li><li>In addition to lower production and operating costs, external economies of scale may also reduce a company's variable costs per unit because of operational efficiencies and synergies.</li><li>On the downside, external economies of scale could dull the competitive edge of a company, as it cannot exclude competitors from benefiting also.</li></ul></div></div></div> <span class="heading-toc" id="toc-the-basics-of-external-economies-of-scale"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> The Basics of External Economies of Scale </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Businesses in the same industry tend to cluster in together. For example, a film studio might determine that California is a particularly good location for year-round film-making, so it moves to Hollywood. New movie producers also move to Hollywood because there are more camera operators, actors, costume designers, and screenwriters in the area. Then, more studios might decide to move to Hollywood to take advantage of the specialized labor and infrastructure already in place, thanks to the success of the first firm. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> As more and more firms succeed in the same area, new industry entrants can take advantage of even more localized benefits. It makes sense for industries to concentrate in areas where they are already strong. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>An agglomeration economy, or synergy, is when businesses in different industries are beneficial to each other and can share resources and opportunities.</p></div></div></div> <span class="heading-toc" id="toc-agglomeration-economy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Agglomeration Economy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> If two or more separate industries are incidentally beneficial to one another, there can be external economies of scale across the entire group. This phenomenon is sometimes called an "agglomeration economy," in which businesses are located close to one another and can share resources and efficiencies. It is similar to the business governance concept of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/synergy.asp" rel="noopener noreferrer">synergy</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Scale economies that occur outside of a company, but from which all companies in an industry benefit could include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>New production methods</li><li>Transportation modes</li><li>Government tax breaks</li><li>Increased tariffs against a foreign competitor</li><li>New off-label use of a prescription drug or other product</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-pros-and-cons-of-external-economies-of-scale"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Pros and Cons of External Economies of Scale </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> External economies of scale have several advantages. They include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li><strong>Egalitarian</strong>: All of the businesses in an industry enjoy these economies of scale equally.</li> <li><strong>Growth</strong>: External economies of scale can drive industry growth in particular regions and can also encourage the rapid economic development of support industries and the entire city or geographic area in general.</li> <li><strong>Lower costs</strong>: In addition to lower production and operating costs, economies of scale may also reduce <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variablecost.asp" rel="noopener noreferrer">variable costs</a> per unit because of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/operationalefficiency.asp" rel="noopener noreferrer">operational efficiencies</a> and synergies.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> But external economies of scale are not without drawbacks as well. These disadvantages include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <li><strong>Lack of control</strong>: Individual firms have no direct control over what happens externally. In particular, this means that a company would not have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/competitive_advantage.asp" rel="noopener noreferrer">competitive edge</a>, as it cannot exclude competitors from benefiting also.</li> <li><strong>Limited locations</strong>: External economies of scale may develop so strongly in one geographic region that it becomes difficult for companies in a certain industry to locate anywhere else.</li> <li><strong>Company instability</strong>: A business might not be able to exploit existing external economies because of its internal shortcomings, such as poor management, or other circumstances.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-real-life-example-of-external-economies-of-scale"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Real-Life Example of External Economies of Scale </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> From the late 1960s to the early 1990s, the arguable epicenter of the U.S. high-tech sector was a region just outside of Boston. It was known as Route 128, named for the freeway that ringed the city, and around which a cluster of technology companies grew—including those in the burgeoning computer business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> A variety of factors enticed entrepreneurs there, including proximity to corporations and educational institutions with their research centers and talent, financial services and venture capital firms, and military bases. And the more businesses that came, the more external economies of scale developed, making it easier for more ventures to find facilities, skilled labor, suppliers, sub-contractors, and support services—and to markets themselves, staging conventions and conferences. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Interestingly, toward the end of the 20th century, Route 128 was eclipsed as the center of the high-tech industry by Silicon Valley in the San Francisco Bay Area, where the external economies of the scale grew—as things in California tend to do—bigger, faster, and on a grander scale. </p></div>

## What Are External Economies of Scale? External economies of scale occur outside of an individual company but within the same industry. Remember that in economics, [economies of scale](https://www.investopedia.com/insights/what-are-economies-of-scale/) mean that the more units a business produces, the less it costs to produce each unit. *External* economies of scale describe similar conditions, only for an entire industry instead of a company. For example, if a city creates a better transportation network to service a particular industry, then all companies in that industry will benefit from the new transportation network, and experience decreased production costs. As an industry grows larger or becomes clustered in one location—as with, say, the banking and financial services in New York or London—than the average costs of doing business within that industry over the long run become lower, and we have external economies of scale. With external economies, costs also may fall because of increased specialization, better training of workers, faster innovation, or shared supplier relationships. These factors are typically referred to as positive [externalities](https://www.investopedia.com/terms/e/externality.asp); industry-level negative externalities are called external [diseconomies](https://www.investopedia.com/ask/answers/060115/what-difference-between-external-economies-and-external-diseconomies.asp). ### Key Takeaways * External economies of scale are business-enhancing factors that occur outside a company but within the same industry. * In addition to lower production and operating costs, external economies of scale may also reduce a company's variable costs per unit because of operational efficiencies and synergies. * On the downside, external economies of scale could dull the competitive edge of a company, as it cannot exclude competitors from benefiting also. ## The Basics of External Economies of Scale Businesses in the same industry tend to cluster in together. For example, a film studio might determine that California is a particularly good location for year-round film-making, so it moves to Hollywood. New movie producers also move to Hollywood because there are more camera operators, actors, costume designers, and screenwriters in the area. Then, more studios might decide to move to Hollywood to take advantage of the specialized labor and infrastructure already in place, thanks to the success of the first firm. As more and more firms succeed in the same area, new industry entrants can take advantage of even more localized benefits. It makes sense for industries to concentrate in areas where they are already strong. ### An agglomeration economy, or synergy, is when businesses in different industries are beneficial to each other and can share resources and opportunities. ## Agglomeration Economy If two or more separate industries are incidentally beneficial to one another, there can be external economies of scale across the entire group. This phenomenon is sometimes called an "agglomeration economy," in which businesses are located close to one another and can share resources and efficiencies. It is similar to the business governance concept of [synergy](https://www.investopedia.com/terms/s/synergy.asp). Scale economies that occur outside of a company, but from which all companies in an industry benefit could include the following: * New production methods * Transportation modes * Government tax breaks * Increased tariffs against a foreign competitor * New off-label use of a prescription drug or other product ## Pros and Cons of External Economies of Scale External economies of scale have several advantages. They include the following: * **Egalitarian**: All of the businesses in an industry enjoy these economies of scale equally. * **Growth**: External economies of scale can drive industry growth in particular regions and can also encourage the rapid economic development of support industries and the entire city or geographic area in general. * **Lower costs**: In addition to lower production and operating costs, economies of scale may also reduce [variable costs](https://www.investopedia.com/terms/v/variablecost.asp) per unit because of [operational efficiencies](https://www.investopedia.com/terms/o/operationalefficiency.asp) and synergies. But external economies of scale are not without drawbacks as well. These disadvantages include: * **Lack of control**: Individual firms have no direct control over what happens externally. In particular, this means that a company would not have a [competitive edge](https://www.investopedia.com/terms/c/competitive_advantage.asp), as it cannot exclude competitors from benefiting also. * **Limited locations**: External economies of scale may develop so strongly in one geographic region that it becomes difficult for companies in a certain industry to locate anywhere else. * **Company instability**: A business might not be able to exploit existing external economies because of its internal shortcomings, such as poor management, or other circumstances. ## Real-Life Example of External Economies of Scale From the late 1960s to the early 1990s, the arguable epicenter of the U.S. high-tech sector was a region just outside of Boston. It was known as Route 128, named for the freeway that ringed the city, and around which a cluster of technology companies grew—including those in the burgeoning computer business. A variety of factors enticed entrepreneurs there, including proximity to corporations and educational institutions with their research centers and talent, financial services and venture capital firms, and military bases. And the more businesses that came, the more external economies of scale developed, making it easier for more ventures to find facilities, skilled labor, suppliers, sub-contractors, and support services—and to markets themselves, staging conventions and conferences. Interestingly, toward the end of the 20th century, Route 128 was eclipsed as the center of the high-tech industry by Silicon Valley in the San Francisco Bay Area, where the external economies of the scale grew—as things in California tend to do—bigger, faster, and on a grander scale.

What Are External Economies of Scale? External economies of scale occur outside of an individual company but within the same industry. Remember that in economics, economies of scale mean that the more units a business produces, the less it costs to produce each unit. External economies of scale describe similar conditions, only for an entire industry instead of a company. For example, if a city creates a better transportation network to service a particular industry, then all companies in that industry will benefit from the new transportation network, and experience decreased production costs. As an industry grows larger or becomes clustered in one location—as with, say, the banking and financial services in New York or London—than the average costs of doing business within that industry over the long run become lower, and we have external economies of scale. With external economies, costs also may fall because of increased specialization, better training of workers, faster innovation, or shared supplier relationships. These factors are typically referred to as positive externalities; industry-level negative externalities are called external diseconomies. Key Takeaways External economies of scale are business-enhancing factors that occur outside a company but within the same industry.In addition to lower production and operating costs, external economies of scale may also reduce a company's variable costs per unit because of operational efficiencies and synergies.On the downside, external economies of scale could dull the competitive edge of a company, as it cannot exclude competitors from benefiting also. The Basics of External Economies of Scale Businesses in the same industry tend to cluster in together. For example, a film studio might determine that California is a particularly good location for year-round film-making, so it moves to Hollywood. New movie producers also move to Hollywood because there are more camera operators, actors, costume designers, and screenwriters in the area. Then, more studios might decide to move to Hollywood to take advantage of the specialized labor and infrastructure already in place, thanks to the success of the first firm. As more and more firms succeed in the same area, new industry entrants can take advantage of even more localized benefits. It makes sense for industries to concentrate in areas where they are already strong. An agglomeration economy, or synergy, is when businesses in different industries are beneficial to each other and can share resources and opportunities. Agglomeration Economy If two or more separate industries are incidentally beneficial to one another, there can be external economies of scale across the entire group. This phenomenon is sometimes called an "agglomeration economy," in which businesses are located close to one another and can share resources and efficiencies. It is similar to the business governance concept of synergy. Scale economies that occur outside of a company, but from which all companies in an industry benefit could include the following: New production methodsTransportation modesGovernment tax breaksIncreased tariffs against a foreign competitorNew off-label use of a prescription drug or other product Pros and Cons of External Economies of Scale External economies of scale have several advantages. They include the following: Egalitarian: All of the businesses in an industry enjoy these economies of scale equally. Growth: External economies of scale can drive industry growth in particular regions and can also encourage the rapid economic development of support industries and the entire city or geographic area in general. Lower costs: In addition to lower production and operating costs, economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies. But external economies of scale are not without drawbacks as well. These disadvantages include: Lack of control: Individual firms have no direct control over what happens externally. In particular, this means that a company would not have a competitive edge, as it cannot exclude competitors from benefiting also. Limited locations: External economies of scale may develop so strongly in one geographic region that it becomes difficult for companies in a certain industry to locate anywhere else. Company instability: A business might not be able to exploit existing external economies because of its internal shortcomings, such as poor management, or other circumstances. Real-Life Example of External Economies of Scale From the late 1960s to the early 1990s, the arguable epicenter of the U.S. high-tech sector was a region just outside of Boston. It was known as Route 128, named for the freeway that ringed the city, and around which a cluster of technology companies grew—including those in the burgeoning computer business. A variety of factors enticed entrepreneurs there, including proximity to corporations and educational institutions with their research centers and talent, financial services and venture capital firms, and military bases. And the more businesses that came, the more external economies of scale developed, making it easier for more ventures to find facilities, skilled labor, suppliers, sub-contractors, and support services—and to markets themselves, staging conventions and conferences. Interestingly, toward the end of the 20th century, Route 128 was eclipsed as the center of the high-tech industry by Silicon Valley in the San Francisco Bay Area, where the external economies of the scale grew—as things in California tend to do—bigger, faster, and on a grander scale.

https://www.investopedia.com/best-small-business-loans-5079093

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Small business loans are an integral component of the business world. Business owners rely on them to invest in new equipment or supplies, cover payroll, or manage cash flow. With a small business loan, business owners and entrepreneurs can access a lump sum of cash or a line of credit, which they can use to remain operational and continue growing their business for years to come. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> The best small business loans have convenient application and funding processes, with competitive fees and flexible terms. Investopedia compared more than 20 of the top small business loan lenders based on their loan products, rates, fees, eligibility requirements, and overall transparency, among other factors. See our top-rated lenders below. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Small Business Loans of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Lender Comparison Site:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" 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data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fundbox" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-revolving-line-of-credit-fundbox" rel="nocaes"> <span class="link__wrapper">Fundbox</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Kiva" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Kiva" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-microloans-kiva" rel="nocaes"> <span class="link__wrapper">Kiva</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Fundera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fundera" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-sba-loans-fundera" rel="nocaes"> <span class="link__wrapper">Fundera</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-OnDeck" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-OnDeck" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-same-day-funding-ondeck" rel="nocaes"> <span class="link__wrapper">OnDeck</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (3)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Loans" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-small-business-loans" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Compare Loans</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faqs-a9bb7c26-e46f-475a-b7b3-50a71ecba582" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">FAQs</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-lender-comparison-site-lendio"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Lender Comparison Site</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Lendio</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 700px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Lendio" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/JeBs-Shklq3SoaDv8SYWJcnuwDQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Lendio-12efb4ac67b549288c214a608d4ac9c3.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Lendio" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/JeBs-Shklq3SoaDv8SYWJcnuwDQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Lendio-12efb4ac67b549288c214a608d4ac9c3.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> Lendio</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Lendio" data-retailer-type="other" data-tracking-container="true" href="https://lendio.grsm.io/7k2nv44l6k2k" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> <li><strong>Mobile app: </strong>Yes</li><li><strong>Best perk: </strong>24-hour funding</li><li><strong>Loan/LOC amount:</strong> $25,000-$500,000</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> We chose Lendio as one of the best loan comparison sites based on the fact that they let you compare loan options from more than 75 lenders in one place, more than other marketplace sites. You can also have your loan funded in as little as 24 hours, which can be a major boon for business owners who need cash fast. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-7"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Compare loan offers from more than 75 lenders</p></li> <li><p>Funding in as little as 24 hours</p></li> <li><p>Small business loans, SBA loans, and business lines of credit available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lendio does not lend money directly.</p></li> <li><p>Eligibility requirements vary, depending on the lender.</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Lendio is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lendio-business-loans-review-7555991">loan marketplace</a>, so it won't be lending you funds directly, and we believe they shine in this category since they let you compare loan offers with more than 75 lenders in the small business space. Having the chance to have lenders compete for your business is the best way to make sure you get a small business loan with the best rate and terms you can possibly qualify for. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Lendio was founded in 2011, yet it has grown dramatically since then. So far, they claim to have funded over 300,000 small business loans worth more than $12 billion, and they don't plan to stop anytime soon. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> In terms of their small business loan offering, Lendio lets you borrow between $25,000 and $500,000, depending on your needs. You can repay your loan over one to five years, and your interest rate could be as low as 4.5%.<span class="ql-inline-citation" data-cite="4"></span> Lendio has just a 15-minute application process, and you can get a decision on the same business day, making it an efficient place to shop for a loan. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-business-checking-kabbage"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Business Checking</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Kabbage</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-12" style="--imgWidth: 790px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Kabbage" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/SmuYbak5WVnAYHHP6r-m0LmGeUI=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Kabbage-7d7d964a14a54ab7ab02119da56aee8f.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Kabbage" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/SmuYbak5WVnAYHHP6r-m0LmGeUI=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Kabbage-7d7d964a14a54ab7ab02119da56aee8f.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p> Kabbage</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-13"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=kabbage&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> <li><strong>Mobile app: </strong>Yes</li><li><strong>Best perk: </strong>Business checking</li><li><strong>Loan/LOC amount:</strong> Up to $150,000</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> We chose Kabbage as best for business checking thanks to its comprehensive package of tools for your small business, including a checking account and mobile app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-19"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Transparent qualification requirements</p></li> <li><p>No application fees</p></li> <li><p>Multiple small business loan options available</p></li> <li><p>Access to a mobile app</p></li> <li><p>Business checking available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>You need to be in business for one year.</p></li> <li><p>You must have at least $4,200 in revenue each month (or $50,000 in annual revenue).</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Founded in 2008, Kabbage is a technology company that aims to provide cash flow to businesses of all sizes. While many online companies focus on small business lending, we believe Kabbage stands out due to its plethora of small business loan options and its added features and benefits.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> Kabbage offers a variety of small business loans and options for a line of credit, including both unsecured and secured options. You can also apply for industry-specific loans for trucking, pawnshops, retail, and more. Kabbage prides itself on its easy online application process and fast funding for those who are approved. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> Loan amounts from Kabbage vary depending on the type of loan you apply for. Kabbage also offers business lines of credit up to $150,000 and online loans in amounts from $500 to $150,000. Other loan types might offer larger limits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> Kabbage Funding also offers repayment terms of six and 12 months, depending on your needs.<span class="ql-inline-citation" data-cite="1"></span> With Kabbage, there are no hidden loan fees or prepayment penalties, either. You will pay a monthly fee, but they are upfront about it. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-revolving-line-of-credit-fundbox"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Revolving Line of Credit</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fundbox</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-25" style="--imgWidth: 300px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Fundbox" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/Q1WNKQIv-c_LZhGT1j3pXOSHVZw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-a530e2cae681403b836270fe2004e8fc.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Fundbox" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/Q1WNKQIv-c_LZhGT1j3pXOSHVZw=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundbox-a530e2cae681403b836270fe2004e8fc.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Fundbox</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-26"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Fundbox" data-retailer-type="other" data-tracking-container="true" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> <li><strong>Mobile app: </strong>Yes</li><li><strong>Best perk: </strong>Decision in minutes</li><li><strong>Loan/LOC amount:</strong> Up to $150,000</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Fundbox focuses on offering <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lineofcredit.asp#:~:text=A%20line%20of%20credit%20%28LOC%29%20is%20a%20preset%20borrowing%20limit,be%20used%20at%20any%20time.&amp;text=The%20borrower%20can%20access%20funds,as%20making%20timely%20minimum%20payments.">lines of credit</a> for business owners, and they make it possible to get prequalified online without a hard inquiry on your credit report. Their focus on business lines of credit makes them an expert on this particular type of small business funding. They offer decisions in minutes as well as funding as soon as the next business day. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-32"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Get prequalified online without a hard inquiry on your credit report</p></li> <li><p>Get a decision in minutes</p></li> <li><p>Only borrow what you need, unlike a small business loan that offers a lump sum</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lines of credit are only available for up to $150,000.</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> We chose Fundbox as the lender offering the best revolving line of credit, which allows you to qualify for a specific amount and borrow only what you need. Fundbox was founded in 2013, and the company uses technology to facilitate its B2B lines of credit with the goal of helping small businesses achieve significant success. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> Lines of credit from Fundbox are only available in amounts up to $150,000, but you can get prequalified online without completing a full loan application. Once you apply, you can get a credit decision within minutes, and you’re under no obligation to accept the loan funds.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> Because Fundbox focuses on lines of credit, you get the chance to borrow only as much money as you need. Funds can transfer from your line of credit to your business checking account as soon as the next business day. This provider gives you the option to save money by paying off your balances early and ahead of schedule without any prepayment fees.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> Fundbox lets you see the fees for your line of credit upfront, and they’ll automatically debit your bank account to pay your amount due, so you won’t have to think about it. You get the option to repay your line of credit over 12 or 24 weeks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-microloans-kiva"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Microloans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Kiva</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-38" style="--imgWidth: 500px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Kiva" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/8FA1t00SjZUSLhYv13s74g1755E=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Kiva-542b42cff0c34393b90198a6e915d804.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Kiva" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/8FA1t00SjZUSLhYv13s74g1755E=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Kiva-542b42cff0c34393b90198a6e915d804.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> Kiva</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-39"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=kiva&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> <li><strong>Mobile app: </strong>Yes</li><li><strong>Best perk: </strong>Zero percent interest</li><li><strong>Loan/LOC amount:</strong> Up to $15,000</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> Kiva is the best option for small business owners who only need to borrow a small amount of money. Their microloans currently come with a 0% interest rate, and you can borrow up to $15,000. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-45"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Borrow money with no interest</p></li> <li><p>Get the chance to market your product to a growing community of Kiva lenders, currently 1.6 million strong</p></li> <li><p>Repay your loan for up to 36 months</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>You can only borrow up to $15,000 with Kiva.</p></li> <li><p>It can take 30 days or longer for your loan to be funded.</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> We chose this lender as the best option for microloans based on the fact that you can borrow money at 0% APR and repay it over three full years.<span class="ql-inline-citation" data-cite="2"></span> Founded in 2005, Kiva aims to help underserved communities and their members qualify for the small business funding they need to get their dreams off the ground. So far, 2.1 million Kiva lenders have funded more than $1.74 billion in loans to more than 4.3 million borrowers in 77 countries around the globe.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> Interestingly, Kiva is not a bank but is instead a peer-to-peer lending platform. Kiva loans are geared to disadvantaged entrepreneurs, so investors who lend money through the platform get the chance to help people around the world. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> In terms of their loan product, Kiva only lets you borrow up to $15,000. You can apply online in 20 to 30 minutes and earn the ability to advertise your funding project on their marketplace within 30 days; you get the chance to repay your loan over 36 months. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50"> Kiva also lists easy requirements to qualify, including living in the U.S. and being at least 18 years old. To qualify for a Kiva loan, you also have to agree to use your loan for business purposes only. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-sba-loans-fundera"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for SBA Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Fundera</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-51" style="--imgWidth: 560px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Fundera" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/2BvnuBLxfD1uoi6_LMGkNU9GEdo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundera-1a9231b8faf6491f8e5c86848b093f61.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Fundera" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/2BvnuBLxfD1uoi6_LMGkNU9GEdo=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Fundera-1a9231b8faf6491f8e5c86848b093f61.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Fundera</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-52"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Fundera" data-retailer-type="other" data-tracking-container="true" href="https://fundera.34rwxn.net/c/2104074/764494/10988" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> <li><strong>Mobile app: </strong>No</li><li><strong>Best perk: </strong>Many lenders</li><li><strong>Loan/LOC amount:</strong> Up to $5.5 million for an SBA loan</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> We chose Fundera as the best option for Small Business Administration (SBA) loans due to the fact that it offers the most SBA options, including loans through the popular SBA 7(a) loan program. You can apply for an SBA loan directly on Fundera with your loan funded through a variety of top SBA lenders. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-58"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fundera offers an array of business loans and lines of credit, including loan offers through the SBA.</p></li> <li><p>Compare loan options through multiple lenders in one place</p></li> <li><p>Gauge your ability to qualify without a hard inquiry on your credit report</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fundera is a small business marketplace and not a direct lender, meaning the company won’t actually fund your loan itself.</p></li> <li><p>Credit score of at least 550 required</p></li> <li><p>Collateral required for some SBA loans and loan amounts</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> Fundera is an excellent option for consumers hoping to qualify for an SBA loan, mostly because it lets you fill out a single application and compare multiple SBA loan options in one place. Founded in 2013, Fundera is a loan marketplace instead of a direct lender. This means the company connects small business owners with the best small business loans and lines of credit on the market today, but it does not lend money itself. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> Because Fundera is a marketplace, it can offer nearly any type of business loan or line of credit available today. This includes loans through the Small Business Administration, which tend to come with flexible repayment terms and affordable interest rates. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> Loan amounts and repayment terms vary, but it’s possible to qualify for an SBA loan in amounts up to $5.5 million.<span class="ql-inline-citation" data-cite="3"></span> You may also be able to repay your loan over a period of up to 25 years, although it can take two weeks to get your loan funded. Note that SBA loans may require collateral, and that’s especially true for larger loan amounts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-same-day-funding-ondeck"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Same-Day Funding</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> OnDeck</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-63" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="OnDeck" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/XMm4WraKELYyvOiVMal5xmSZJK4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/OnDeck-60a5fbf3235f4a9ea1c47bcf1c21adb7.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="OnDeck" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/XMm4WraKELYyvOiVMal5xmSZJK4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/OnDeck-60a5fbf3235f4a9ea1c47bcf1c21adb7.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> OnDeck</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-64"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Lendio" data-retailer-type="other" data-tracking-container="true" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=rUO1VVu2ZdQi&amp;term=ondeck&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> <li><strong>Mobile app: </strong>Yes</li><li><strong>Best perk: </strong>Same-day funding</li><li><strong>Loan/LOC amount:</strong> Up to $250,000 for a loan; up to $100,000 for a line of credit</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> We chose OnDeck due to the fact they offer small business loans with funding as soon as the same business day. This can be crucial for business owners who need fast access to cash to keep up with business expenses or pay for an important piece of equipment right away. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-70"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Funding available as soon as the same business day</p></li> <li><p>Borrow up to $250,000 with a small business loan or up to $100,000 with a line of credit</p></li> <li><p>OnDeck is transparent about loan details and eligibility requirements.</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Minimum personal credit score of 600 required</p></li> <li><p>Applicants need at least one year in business with a minimum of $100,000 in annual business revenue.</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> Since its founding in 2006, OnDeck has grown to become one of the most prominent small business lenders offering capital on the market today. We chose OnDeck as best for same-day funding due to its easy online application process and rapid approval and fulfillment of your small business loan. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> OnDeck makes it easy to qualify for a line of credit in amounts from $6,000 to $100,000 or a small business loan in amounts from $5,000 to $250,000. Repayment terms on small business loans are available for up to 24 months, and you will benefit from transparent pricing and no prepayment penalties. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74"> Meanwhile, you can repay one of OnDeck's lines of credit over 12 months, plus you get the benefit of borrowing only what you need. Either option can work for small business owners who need access to capital, and both types of funding let you apply and receive a decision within the day. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> OnDeck lists some basic <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/082616/4-steps-getting-small-business-loan-without-collateral.asp">requirements to qualify for a business loan</a>, which include a minimum personal credit score of at least 600 for a long-term loan. You also need to be in business for at least two years and you need to have a least $250,000 in annual business revenue to qualify. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-compare-small-business-loans"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Compare Small Business Loans </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-1"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Lender</b> </th> <th><b>Mobile App</b></th> <th><b>Best Perk</b></th> <th><b>Loan/LOC Amount</b></th> </tr> </thead> <tbody data-check="0"> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://lendio.grsm.io/7k2nv44l6k2k" rel="nofollow">Lendio</a> <br/>Best Lender Comparison Site</th> <td>Yes</td> <td>24-hour funding</td> <td>$25,000-$500,000</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=kabbage&amp;bwid_id=6388b14276b3780decf128fd&amp;pub_param_1=5079093&amp;pub_param_2=ndbe661a0caac4efa9a4c2b04d0e947d720" rel="nofollow">Kabbage</a> <br/>Best for Business Checking</th> <td>Yes</td> <td>Business checking</td> <td>Up to $150,000</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=yB7LfGOyM4aW&amp;term=fundbox&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="sponsored nofollow">Fundbox</a> <br/>Best Revolving Line of Credit</th> <td>Yes</td> <td>Decision in minutes</td> <td>Up to $150,000</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=kiva&amp;bwid_id=6388b14276b3780decf128fd&amp;pub_param_1=5079093&amp;pub_param_2=ndbe661a0caac4efa9a4c2b04d0e947d720" rel="nofollow">Kiva</a> <br/>Best for Microloans</th> <td>Yes</td> <td>Zero percent interest</td> <td>Up to $15,000</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fundera.34rwxn.net/c/2104074/764494/10988" rel="sponsored nofollow">Fundera</a> <br/>Best for SBA Loans</th> <td>No</td> <td>Multiple offers</td> <td>Up to $5.5 million</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&amp;gsxid=rUO1VVu2ZdQi&amp;term=ondeck&amp;source=PStack&amp;medium=Paid&amp;campaign=Investopedia&amp;adgroup=dotdash" rel="sponsored nofollow">OnDeck</a> <br/>Best for Same-Day Funding</th> <td>Yes</td> <td>Same-day funding</td> <td>Up to $250,000 for a loan; up to $100,000 for a line of credit</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-2"> <span class="heading-toc" id="toc-faqs-a9bb7c26-e46f-475a-b7b3-50a71ecba582"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Is a Business Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>A business loan is a type of loan business owners take out in order to access funds for inventory, payroll, and other business expenses. Business loans come in many different forms, although traditional small business loans tend to be offered in one lump sum and with a fixed monthly payment and interest rate.</p><p>However, there are other types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">funding available for small businesses</a>. Lines of credit are a popular option since they let business owners borrow only what they need. Further, invoice factoring can be helpful for some business owners who are short on cash but have plenty of unpaid invoices to use as collateral.</p><p>Small business owners can also apply for an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">SBA loan</a>, which is a type of loan that is backed by the Small Business Administration. While the SBA does not loan money themselves, they connect borrowers with SBA-approved lenders that offer SBA-backed loans with competitive rates and terms.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Are You Personally Liable for an SBA Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>When applying for an SBA loan, you must provide an unlimited personal guarantee if you own 20% or more of the business. This means that if you fail to repay the loan because the business fails, you are still on the hook for repaying the entire loan amount. Also note that, in the case of a borrower defaulting, the lender can recover 50% to 85% of the outstanding loan balance from the SBA.<span class="ql-inline-citation" data-cite="5"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Can I Use a Small Business Loan For?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Approved applicants can use their small business loan funds to pay for any ongoing expenses as well as payroll or investments in equipment or inventory. Small business loans are also frequently used as a means to manage or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/keep-small-business-afloat.asp">smooth out cash flow</a> in times when expenses exceed income. If you’re a small business owner who needs to buy some equipment but you’re waiting to be paid by a few major clients, for example, it could help you keep up with your expenses and buy equipment while you wait for your invoices to be paid.</p><p>Other popular uses of small business loans include raising capital to hire new staff or to launch a new marketing or ad campaign that could help boost revenue.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> We looked at more than 20 lenders who offer small business loans, small business lines of credit, and unique funding options like invoice factoring. We looked for lenders who offer transparency when it comes to their loan products and eligibility requirements, and we also looked for lenders who post fees and ongoing costs prominently on their websites.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> To find the best small business loans, we compared loan options and lenders to find companies with excellent ratings and user reviews on websites like Trustpilot. We also looked for lenders who offer high loan amounts and flexible repayment options, as well as the ability to apply and set up loan funding online. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Best Small Business Loans" class="primary-image__image mntl-primary-image--blurry" height="1414" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/KW8rBllFG128X4IKjxHD7f0-f6A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg" srcset="https://www.investopedia.com/thmb/g51Y5wCIx0IfvRJK417X-re5Ffs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPUAABQHAREIAxAIBRUKBBwNBhoRCDMVCzAjGjcjGDslGFk3HF06HFY4IFU8KF0+IlZEOGpPOnVXM3VXPWJWSGRWSXZdR4NiQ4x0UI94WIN/dJB/bZqJb5CDc5+OdKOBZa+Xa6+VdLWcfpuTiJ6bkqminLqnh7mpkKuro6qrpa2wqbKxrM21k8izmNO8nMm9rcLBvcTAvcvMx9TVxdbW1Nvc1+bm5P7+/hQHARQHARQHARQHARQHARQHARQHARQHARQHASwAAAAACgAHAEUISwBtyKDwAMECBhhonLCRwoYKCRoMoBCRwIZFGy4iKADR4oKHFzNikAAwIIOAABdtdGjgYMOKEilhWKgQgoUJGhxqQDjwgcCICQUCAgA7')" width="2120"/> <noscript> <img alt="Best Small Business Loans" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1414" sizes="750px" src="https://www.investopedia.com/thmb/KW8rBllFG128X4IKjxHD7f0-f6A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg" srcset="https://www.investopedia.com/thmb/g51Y5wCIx0IfvRJK417X-re5Ffs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg 750w" width="2120"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>PixelsEffect / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.lendio.com/loan-types/" rel="nofollow sponsored">Business Loan Types | Lendio</a>."</p></li> <li class="mntl-sources__source" id="citation-1"><p>Kabbage. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.kabbage.com/s/article/Funding-Loans">Kabbage Funding Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>Kiva. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.kivaushub.org/kivaprocess#:~:text=At%20Kiva%20you%20can%20qualify,%2C%20or%20project%2Dbased%20investments.">How Kiva US works</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>Small Business Administration. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/brand/assets/sba/sba-lenders/504-Loan-Fact-Sheet-Borrower-Version.pdf">504 Loan Program - Small Business Administration</a>."</p></li> <li class="mntl-sources__source" id="citation-5"><p>Small Business Administration. 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Small business loans are an integral component of the business world. Business owners rely on them to invest in new equipment or supplies, cover payroll, or manage cash flow. With a small business loan, business owners and entrepreneurs can access a lump sum of cash or a line of credit, which they can use to remain operational and continue growing their business for years to come. The best small business loans have convenient application and funding processes, with competitive fees and flexible terms. Investopedia compared more than 20 of the top small business loan lenders based on their loan products, rates, fees, eligibility requirements, and overall transparency, among other factors. See our top-rated lenders below. ## Best Small Business Loans of 2024 * **Best Lender Comparison Site:** [Lendio](https://lendio.grsm.io/7k2nv44l6k2k) * **Best for Business Checking:** [Kabbage](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kabbage&bwid_id=6388b14276b3780decf128fd) * **Best Revolving Line of Credit:** [Fundbox](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) * **Best for Microloans:** [Kiva](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kiva&bwid_id=6388b14276b3780decf128fd) * **Best for SBA Loans:** [Fundera](https://fundera.34rwxn.net/c/2104074/764494/10988) * **Best for Same-Day Funding:** [OnDeck](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=rUO1VVu2ZdQi&term=ondeck&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Best Small Business Loans Expand Best Small Business Loans * [Our Top Picks](#summary-list) * [Lendio](#toc-best-lender-comparison-site-lendio) * [Kabbage](#toc-best-for-business-checking-kabbage) * [Fundbox](#toc-best-revolving-line-of-credit-fundbox) * [Kiva](#toc-best-for-microloans-kiva) * [Fundera](#toc-best-for-sba-loans-fundera) * [OnDeck](#toc-best-for-same-day-funding-ondeck) * See More (3) * [Compare Loans](#toc-compare-small-business-loans) * [FAQs](#toc-faqs-a9bb7c26-e46f-475a-b7b3-50a71ecba582) * [Methodology](#toc-methodology) ### Best Lender Comparison Site : Lendio --- ![Lendio]() :fill(white):max_bytes(150000):strip_icc()/Lendio-12efb4ac67b549288c214a608d4ac9c3.jpg)  Lendio [Apply Now](https://lendio.grsm.io/7k2nv44l6k2k) Key Specs * **Mobile app:** Yes * **Best perk:** 24-hour funding * **Loan/LOC amount:** $25,000-$500,000 Why We Chose It We chose Lendio as one of the best loan comparison sites based on the fact that they let you compare loan options from more than 75 lenders in one place, more than other marketplace sites. You can also have your loan funded in as little as 24 hours, which can be a major boon for business owners who need cash fast. Pros & Cons Pros * Compare loan offers from more than 75 lenders * Funding in as little as 24 hours * Small business loans, SBA loans, and business lines of credit available Cons * Lendio does not lend money directly. * Eligibility requirements vary, depending on the lender. Overview Lendio is a [loan marketplace](https://www.investopedia.com/lendio-business-loans-review-7555991), so it won't be lending you funds directly, and we believe they shine in this category since they let you compare loan offers with more than 75 lenders in the small business space. Having the chance to have lenders compete for your business is the best way to make sure you get a small business loan with the best rate and terms you can possibly qualify for. Lendio was founded in 2011, yet it has grown dramatically since then. So far, they claim to have funded over 300,000 small business loans worth more than $12 billion, and they don't plan to stop anytime soon. In terms of their small business loan offering, Lendio lets you borrow between $25,000 and $500,000, depending on your needs. You can repay your loan over one to five years, and your interest rate could be as low as 4.5%. Lendio has just a 15-minute application process, and you can get a decision on the same business day, making it an efficient place to shop for a loan. ### Best for Business Checking : Kabbage --- ![Kabbage]() :fill(white):max_bytes(150000):strip_icc()/Kabbage-7d7d964a14a54ab7ab02119da56aee8f.png)  Kabbage [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kabbage&bwid_id=6388b14276b3780decf128fd) Key Specs * **Mobile app:** Yes * **Best perk:** Business checking * **Loan/LOC amount:** Up to $150,000 Why We Chose It We chose Kabbage as best for business checking thanks to its comprehensive package of tools for your small business, including a checking account and mobile app. Pros & Cons Pros * Transparent qualification requirements * No application fees * Multiple small business loan options available * Access to a mobile app * Business checking available Cons * You need to be in business for one year. * You must have at least $4,200 in revenue each month (or $50,000 in annual revenue). Overview Founded in 2008, Kabbage is a technology company that aims to provide cash flow to businesses of all sizes. While many online companies focus on small business lending, we believe Kabbage stands out due to its plethora of small business loan options and its added features and benefits.  Kabbage offers a variety of small business loans and options for a line of credit, including both unsecured and secured options. You can also apply for industry-specific loans for trucking, pawnshops, retail, and more. Kabbage prides itself on its easy online application process and fast funding for those who are approved. Loan amounts from Kabbage vary depending on the type of loan you apply for. Kabbage also offers business lines of credit up to $150,000 and online loans in amounts from $500 to $150,000. Other loan types might offer larger limits. Kabbage Funding also offers repayment terms of six and 12 months, depending on your needs. With Kabbage, there are no hidden loan fees or prepayment penalties, either. You will pay a monthly fee, but they are upfront about it. ### Best Revolving Line of Credit : Fundbox --- ![Fundbox]() :fill(white):max_bytes(150000):strip_icc()/Fundbox-a530e2cae681403b836270fe2004e8fc.jpg)  Fundbox [Apply Now](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Key Specs * **Mobile app:** Yes * **Best perk:** Decision in minutes * **Loan/LOC amount:** Up to $150,000 Why We Chose It Fundbox focuses on offering [lines of credit](https://www.investopedia.com/terms/l/lineofcredit.asp#:~:text=A%20line%20of%20credit%20%28LOC%29%20is%20a%20preset%20borrowing%20limit,be%20used%20at%20any%20time.&text=The%20borrower%20can%20access%20funds,as%20making%20timely%20minimum%20payments.) for business owners, and they make it possible to get prequalified online without a hard inquiry on your credit report. Their focus on business lines of credit makes them an expert on this particular type of small business funding. They offer decisions in minutes as well as funding as soon as the next business day. Pros & Cons Pros * Get prequalified online without a hard inquiry on your credit report * Get a decision in minutes * Only borrow what you need, unlike a small business loan that offers a lump sum Cons * Lines of credit are only available for up to $150,000. Overview We chose Fundbox as the lender offering the best revolving line of credit, which allows you to qualify for a specific amount and borrow only what you need. Fundbox was founded in 2013, and the company uses technology to facilitate its B2B lines of credit with the goal of helping small businesses achieve significant success. Lines of credit from Fundbox are only available in amounts up to $150,000, but you can get prequalified online without completing a full loan application. Once you apply, you can get a credit decision within minutes, and you’re under no obligation to accept the loan funds.  Because Fundbox focuses on lines of credit, you get the chance to borrow only as much money as you need. Funds can transfer from your line of credit to your business checking account as soon as the next business day. This provider gives you the option to save money by paying off your balances early and ahead of schedule without any prepayment fees.  Fundbox lets you see the fees for your line of credit upfront, and they’ll automatically debit your bank account to pay your amount due, so you won’t have to think about it. You get the option to repay your line of credit over 12 or 24 weeks. ### Best for Microloans : Kiva --- ![Kiva]() :fill(white):max_bytes(150000):strip_icc()/Kiva-542b42cff0c34393b90198a6e915d804.png)  Kiva [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kiva&bwid_id=6388b14276b3780decf128fd) Key Specs * **Mobile app:** Yes * **Best perk:** Zero percent interest * **Loan/LOC amount:** Up to $15,000 Why We Chose It Kiva is the best option for small business owners who only need to borrow a small amount of money. Their microloans currently come with a 0% interest rate, and you can borrow up to $15,000. Pros & Cons Pros * Borrow money with no interest * Get the chance to market your product to a growing community of Kiva lenders, currently 1.6 million strong * Repay your loan for up to 36 months Cons * You can only borrow up to $15,000 with Kiva. * It can take 30 days or longer for your loan to be funded. Overview We chose this lender as the best option for microloans based on the fact that you can borrow money at 0% APR and repay it over three full years. Founded in 2005, Kiva aims to help underserved communities and their members qualify for the small business funding they need to get their dreams off the ground. So far, 2.1 million Kiva lenders have funded more than $1.74 billion in loans to more than 4.3 million borrowers in 77 countries around the globe.  Interestingly, Kiva is not a bank but is instead a peer-to-peer lending platform. Kiva loans are geared to disadvantaged entrepreneurs, so investors who lend money through the platform get the chance to help people around the world. In terms of their loan product, Kiva only lets you borrow up to $15,000. You can apply online in 20 to 30 minutes and earn the ability to advertise your funding project on their marketplace within 30 days; you get the chance to repay your loan over 36 months. Kiva also lists easy requirements to qualify, including living in the U.S. and being at least 18 years old. To qualify for a Kiva loan, you also have to agree to use your loan for business purposes only. ### Best for SBA Loans : Fundera --- ![Fundera]() :fill(white):max_bytes(150000):strip_icc()/Fundera-1a9231b8faf6491f8e5c86848b093f61.png)  Fundera [Apply Now](https://fundera.34rwxn.net/c/2104074/764494/10988) Key Specs * **Mobile app:** No * **Best perk:** Many lenders * **Loan/LOC amount:** Up to $5.5 million for an SBA loan Why We Chose It We chose Fundera as the best option for Small Business Administration (SBA) loans due to the fact that it offers the most SBA options, including loans through the popular SBA 7(a) loan program. You can apply for an SBA loan directly on Fundera with your loan funded through a variety of top SBA lenders. Pros & Cons Pros * Fundera offers an array of business loans and lines of credit, including loan offers through the SBA. * Compare loan options through multiple lenders in one place * Gauge your ability to qualify without a hard inquiry on your credit report Cons * Fundera is a small business marketplace and not a direct lender, meaning the company won’t actually fund your loan itself. * Credit score of at least 550 required * Collateral required for some SBA loans and loan amounts Overview Fundera is an excellent option for consumers hoping to qualify for an SBA loan, mostly because it lets you fill out a single application and compare multiple SBA loan options in one place. Founded in 2013, Fundera is a loan marketplace instead of a direct lender. This means the company connects small business owners with the best small business loans and lines of credit on the market today, but it does not lend money itself. Because Fundera is a marketplace, it can offer nearly any type of business loan or line of credit available today. This includes loans through the Small Business Administration, which tend to come with flexible repayment terms and affordable interest rates. Loan amounts and repayment terms vary, but it’s possible to qualify for an SBA loan in amounts up to $5.5 million. You may also be able to repay your loan over a period of up to 25 years, although it can take two weeks to get your loan funded. Note that SBA loans may require collateral, and that’s especially true for larger loan amounts. ### Best for Same-Day Funding : OnDeck --- ![OnDeck]() :fill(white):max_bytes(150000):strip_icc()/OnDeck-60a5fbf3235f4a9ea1c47bcf1c21adb7.jpg)  OnDeck [Apply Now](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=rUO1VVu2ZdQi&term=ondeck&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Key Specs * **Mobile app:** Yes * **Best perk:** Same-day funding * **Loan/LOC amount:** Up to $250,000 for a loan; up to $100,000 for a line of credit Why We Chose It We chose OnDeck due to the fact they offer small business loans with funding as soon as the same business day. This can be crucial for business owners who need fast access to cash to keep up with business expenses or pay for an important piece of equipment right away. Pros & Cons Pros * Funding available as soon as the same business day * Borrow up to $250,000 with a small business loan or up to $100,000 with a line of credit * OnDeck is transparent about loan details and eligibility requirements. Cons * Minimum personal credit score of 600 required * Applicants need at least one year in business with a minimum of $100,000 in annual business revenue. Overview Since its founding in 2006, OnDeck has grown to become one of the most prominent small business lenders offering capital on the market today. We chose OnDeck as best for same-day funding due to its easy online application process and rapid approval and fulfillment of your small business loan. OnDeck makes it easy to qualify for a line of credit in amounts from $6,000 to $100,000 or a small business loan in amounts from $5,000 to $250,000. Repayment terms on small business loans are available for up to 24 months, and you will benefit from transparent pricing and no prepayment penalties. Meanwhile, you can repay one of OnDeck's lines of credit over 12 months, plus you get the benefit of borrowing only what you need. Either option can work for small business owners who need access to capital, and both types of funding let you apply and receive a decision within the day. OnDeck lists some basic [requirements to qualify for a business loan](https://www.investopedia.com/articles/personal-finance/082616/4-steps-getting-small-business-loan-without-collateral.asp), which include a minimum personal credit score of at least 600 for a long-term loan. You also need to be in business for at least two years and you need to have a least $250,000 in annual business revenue to qualify. ## Compare Small Business Loans | **Lender** | **Mobile App** | **Best Perk** | **Loan/LOC Amount** | | --- | --- | --- | --- | | [Lendio](https://lendio.grsm.io/7k2nv44l6k2k) Best Lender Comparison Site | Yes | 24-hour funding | $25,000-$500,000 | | [Kabbage](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kabbage&bwid_id=6388b14276b3780decf128fd&pub_param_1=5079093&pub_param_2=ndbe661a0caac4efa9a4c2b04d0e947d720) Best for Business Checking | Yes | Business checking | Up to $150,000 | | [Fundbox](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=yB7LfGOyM4aW&term=fundbox&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Best Revolving Line of Credit | Yes | Decision in minutes | Up to $150,000 | | [Kiva](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=kiva&bwid_id=6388b14276b3780decf128fd&pub_param_1=5079093&pub_param_2=ndbe661a0caac4efa9a4c2b04d0e947d720) Best for Microloans | Yes | Zero percent interest | Up to $15,000 | | [Fundera](https://fundera.34rwxn.net/c/2104074/764494/10988) Best for SBA Loans | No | Multiple offers | Up to $5.5 million | | [OnDeck](https://lp.lendio.com/lendio-ps?gspk=ZG90ZGFzaA&gsxid=rUO1VVu2ZdQi&term=ondeck&source=PStack&medium=Paid&campaign=Investopedia&adgroup=dotdash) Best for Same-Day Funding | Yes | Same-day funding | Up to $250,000 for a loan; up to $100,000 for a line of credit | ## Frequently Asked Questions * ### What Is a Business Loan? A business loan is a type of loan business owners take out in order to access funds for inventory, payroll, and other business expenses. Business loans come in many different forms, although traditional small business loans tend to be offered in one lump sum and with a fixed monthly payment and interest rate. However, there are other types of [funding available for small businesses](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp). Lines of credit are a popular option since they let business owners borrow only what they need. Further, invoice factoring can be helpful for some business owners who are short on cash but have plenty of unpaid invoices to use as collateral. Small business owners can also apply for an [SBA loan](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp), which is a type of loan that is backed by the Small Business Administration. While the SBA does not loan money themselves, they connect borrowers with SBA-approved lenders that offer SBA-backed loans with competitive rates and terms. * ### Are You Personally Liable for an SBA Loan? When applying for an SBA loan, you must provide an unlimited personal guarantee if you own 20% or more of the business. This means that if you fail to repay the loan because the business fails, you are still on the hook for repaying the entire loan amount. Also note that, in the case of a borrower defaulting, the lender can recover 50% to 85% of the outstanding loan balance from the SBA. * ### What Can I Use a Small Business Loan For? Approved applicants can use their small business loan funds to pay for any ongoing expenses as well as payroll or investments in equipment or inventory. Small business loans are also frequently used as a means to manage or [smooth out cash flow](https://www.investopedia.com/articles/pf/09/keep-small-business-afloat.asp) in times when expenses exceed income. If you’re a small business owner who needs to buy some equipment but you’re waiting to be paid by a few major clients, for example, it could help you keep up with your expenses and buy equipment while you wait for your invoices to be paid. Other popular uses of small business loans include raising capital to hire new staff or to launch a new marketing or ad campaign that could help boost revenue. ## Methodology We looked at more than 20 lenders who offer small business loans, small business lines of credit, and unique funding options like invoice factoring. We looked for lenders who offer transparency when it comes to their loan products and eligibility requirements, and we also looked for lenders who post fees and ongoing costs prominently on their websites.  To find the best small business loans, we compared loan options and lenders to find companies with excellent ratings and user reviews on websites like Trustpilot. We also looked for lenders who offer high loan amounts and flexible repayment options, as well as the ability to apply and set up loan funding online. :max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg) :max_bytes(150000):strip_icc()/GettyImages-1388423569-b594b9d3320b44c1ae64900dbc8f75fb.jpg) PixelsEffect / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Lendio. "[Business Loan Types | Lendio](https://www.lendio.com/loan-types/)." 2. Kabbage. "[Kabbage Funding Loans](https://help.kabbage.com/s/article/Funding-Loans)." 3. Kiva. "[How Kiva US works](https://www.kivaushub.org/kivaprocess#:~:text=At%20Kiva%20you%20can%20qualify,%2C%20or%20project%2Dbased%20investments.)." 4. Small Business Administration. "[504 Loan Program - Small Business Administration](https://www.sba.gov/brand/assets/sba/sba-lenders/504-Loan-Fact-Sheet-Borrower-Version.pdf)." 5. Small Business Administration. "[Loan Fact Sheet - Small Business Administration](https://www.sba.gov/sites/default/files/SDOLoanFactSheet_Oct_2011.pdf)." 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Small business loans are an integral component of the business world. Business owners rely on them to invest in new equipment or supplies, cover payroll, or manage cash flow. With a small business loan, business owners and entrepreneurs can access a lump sum of cash or a line of credit, which they can use to remain operational and continue growing their business for years to come. The best small business loans have convenient application and funding processes, with competitive fees and flexible terms. Investopedia compared more than 20 of the top small business loan lenders based on their loan products, rates, fees, eligibility requirements, and overall transparency, among other factors. See our top-rated lenders below. Best Small Business Loans of 2024 Best Lender Comparison Site: Lendio Best for Business Checking: Kabbage Best Revolving Line of Credit: Fundbox Best for Microloans: Kiva Best for SBA Loans: Fundera Best for Same-Day Funding: OnDeck Best Small Business Loans Expand Best Small Business Loans Our Top Picks Lendio Kabbage Fundbox Kiva Fundera OnDeck See More (3) Compare Loans FAQs Methodology Best Lender Comparison Site : Lendio  Lendio Apply Now Key Specs Mobile app: YesBest perk: 24-hour fundingLoan/LOC amount: $25,000-$500,000 Why We Chose It We chose Lendio as one of the best loan comparison sites based on the fact that they let you compare loan options from more than 75 lenders in one place, more than other marketplace sites. You can also have your loan funded in as little as 24 hours, which can be a major boon for business owners who need cash fast. Pros & Cons Pros Compare loan offers from more than 75 lenders Funding in as little as 24 hours Small business loans, SBA loans, and business lines of credit available Cons Lendio does not lend money directly. Eligibility requirements vary, depending on the lender. Overview Lendio is a loan marketplace, so it won't be lending you funds directly, and we believe they shine in this category since they let you compare loan offers with more than 75 lenders in the small business space. Having the chance to have lenders compete for your business is the best way to make sure you get a small business loan with the best rate and terms you can possibly qualify for. Lendio was founded in 2011, yet it has grown dramatically since then. So far, they claim to have funded over 300,000 small business loans worth more than $12 billion, and they don't plan to stop anytime soon. In terms of their small business loan offering, Lendio lets you borrow between $25,000 and $500,000, depending on your needs. You can repay your loan over one to five years, and your interest rate could be as low as 4.5%. Lendio has just a 15-minute application process, and you can get a decision on the same business day, making it an efficient place to shop for a loan. Best for Business Checking : Kabbage  Kabbage Apply Now Key Specs Mobile app: YesBest perk: Business checkingLoan/LOC amount: Up to $150,000 Why We Chose It We chose Kabbage as best for business checking thanks to its comprehensive package of tools for your small business, including a checking account and mobile app. Pros & Cons Pros Transparent qualification requirements No application fees Multiple small business loan options available Access to a mobile app Business checking available Cons You need to be in business for one year. You must have at least $4,200 in revenue each month (or $50,000 in annual revenue). Overview Founded in 2008, Kabbage is a technology company that aims to provide cash flow to businesses of all sizes. While many online companies focus on small business lending, we believe Kabbage stands out due to its plethora of small business loan options and its added features and benefits.  Kabbage offers a variety of small business loans and options for a line of credit, including both unsecured and secured options. You can also apply for industry-specific loans for trucking, pawnshops, retail, and more. Kabbage prides itself on its easy online application process and fast funding for those who are approved. Loan amounts from Kabbage vary depending on the type of loan you apply for. Kabbage also offers business lines of credit up to $150,000 and online loans in amounts from $500 to $150,000. Other loan types might offer larger limits. Kabbage Funding also offers repayment terms of six and 12 months, depending on your needs. With Kabbage, there are no hidden loan fees or prepayment penalties, either. You will pay a monthly fee, but they are upfront about it. Best Revolving Line of Credit : Fundbox  Fundbox Apply Now Key Specs Mobile app: YesBest perk: Decision in minutesLoan/LOC amount: Up to $150,000 Why We Chose It Fundbox focuses on offering lines of credit for business owners, and they make it possible to get prequalified online without a hard inquiry on your credit report. Their focus on business lines of credit makes them an expert on this particular type of small business funding. They offer decisions in minutes as well as funding as soon as the next business day. Pros & Cons Pros Get prequalified online without a hard inquiry on your credit report Get a decision in minutes Only borrow what you need, unlike a small business loan that offers a lump sum Cons Lines of credit are only available for up to $150,000. Overview We chose Fundbox as the lender offering the best revolving line of credit, which allows you to qualify for a specific amount and borrow only what you need. Fundbox was founded in 2013, and the company uses technology to facilitate its B2B lines of credit with the goal of helping small businesses achieve significant success. Lines of credit from Fundbox are only available in amounts up to $150,000, but you can get prequalified online without completing a full loan application. Once you apply, you can get a credit decision within minutes, and you’re under no obligation to accept the loan funds.  Because Fundbox focuses on lines of credit, you get the chance to borrow only as much money as you need. Funds can transfer from your line of credit to your business checking account as soon as the next business day. This provider gives you the option to save money by paying off your balances early and ahead of schedule without any prepayment fees.  Fundbox lets you see the fees for your line of credit upfront, and they’ll automatically debit your bank account to pay your amount due, so you won’t have to think about it. You get the option to repay your line of credit over 12 or 24 weeks. Best for Microloans : Kiva  Kiva Apply Now Key Specs Mobile app: YesBest perk: Zero percent interestLoan/LOC amount: Up to $15,000 Why We Chose It Kiva is the best option for small business owners who only need to borrow a small amount of money. Their microloans currently come with a 0% interest rate, and you can borrow up to $15,000. Pros & Cons Pros Borrow money with no interest Get the chance to market your product to a growing community of Kiva lenders, currently 1.6 million strong Repay your loan for up to 36 months Cons You can only borrow up to $15,000 with Kiva. It can take 30 days or longer for your loan to be funded. Overview We chose this lender as the best option for microloans based on the fact that you can borrow money at 0% APR and repay it over three full years. Founded in 2005, Kiva aims to help underserved communities and their members qualify for the small business funding they need to get their dreams off the ground. So far, 2.1 million Kiva lenders have funded more than $1.74 billion in loans to more than 4.3 million borrowers in 77 countries around the globe.  Interestingly, Kiva is not a bank but is instead a peer-to-peer lending platform. Kiva loans are geared to disadvantaged entrepreneurs, so investors who lend money through the platform get the chance to help people around the world. In terms of their loan product, Kiva only lets you borrow up to $15,000. You can apply online in 20 to 30 minutes and earn the ability to advertise your funding project on their marketplace within 30 days; you get the chance to repay your loan over 36 months. Kiva also lists easy requirements to qualify, including living in the U.S. and being at least 18 years old. To qualify for a Kiva loan, you also have to agree to use your loan for business purposes only. Best for SBA Loans : Fundera  Fundera Apply Now Key Specs Mobile app: NoBest perk: Many lendersLoan/LOC amount: Up to $5.5 million for an SBA loan Why We Chose It We chose Fundera as the best option for Small Business Administration (SBA) loans due to the fact that it offers the most SBA options, including loans through the popular SBA 7(a) loan program. You can apply for an SBA loan directly on Fundera with your loan funded through a variety of top SBA lenders. Pros & Cons Pros Fundera offers an array of business loans and lines of credit, including loan offers through the SBA. Compare loan options through multiple lenders in one place Gauge your ability to qualify without a hard inquiry on your credit report Cons Fundera is a small business marketplace and not a direct lender, meaning the company won’t actually fund your loan itself. Credit score of at least 550 required Collateral required for some SBA loans and loan amounts Overview Fundera is an excellent option for consumers hoping to qualify for an SBA loan, mostly because it lets you fill out a single application and compare multiple SBA loan options in one place. Founded in 2013, Fundera is a loan marketplace instead of a direct lender. This means the company connects small business owners with the best small business loans and lines of credit on the market today, but it does not lend money itself. Because Fundera is a marketplace, it can offer nearly any type of business loan or line of credit available today. This includes loans through the Small Business Administration, which tend to come with flexible repayment terms and affordable interest rates. Loan amounts and repayment terms vary, but it’s possible to qualify for an SBA loan in amounts up to $5.5 million. You may also be able to repay your loan over a period of up to 25 years, although it can take two weeks to get your loan funded. Note that SBA loans may require collateral, and that’s especially true for larger loan amounts. Best for Same-Day Funding : OnDeck  OnDeck Apply Now Key Specs Mobile app: YesBest perk: Same-day fundingLoan/LOC amount: Up to $250,000 for a loan; up to $100,000 for a line of credit Why We Chose It We chose OnDeck due to the fact they offer small business loans with funding as soon as the same business day. This can be crucial for business owners who need fast access to cash to keep up with business expenses or pay for an important piece of equipment right away. Pros & Cons Pros Funding available as soon as the same business day Borrow up to $250,000 with a small business loan or up to $100,000 with a line of credit OnDeck is transparent about loan details and eligibility requirements. Cons Minimum personal credit score of 600 required Applicants need at least one year in business with a minimum of $100,000 in annual business revenue. Overview Since its founding in 2006, OnDeck has grown to become one of the most prominent small business lenders offering capital on the market today. We chose OnDeck as best for same-day funding due to its easy online application process and rapid approval and fulfillment of your small business loan. OnDeck makes it easy to qualify for a line of credit in amounts from $6,000 to $100,000 or a small business loan in amounts from $5,000 to $250,000. Repayment terms on small business loans are available for up to 24 months, and you will benefit from transparent pricing and no prepayment penalties. Meanwhile, you can repay one of OnDeck's lines of credit over 12 months, plus you get the benefit of borrowing only what you need. Either option can work for small business owners who need access to capital, and both types of funding let you apply and receive a decision within the day. OnDeck lists some basic requirements to qualify for a business loan, which include a minimum personal credit score of at least 600 for a long-term loan. You also need to be in business for at least two years and you need to have a least $250,000 in annual business revenue to qualify. Compare Small Business Loans Lender  Mobile App Best Perk Loan/LOC Amount Lendio Best Lender Comparison Site Yes 24-hour funding $25,000-$500,000 Kabbage Best for Business Checking Yes Business checking Up to $150,000 Fundbox Best Revolving Line of Credit Yes Decision in minutes Up to $150,000 Kiva Best for Microloans Yes Zero percent interest Up to $15,000 Fundera Best for SBA Loans No Multiple offers Up to $5.5 million OnDeck Best for Same-Day Funding Yes Same-day funding Up to $250,000 for a loan; up to $100,000 for a line of credit Frequently Asked Questions What Is a Business Loan? A business loan is a type of loan business owners take out in order to access funds for inventory, payroll, and other business expenses. Business loans come in many different forms, although traditional small business loans tend to be offered in one lump sum and with a fixed monthly payment and interest rate.However, there are other types of funding available for small businesses. Lines of credit are a popular option since they let business owners borrow only what they need. Further, invoice factoring can be helpful for some business owners who are short on cash but have plenty of unpaid invoices to use as collateral.Small business owners can also apply for an SBA loan, which is a type of loan that is backed by the Small Business Administration. While the SBA does not loan money themselves, they connect borrowers with SBA-approved lenders that offer SBA-backed loans with competitive rates and terms. Are You Personally Liable for an SBA Loan? When applying for an SBA loan, you must provide an unlimited personal guarantee if you own 20% or more of the business. This means that if you fail to repay the loan because the business fails, you are still on the hook for repaying the entire loan amount. Also note that, in the case of a borrower defaulting, the lender can recover 50% to 85% of the outstanding loan balance from the SBA. What Can I Use a Small Business Loan For? Approved applicants can use their small business loan funds to pay for any ongoing expenses as well as payroll or investments in equipment or inventory. Small business loans are also frequently used as a means to manage or smooth out cash flow in times when expenses exceed income. If you’re a small business owner who needs to buy some equipment but you’re waiting to be paid by a few major clients, for example, it could help you keep up with your expenses and buy equipment while you wait for your invoices to be paid.Other popular uses of small business loans include raising capital to hire new staff or to launch a new marketing or ad campaign that could help boost revenue. Methodology We looked at more than 20 lenders who offer small business loans, small business lines of credit, and unique funding options like invoice factoring. We looked for lenders who offer transparency when it comes to their loan products and eligibility requirements, and we also looked for lenders who post fees and ongoing costs prominently on their websites.  To find the best small business loans, we compared loan options and lenders to find companies with excellent ratings and user reviews on websites like Trustpilot. We also looked for lenders who offer high loan amounts and flexible repayment options, as well as the ability to apply and set up loan funding online. PixelsEffect / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Lendio. "Business Loan Types | Lendio." Kabbage. "Kabbage Funding Loans." Kiva. "How Kiva US works." Small Business Administration. "504 Loan Program - Small Business Administration." Small Business Administration. "Loan Fact Sheet - Small Business Administration." Related Articles Best Peer-to-Peer Loans for May 2024 Best Small Personal Loans for 2024 Best Auto Refinance Loans for May 2024 10 Best Personal Loans for May 2024 Best Credit Builder Loans of 2024 Best Personal Loans for Fair Credit for 2024 Related Terms Private Student Loans: What They Are, How They Work Private student loans are offered through third-party lenders, and they don't come with the protections afforded to federal student loan borrowers. more Emergency Loan: Types, Eligibility, Pros and Cons Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. more What Is a Reverse Mortgage? Types, How They Work, Pros & Cons A reverse mortgage is a type of mortgage loan that enables older homeowners to cash out some of their home equity without making monthly loan payments. more Line of Credit (LOC) Definition, Types, and Examples A line of credit is an arrangement between a bank and a customer that establishes a preset borrowing limit that can be drawn on repeatedly. more Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC A sole proprietorship or sole trader is an unincorporated business with a single owner who pays personal income tax on business profits. more What Is a Checking Account? Here's Everything You Need To Know A checking account is an account held at a financial institution that allows deposits and withdrawals. Learn how checking accounts work and how to get one. more

https://www.investopedia.com/are-business-grants-taxable-7814330

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">business grants</a> are regarded as taxable income, though there are some exceptions. If you are unsure whether your business grant is taxable, you should check the grant agreement, check the Internal Revenue Service (IRS) guidelines, or contact your grant donor or a tax professional.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> For most businesses, it makes sense to reserve part of a business grant for tax purposes. Rather than spending all of the grant, you should hold on to part of it to meet your tax liabilities.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Most business grants are taxable, with only a few exceptions.</li><li>Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant.</li><li>If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional.</li><li>It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations.</li></ul></div></div></div> <span class="heading-toc" id="toc-are-business-grants-taxable"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Are Business Grants Taxable? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The majority of business grants, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-grant.asp">government grants</a>, count as taxable income. This means that you’ll have to pay taxes on the money you receive from the grant, effectively reducing the total amount of grant that you receive.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> There are some important exceptions to this rule, however: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>Nonprofit organizations with 501(c)(3) status are generally tax-exempt, so they don’t pay tax on their income whether this comes from a business grant or another source.<span class="ql-inline-citation" data-cite="6"></span></li> <li>Most of the business grants that were given out as part of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723">federal government’s COVID-19 relief program</a> were tax-exempt.<span class="ql-inline-citation" data-cite="7"></span></li> <li>Grants received by a member of a federally recognized American Indian tribe are also tax-exempt.<span class="ql-inline-citation" data-cite="8"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-how-to-determine-if-business-grants-are-taxable"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> How to Determine If Business Grants Are Taxable </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> It’s important to ascertain whether a business grant is taxable before you use it. That’s because if you have to pay taxes, this essentially reduces the total amount of the award. It’s best to assume that a grant is taxable, but you can then check a number of sources for information to the contrary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> 1. Check the Grant Agreement </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Your business grant agreement will outline the terms under which you are given the grant, and will state whether it is tax-exempt. If the grant agreement doesn’t state this, it’s best to assume that you have to pay tax on it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> 2. Contact the Funding Organization </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The funding organization that gave you the grant should know whether it is tax-exempt. If your grant agreement doesn’t explicitly mention your tax liabilities, you should call your funding organization to check this. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> 3. Review Federal and State Guidelines </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> You can also consult the official IRS guidelines on taxable and nontaxable income. The IRS website contains a comprehensive list of what is considered taxable, and can help you to determine your tax obligations.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> You should also check your state’s guidelines on taxable and nontaxable income, because these can differ from the federal government’s rules.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> 4. Consult with a Tax Professional </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> If you are still unsure about your tax liabilities, or whether your business grant is taxable, you can seek professional help. If you don’t have a business accountant, you can find certified accountants through a number of websites: CPAverify, the Association of International Certified Public Accountants (AICPA), or the National Association of Enrolled Agents (NAEA). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-financial-preparations-for-taxable-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Financial Preparations for Taxable Grants  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> In the majority of cases, any business grant you receive will be taxable. It’s wise to keep this in mind when you are applying for the grant, and definitely before you spend it. Here are some principles that can make it easier to administer the grant: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li>Reserve some of the grant for taxes. You should work out in advance how much of the grant you will have to pay in tax, and then set this amount aside. This will avoid you having to find these funds from elsewhere once you’ve filed your taxes.</li> <li>Include grants in your accounts. Any grants you receive should appear on your tax return. If you exclude them, you may have to pay penalties.</li> <li>Keep good financial records. You should make sure that your business records are accurate, are up to date, and include any grants you’ve received, whether they are taxable or not.</li> <li>Research tax deductions. It may be possible to lower the amount of tax that your business pays by taking advantage of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-deduction.asp">tax deductions</a>. This can free up more of the money you’ve received in your business grant.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-finding-and-applying-for-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Finding and Applying for Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Many organizations give out business grants, and it can take a significant amount of research to find a grant that your business is eligible for. You should check: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>Government grants are offered by both the federal and state governments. Grants.gov is a website with a comprehensive list of federal business grants, and the websites of the U.S. Small Business Administration (SBA) and the State Business Incentives Database are also good resources.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="13"></span></li><li>Corporations also give out grants, often to businesses operating in a particular sector. Finding these grants is most often a case of searching online for a grant that is available to your kind of business.</li><li>Charities and foundations also give out grants, particularly to businesses owned by underrepresented communities.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Once you’ve found a suitable grant, you can generally apply online for it. You’ll likely have to include some documents to support your application, including a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-plan.asp">business plan</a> that explains how the grant will help your business to develop.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Once you’ve applied, it’s a case of waiting. Sometimes, it can take months for a donor organization to make a decision on a grant application, and you might have to call them for an update. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-is-grant-money-taxable-income-to-a-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Grant Money Taxable Income to a Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Generally, yes. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">The IRS</a> regards most types of business grants as taxable income, with only a few exceptions.<span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-how-are-cash-grants-taxed"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Are Cash Grants Taxed?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Cash grants are taxed in the same way as non-cash grants. If your business deals in cash, you should be careful to ensure that your records are accurate. Otherwise, you could be hit with tax penalties.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-are-grants-reported-to-the-irs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Grants Reported to the IRS?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You need to report any business grant you receive to the IRS as part of your tax return. Failure to do this is considered tax fraud and could have serious consequences.<span class="ql-inline-citation" data-cite="12"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Most business grants are taxable, with only a few exceptions. Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional. It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations. </p></div>

Most [business grants](https://www.investopedia.com/terms/g/grant.asp) are regarded as taxable income, though there are some exceptions. If you are unsure whether your business grant is taxable, you should check the grant agreement, check the Internal Revenue Service (IRS) guidelines, or contact your grant donor or a tax professional.  For most businesses, it makes sense to reserve part of a business grant for tax purposes. Rather than spending all of the grant, you should hold on to part of it to meet your tax liabilities.  ### Key Takeaways * Most business grants are taxable, with only a few exceptions. * Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant. * If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional. * It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations. ## Are Business Grants Taxable? The majority of business grants, including [government grants](https://www.investopedia.com/terms/g/government-grant.asp), count as taxable income. This means that you’ll have to pay taxes on the money you receive from the grant, effectively reducing the total amount of grant that you receive. There are some important exceptions to this rule, however: * Nonprofit organizations with 501(c)(3) status are generally tax-exempt, so they don’t pay tax on their income whether this comes from a business grant or another source. * Most of the business grants that were given out as part of the [federal government’s COVID-19 relief program](https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723) were tax-exempt. * Grants received by a member of a federally recognized American Indian tribe are also tax-exempt. ## How to Determine If Business Grants Are Taxable It’s important to ascertain whether a business grant is taxable before you use it. That’s because if you have to pay taxes, this essentially reduces the total amount of the award. It’s best to assume that a grant is taxable, but you can then check a number of sources for information to the contrary. ### 1. Check the Grant Agreement Your business grant agreement will outline the terms under which you are given the grant, and will state whether it is tax-exempt. If the grant agreement doesn’t state this, it’s best to assume that you have to pay tax on it. ### 2. Contact the Funding Organization The funding organization that gave you the grant should know whether it is tax-exempt. If your grant agreement doesn’t explicitly mention your tax liabilities, you should call your funding organization to check this. ### 3. Review Federal and State Guidelines You can also consult the official IRS guidelines on taxable and nontaxable income. The IRS website contains a comprehensive list of what is considered taxable, and can help you to determine your tax obligations. You should also check your state’s guidelines on taxable and nontaxable income, because these can differ from the federal government’s rules.  ### 4. Consult with a Tax Professional If you are still unsure about your tax liabilities, or whether your business grant is taxable, you can seek professional help. If you don’t have a business accountant, you can find certified accountants through a number of websites: CPAverify, the Association of International Certified Public Accountants (AICPA), or the National Association of Enrolled Agents (NAEA). ## Financial Preparations for Taxable Grants In the majority of cases, any business grant you receive will be taxable. It’s wise to keep this in mind when you are applying for the grant, and definitely before you spend it. Here are some principles that can make it easier to administer the grant: * Reserve some of the grant for taxes. You should work out in advance how much of the grant you will have to pay in tax, and then set this amount aside. This will avoid you having to find these funds from elsewhere once you’ve filed your taxes. * Include grants in your accounts. Any grants you receive should appear on your tax return. If you exclude them, you may have to pay penalties. * Keep good financial records. You should make sure that your business records are accurate, are up to date, and include any grants you’ve received, whether they are taxable or not. * Research tax deductions. It may be possible to lower the amount of tax that your business pays by taking advantage of [tax deductions](https://www.investopedia.com/terms/t/tax-deduction.asp). This can free up more of the money you’ve received in your business grant. ## Finding and Applying for Business Grants Many organizations give out business grants, and it can take a significant amount of research to find a grant that your business is eligible for. You should check: * Government grants are offered by both the federal and state governments. Grants.gov is a website with a comprehensive list of federal business grants, and the websites of the U.S. Small Business Administration (SBA) and the State Business Incentives Database are also good resources. * Corporations also give out grants, often to businesses operating in a particular sector. Finding these grants is most often a case of searching online for a grant that is available to your kind of business. * Charities and foundations also give out grants, particularly to businesses owned by underrepresented communities. Once you’ve found a suitable grant, you can generally apply online for it. You’ll likely have to include some documents to support your application, including a [business plan](https://www.investopedia.com/terms/b/business-plan.asp) that explains how the grant will help your business to develop.  Once you’ve applied, it’s a case of waiting. Sometimes, it can take months for a donor organization to make a decision on a grant application, and you might have to call them for an update. ## Is Grant Money Taxable Income to a Business? Generally, yes. [The IRS](https://www.investopedia.com/terms/i/irs.asp) regards most types of business grants as taxable income, with only a few exceptions. ## How Are Cash Grants Taxed? Cash grants are taxed in the same way as non-cash grants. If your business deals in cash, you should be careful to ensure that your records are accurate. Otherwise, you could be hit with tax penalties. ## Are Grants Reported to the IRS? You need to report any business grant you receive to the IRS as part of your tax return. Failure to do this is considered tax fraud and could have serious consequences. ## The Bottom Line Most business grants are taxable, with only a few exceptions. Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant. If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional. It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations.

Most business grants are regarded as taxable income, though there are some exceptions. If you are unsure whether your business grant is taxable, you should check the grant agreement, check the Internal Revenue Service (IRS) guidelines, or contact your grant donor or a tax professional.  For most businesses, it makes sense to reserve part of a business grant for tax purposes. Rather than spending all of the grant, you should hold on to part of it to meet your tax liabilities.  Key Takeaways Most business grants are taxable, with only a few exceptions.Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant.If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional.It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations. Are Business Grants Taxable? The majority of business grants, including government grants, count as taxable income. This means that you’ll have to pay taxes on the money you receive from the grant, effectively reducing the total amount of grant that you receive. There are some important exceptions to this rule, however: Nonprofit organizations with 501(c)(3) status are generally tax-exempt, so they don’t pay tax on their income whether this comes from a business grant or another source. Most of the business grants that were given out as part of the federal government’s COVID-19 relief program were tax-exempt. Grants received by a member of a federally recognized American Indian tribe are also tax-exempt. How to Determine If Business Grants Are Taxable It’s important to ascertain whether a business grant is taxable before you use it. That’s because if you have to pay taxes, this essentially reduces the total amount of the award. It’s best to assume that a grant is taxable, but you can then check a number of sources for information to the contrary. 1. Check the Grant Agreement Your business grant agreement will outline the terms under which you are given the grant, and will state whether it is tax-exempt. If the grant agreement doesn’t state this, it’s best to assume that you have to pay tax on it. 2. Contact the Funding Organization The funding organization that gave you the grant should know whether it is tax-exempt. If your grant agreement doesn’t explicitly mention your tax liabilities, you should call your funding organization to check this. 3. Review Federal and State Guidelines You can also consult the official IRS guidelines on taxable and nontaxable income. The IRS website contains a comprehensive list of what is considered taxable, and can help you to determine your tax obligations. You should also check your state’s guidelines on taxable and nontaxable income, because these can differ from the federal government’s rules.  4. Consult with a Tax Professional If you are still unsure about your tax liabilities, or whether your business grant is taxable, you can seek professional help. If you don’t have a business accountant, you can find certified accountants through a number of websites: CPAverify, the Association of International Certified Public Accountants (AICPA), or the National Association of Enrolled Agents (NAEA). Financial Preparations for Taxable Grants  In the majority of cases, any business grant you receive will be taxable. It’s wise to keep this in mind when you are applying for the grant, and definitely before you spend it. Here are some principles that can make it easier to administer the grant: Reserve some of the grant for taxes. You should work out in advance how much of the grant you will have to pay in tax, and then set this amount aside. This will avoid you having to find these funds from elsewhere once you’ve filed your taxes. Include grants in your accounts. Any grants you receive should appear on your tax return. If you exclude them, you may have to pay penalties. Keep good financial records. You should make sure that your business records are accurate, are up to date, and include any grants you’ve received, whether they are taxable or not. Research tax deductions. It may be possible to lower the amount of tax that your business pays by taking advantage of tax deductions. This can free up more of the money you’ve received in your business grant. Finding and Applying for Business Grants Many organizations give out business grants, and it can take a significant amount of research to find a grant that your business is eligible for. You should check: Government grants are offered by both the federal and state governments. Grants.gov is a website with a comprehensive list of federal business grants, and the websites of the U.S. Small Business Administration (SBA) and the State Business Incentives Database are also good resources.Corporations also give out grants, often to businesses operating in a particular sector. Finding these grants is most often a case of searching online for a grant that is available to your kind of business.Charities and foundations also give out grants, particularly to businesses owned by underrepresented communities. Once you’ve found a suitable grant, you can generally apply online for it. You’ll likely have to include some documents to support your application, including a business plan that explains how the grant will help your business to develop.  Once you’ve applied, it’s a case of waiting. Sometimes, it can take months for a donor organization to make a decision on a grant application, and you might have to call them for an update. Is Grant Money Taxable Income to a Business? Generally, yes. The IRS regards most types of business grants as taxable income, with only a few exceptions. How Are Cash Grants Taxed? Cash grants are taxed in the same way as non-cash grants. If your business deals in cash, you should be careful to ensure that your records are accurate. Otherwise, you could be hit with tax penalties. Are Grants Reported to the IRS? You need to report any business grant you receive to the IRS as part of your tax return. Failure to do this is considered tax fraud and could have serious consequences. The Bottom Line Most business grants are taxable, with only a few exceptions. Your business grant agreement will state whether your business grant is tax-exempt; if it doesn’t, it’s best to assume that you’ll have to pay tax on the grant. If you’re still unsure, you can check the IRS guidelines, or with your grant organization or a tax professional. It’s best to reserve a portion of your business grant when you first receive it, in order to meet your tax obligations.

https://www.investopedia.com/seo-for-small-businesses-8584627

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Search engine optimization (SEO) is the process of improving visibility on a search engine such as Google, Yahoo!, or Bing. SEO is an important aspect of any digital marketing strategy and online presence. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> For <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small businesses</a>, improving SEO is a relatively inexpensive and accessible tactic to make information about the business and its offerings easier to find online. This, in turn, can help improve its web traffic and drive more customers to the business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> In particular, optimizing for local SEO can be a powerful way to ensure a business reaches customers in the area, particularly for businesses with brick-and-mortar locations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>SEO is a key part of improving a business’s online visibility and attracting organic web traffic to drive more visitors and potential customers.</li><li>Google Analytics, Google Search Console, Google Keyword Planner, and Google Business Profile are all tools that can help optimize a small business’s SEO.</li><li>Keyword research can help small business owners identify the most relevant search terms for their business and improve the SEO ranking of their online content.</li><li>SEO tactics include optimizing on-page content such as page URLs, title and body tags, alt text, meta descriptions, and keywords.</li><li>Local SEO strategies and link building can further improve a small business’s online presence.</li></ul></div></div></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">SEO vs. Local SEO</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>SEO describes the general process of improving online searchability, while local SEO is focused on making search ranking improvements in a local geographical area.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-benefits-of-seo-for-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Benefits of SEO for Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> For small businesses, optimizing SEO can have many positive impacts, including: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <li><strong>Increased web traffic</strong>: This is especially important for ecommerce businesses, but it can also indirectly lead to increased foot traffic to brick-and-mortar locations.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span></li><li><strong>Better online visibility</strong>: A higher SEO ranking can improve the position in which a business’s website is listed on a search engine. Listings that appear closer to the top and on the first page of search engine results are more likely to be visited by users. Only 0.63% of Google Search users clicked on results from the second page of Google in 2023.<span class="ql-inline-citation" data-cite="16"></span></li><li><strong>Improved user experience</strong>: SEO rankings are based on how useful the algorithm deems a result to be, so many of the best practices associated with SEO are also good for organizing and describing information on the web more generally.<span class="ql-inline-citation" data-cite="3"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-how-to-improve-seo-as-a-small-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> How to Improve SEO as a Small Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Although taking advantage of SEO best practices is a multistage and long-term process, here are some steps that any small business can take to improve its SEO ranking fairly quickly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> 1. Make a Quality Website </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> A website’s quality can be evaluated across different criteria, which will vary depending on the industry and nature of the business. However, most good websites will be clear, functional, and easy to use, and offer a true representation of the business’s brand. From an SEO perspective, a good website contains the information or solution that potential customers are looking for.<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> 2. Set Up Google Analytics and Google Search Console </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Once you have a website, follow these steps to set up a free Google Analytics account. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <li><strong>Create a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://analytics.google.com/analytics/web/provision/#/provision">Google Analytics account</a></strong>: This will include adjusting the settings for which data you decide to share with Google.</li> <li><strong>Add a property to the account</strong>: This is essentially a category for the business in question. At this stage, you’ll add your reporting time zone, currency, industry category, and business size, and select how you intend to use Google Analytics.</li> <li><strong>Add a data stream</strong>: This is your business’s website URL. Here, you can also enable or disable further data collection, referred to as “enhanced measurement.”</li> <li><strong>Add tags to set up data collection</strong>: There are direct and indirect ways to do this, depending on how your website is built or hosted.</li> <li><strong>Configure additional settings</strong>:<strong> </strong>Completing this extra step can help ensure that you collect the data you need to measure the results you seek. Google has a checklist of common configurations and their outcomes.<span class="ql-inline-citation" data-cite="4"></span></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> After setting up a Google Analytics account, signing up for Google Search Console can help you measure search traffic for your website, determine and fix issues, and improve your performance in Google Search results, free of charge.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Here’s how to do it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <li><strong>Make a Google account</strong>.</li> <li><strong>Add your website to Search Console</strong>: You’ll also need to verify that you are the site’s owner, as it will display confidential information and allow you to make changes that impact how your site is displayed on Google.</li> <li><strong>Get familiar with Search Console and Google Search</strong>: Google offers a basic guide to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://support.google.com/webmasters/answer/6258314?hl=en&amp;ref_topic=10265228">Search Console</a> usage and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://developers.google.com/search/docs/fundamentals/how-search-works">Google Search</a>, both of which it recommends getting acquainted with to understand the reports and data that Search Console generates.</li> <li><strong>Check Search Console monthly and whenever your site content changes</strong>: Users will receive email alerts informing them of any unusual events occurring with their website (which may indicate hacking or other problems), so there’s no need to review data daily. However, Google recommends logging in to look at the Search Console dashboard every month as a health check of your website, as well as whenever new content is added to your site.<span class="ql-inline-citation" data-cite="6"></span><br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> 3. Set Up a Google Business Profile </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> A Google Business Profile is another free tool that business owners can use to help people find their business on Google Search and Google Maps. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Setting up a Google Business Profile is relatively easy and offers many useful pieces of information to potential customers. Here’s how to set one up. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li><strong>Sign up for a Google Business Profile</strong>.</li><li><strong>Verify your business on Google</strong>:<strong> </strong>Once you sign up, Google will ask you to verify your business through phone, text, email, and/or video. Often, it will also review verifications and will send a notification once the review is complete.</li><li><strong>Ensure your information is complete and up to date</strong>. Providing correct and comprehensive information about your business helps customers find and understand your business.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-subheading__text"> 4. Do Basic Keyword Research </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Keyword research is the process of identifying keywords and phrases that are relevant to your business. These include words that people may use when searching for information about a business and its offerings online. Much of SEO is about optimizing for keywords, so ensuring that your website contains them will contribute to a more prominent online presence for your business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Many tools are available that assist with keyword analysis and research, both free and paid. Google Keyword Planner is one free tool that is useful for researching, identifying, and targeting keywords that are relevant to your business. Whichever tool you use, a keyword-targeting strategy should balance the competitiveness of ranking for a certain keyword or phrase with the number of monthly searches it gets.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> For example, certain keywords that are relevant to your business might have little competition associated with them, but a relatively good monthly search volume. These would be good candidates to include in your keyword strategy.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> 5. Optimize On-Page Elements </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> On-page elements are different components of your website, including content, site architecture elements, and HTML elements. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Here are some key on-page elements that every small business should strive to optimize for SEO. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> <li><strong>Page URLs</strong>:<strong> </strong>These should be simple and short, and contain relevant keywords.</li><li><strong>Page titles</strong>: Also referred to as title tags, these indicate to visitors and search engines what the page is about. The main keyword for each page should be included in the page title.</li><li><strong>Headers</strong>: Also called body tags, these help organize and structure a page’s content for readers and search engines. Headers should be relevant to the content and include keywords when possible.</li><li><strong>Alt text</strong>: Adding alt text to images helps search engines and those using screen reader software understand what your images are about.</li><li><strong>Meta descriptions</strong>:<strong> </strong>These appear underneath a title in search engine results. Meta descriptions should both accurately describe the page and entice users to click on it, and they are a good place to include relevant keywords.</li><li><strong>Content</strong>:<strong> </strong>SEO-optimized content includes keywords that are relevant to the business throughout text and alt text. Images, videos, and other visual content also contribute to SEO ranking, as they make the content more scannable and enhance the website’s visual appeal.<span class="ql-inline-citation" data-cite="11"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-subheading__text"> 6. Create Relevant, High-Quality Content </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Search engines use several other criteria to assess and rank websites: expertise, experience, authoritativeness, and trustworthiness (EEAT). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Examples of how high-quality, relevant content might incorporate and demonstrate these criteria include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <li><strong>Expertise</strong>: bios; credentials</li><li><strong>Experience</strong>: photos; real-life examples</li><li><strong>Authoritativeness</strong>: good-quality backlinks; regular posting of new information on a subject; bios; credentials</li><li><strong>Trustworthiness</strong>: transparent crediting and citing; accurate information; user reviews or testimonials on third-party sites; good site security<span class="ql-inline-citation" data-cite="12"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> SEO-optimized content will also include relevant keywords in page URLs, page titles, headers, alt text, meta descriptions, and body paragraphs. It’s recommended to break up long sections of text with relevant headers as well as into sections and lists to make content easy to read, understand, and scan. It’s also good practice to avoid publishing duplicate content across different pages.<span class="ql-inline-citation" data-cite="3"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_63-0"> <span class="mntl-sc-block-subheading__text"> 7. Incorporate a Link-Building Strategy </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Link building is another tactic that can improve a small business’s search engine ranking. There are two types of link building: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> <li><strong>Internal link building </strong>means including links to pages within your own website. It offers a good experience to users and demonstrates to search engines that your website has hierarchy and structure.</li><li><strong>External link building </strong>is the practice of getting other websites to link to your website. Search engines evaluate backlinks as an indicator of credibility and authority, so it’s important to choose high-quality, trusted websites and avoid purchasing links, as using low-quality backlinks can negatively affect your SEO score.<span class="ql-inline-citation" data-cite="1"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> There are many strategies for acquiring good-quality backlinks, some of which could be considered part of a wider digital public relations strategy. Some relatively easy ones include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> <li>Applying or asking for your website to be listed on a resources, directory, or business association members page</li><li>Creating high-quality content, sharing it with people who might be interested in it, and asking for them to link to it</li><li>Providing testimonials to other businesses and letting them know so they can link to your content</li><li>Reaching out to suppliers that have a “retailers” or “dealers” page and asking for your business’s website to be listed there<span class="ql-inline-citation" data-cite="13"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_72-0"> <span class="mntl-sc-block-subheading__text"> 8. Take Advantage of Local SEO </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Local SEO is an important tool for any small business that wants to attract local customers. In 2023, 76% of those who searched on their smartphones for something nearby visited a business within a day, and 28% of searches for something nearby resulted in a purchase.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> The most important techniques and tools when optimizing for local search include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> <li>A Google My Business profile</li><li>Online reviews</li><li>Comprehensive, consistent, and up-to-date business information in online directories</li><li>Location pages on your website (for brick-and-mortar locations)</li><li>Locally focused content</li><li>A mobile-friendly website and content. Many people use their phones to look up business information such as reviews, location, and contact details.<span class="ql-inline-citation" data-cite="2"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-subheading__text"> 9. Measure and Track SEO Performance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Although many SEO changes can be implemented quite quickly, it can take a while for these changes to pay off. Also, SEO rankings are not static, as new content is constantly being published online. As such, it’s important to monitor, measure, and track SEO performance and adjust your strategy and content accordingly; this ensures that your website is performing well, especially relative to those of your competitors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> Google Analytics and Google Search Console are two free tools that can generate reports and offer data on SEO performance. There are many other paid tools and agencies that specialize in SEO performance as well. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-does-seo-stand-for"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does SEO Stand for?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SEO stands for search engine optimization, and it refers to the strategies and tactics associated with helping your website and online content stand out and rank highly in search engine results.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_86-0"><span class="heading-toc" id="toc-why-is-local-seo-important-for-small-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is Local SEO Important for Small Businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Local SEO should be a major focus for small businesses, especially those that have a brick-and-mortar location, as it helps make businesses easy to find. In 2023, 28% of those who searched for something nearby ended up making a purchase, and 76% of those who used their smartphone to search for something nearby visited a business within a day.<span class="ql-inline-citation" data-cite="17"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-is-seo-worth-it-for-a-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is SEO Worth It for a Small Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SEO is a valuable tool in any small business’s digital marketing toolkit. It’s a relatively inexpensive and accessible way to make your business easy to find online, and your website easy to use.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-what-tools-can-small-businesses-use-to-measure-and-track-their-seo-performance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Tools Can Small Businesses Use to Measure and Track Their SEO Performance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are many free and paid tools available for tracking and measuring SEO performance. Google offers several useful free tools, including Google Analytics, Google Search Console, and Google My Business.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_92-0"><span class="heading-toc" id="toc-what-are-the-key-on-page-elements-to-optimize-for-seo"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Key On-Page Elements to Optimize for SEO?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>On-page elements that should be optimized include page URLs, page titles (also known as title tags), headers (also known as body tags), alt text, meta descriptions, and page content.<span class="ql-inline-citation" data-cite="11"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_94-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Small businesses that implement and dedicate time to an SEO strategy can see many benefits. In 2023, it was reported that 53.3% of all website traffic came from organic searches, and 90.86% of global traffic came from Google Search, Google Images, and Google Maps.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_97-0"> Taking advantage of SEO best practices involves a few steps, including setting up and optimizing a website, signing up for free tools to monitor and track performance, setting up free online business profiles, conducting keyword research, creating quality content, and creating a link-building strategy. However, these small investments can have a huge payoff for a small business through increased visibility and traffic, better online experience, new customers, and increased sales. </p></div>

Search engine optimization (SEO) is the process of improving visibility on a search engine such as Google, Yahoo!, or Bing. SEO is an important aspect of any digital marketing strategy and online presence. For [small businesses](https://www.investopedia.com/small-business-4427743), improving SEO is a relatively inexpensive and accessible tactic to make information about the business and its offerings easier to find online. This, in turn, can help improve its web traffic and drive more customers to the business. In particular, optimizing for local SEO can be a powerful way to ensure a business reaches customers in the area, particularly for businesses with brick-and-mortar locations. ### Key Takeaways * SEO is a key part of improving a business’s online visibility and attracting organic web traffic to drive more visitors and potential customers. * Google Analytics, Google Search Console, Google Keyword Planner, and Google Business Profile are all tools that can help optimize a small business’s SEO. * Keyword research can help small business owners identify the most relevant search terms for their business and improve the SEO ranking of their online content. * SEO tactics include optimizing on-page content such as page URLs, title and body tags, alt text, meta descriptions, and keywords. * Local SEO strategies and link building can further improve a small business’s online presence. ### SEO vs. Local SEO SEO describes the general process of improving online searchability, while local SEO is focused on making search ranking improvements in a local geographical area. ## Benefits of SEO for Small Businesses For small businesses, optimizing SEO can have many positive impacts, including: * **Increased web traffic**: This is especially important for ecommerce businesses, but it can also indirectly lead to increased foot traffic to brick-and-mortar locations. * **Better online visibility**: A higher SEO ranking can improve the position in which a business’s website is listed on a search engine. Listings that appear closer to the top and on the first page of search engine results are more likely to be visited by users. Only 0.63% of Google Search users clicked on results from the second page of Google in 2023. * **Improved user experience**: SEO rankings are based on how useful the algorithm deems a result to be, so many of the best practices associated with SEO are also good for organizing and describing information on the web more generally. ## How to Improve SEO as a Small Business Although taking advantage of SEO best practices is a multistage and long-term process, here are some steps that any small business can take to improve its SEO ranking fairly quickly. ### 1. Make a Quality Website A website’s quality can be evaluated across different criteria, which will vary depending on the industry and nature of the business. However, most good websites will be clear, functional, and easy to use, and offer a true representation of the business’s brand. From an SEO perspective, a good website contains the information or solution that potential customers are looking for. ### 2. Set Up Google Analytics and Google Search Console Once you have a website, follow these steps to set up a free Google Analytics account. 1. **Create a [Google Analytics account](https://analytics.google.com/analytics/web/provision/#/provision)**: This will include adjusting the settings for which data you decide to share with Google. 2. **Add a property to the account**: This is essentially a category for the business in question. At this stage, you’ll add your reporting time zone, currency, industry category, and business size, and select how you intend to use Google Analytics. 3. **Add a data stream**: This is your business’s website URL. Here, you can also enable or disable further data collection, referred to as “enhanced measurement.” 4. **Add tags to set up data collection**: There are direct and indirect ways to do this, depending on how your website is built or hosted. 5. **Configure additional settings**:Completing this extra step can help ensure that you collect the data you need to measure the results you seek. Google has a checklist of common configurations and their outcomes. After setting up a Google Analytics account, signing up for Google Search Console can help you measure search traffic for your website, determine and fix issues, and improve your performance in Google Search results, free of charge. Here’s how to do it. 1. **Make a Google account**. 2. **Add your website to Search Console**: You’ll also need to verify that you are the site’s owner, as it will display confidential information and allow you to make changes that impact how your site is displayed on Google. 3. **Get familiar with Search Console and Google Search**: Google offers a basic guide to [Search Console](https://support.google.com/webmasters/answer/6258314?hl=en&ref_topic=10265228) usage and [Google Search](https://developers.google.com/search/docs/fundamentals/how-search-works), both of which it recommends getting acquainted with to understand the reports and data that Search Console generates. 4. **Check Search Console monthly and whenever your site content changes**: Users will receive email alerts informing them of any unusual events occurring with their website (which may indicate hacking or other problems), so there’s no need to review data daily. However, Google recommends logging in to look at the Search Console dashboard every month as a health check of your website, as well as whenever new content is added to your site. ### 3. Set Up a Google Business Profile A Google Business Profile is another free tool that business owners can use to help people find their business on Google Search and Google Maps. Setting up a Google Business Profile is relatively easy and offers many useful pieces of information to potential customers. Here’s how to set one up. 1. **Sign up for a Google Business Profile**. 2. **Verify your business on Google**:Once you sign up, Google will ask you to verify your business through phone, text, email, and/or video. Often, it will also review verifications and will send a notification once the review is complete. 3. **Ensure your information is complete and up to date**. Providing correct and comprehensive information about your business helps customers find and understand your business. ### 4. Do Basic Keyword Research Keyword research is the process of identifying keywords and phrases that are relevant to your business. These include words that people may use when searching for information about a business and its offerings online. Much of SEO is about optimizing for keywords, so ensuring that your website contains them will contribute to a more prominent online presence for your business. Many tools are available that assist with keyword analysis and research, both free and paid. Google Keyword Planner is one free tool that is useful for researching, identifying, and targeting keywords that are relevant to your business. Whichever tool you use, a keyword-targeting strategy should balance the competitiveness of ranking for a certain keyword or phrase with the number of monthly searches it gets. For example, certain keywords that are relevant to your business might have little competition associated with them, but a relatively good monthly search volume. These would be good candidates to include in your keyword strategy. ### 5. Optimize On-Page Elements On-page elements are different components of your website, including content, site architecture elements, and HTML elements. Here are some key on-page elements that every small business should strive to optimize for SEO. * **Page URLs**:These should be simple and short, and contain relevant keywords. * **Page titles**: Also referred to as title tags, these indicate to visitors and search engines what the page is about. The main keyword for each page should be included in the page title. * **Headers**: Also called body tags, these help organize and structure a page’s content for readers and search engines. Headers should be relevant to the content and include keywords when possible. * **Alt text**: Adding alt text to images helps search engines and those using screen reader software understand what your images are about. * **Meta descriptions**:These appear underneath a title in search engine results. Meta descriptions should both accurately describe the page and entice users to click on it, and they are a good place to include relevant keywords. * **Content**:SEO-optimized content includes keywords that are relevant to the business throughout text and alt text. Images, videos, and other visual content also contribute to SEO ranking, as they make the content more scannable and enhance the website’s visual appeal. ### 6. Create Relevant, High-Quality Content Search engines use several other criteria to assess and rank websites: expertise, experience, authoritativeness, and trustworthiness (EEAT). Examples of how high-quality, relevant content might incorporate and demonstrate these criteria include: * **Expertise**: bios; credentials * **Experience**: photos; real-life examples * **Authoritativeness**: good-quality backlinks; regular posting of new information on a subject; bios; credentials * **Trustworthiness**: transparent crediting and citing; accurate information; user reviews or testimonials on third-party sites; good site security SEO-optimized content will also include relevant keywords in page URLs, page titles, headers, alt text, meta descriptions, and body paragraphs. It’s recommended to break up long sections of text with relevant headers as well as into sections and lists to make content easy to read, understand, and scan. It’s also good practice to avoid publishing duplicate content across different pages. ### 7. Incorporate a Link-Building Strategy Link building is another tactic that can improve a small business’s search engine ranking. There are two types of link building: * **Internal link building** means including links to pages within your own website. It offers a good experience to users and demonstrates to search engines that your website has hierarchy and structure. * **External link building** is the practice of getting other websites to link to your website. Search engines evaluate backlinks as an indicator of credibility and authority, so it’s important to choose high-quality, trusted websites and avoid purchasing links, as using low-quality backlinks can negatively affect your SEO score. There are many strategies for acquiring good-quality backlinks, some of which could be considered part of a wider digital public relations strategy. Some relatively easy ones include: * Applying or asking for your website to be listed on a resources, directory, or business association members page * Creating high-quality content, sharing it with people who might be interested in it, and asking for them to link to it * Providing testimonials to other businesses and letting them know so they can link to your content * Reaching out to suppliers that have a “retailers” or “dealers” page and asking for your business’s website to be listed there ### 8. Take Advantage of Local SEO Local SEO is an important tool for any small business that wants to attract local customers. In 2023, 76% of those who searched on their smartphones for something nearby visited a business within a day, and 28% of searches for something nearby resulted in a purchase. The most important techniques and tools when optimizing for local search include: * A Google My Business profile * Online reviews * Comprehensive, consistent, and up-to-date business information in online directories * Location pages on your website (for brick-and-mortar locations) * Locally focused content * A mobile-friendly website and content. Many people use their phones to look up business information such as reviews, location, and contact details. ### 9. Measure and Track SEO Performance Although many SEO changes can be implemented quite quickly, it can take a while for these changes to pay off. Also, SEO rankings are not static, as new content is constantly being published online. As such, it’s important to monitor, measure, and track SEO performance and adjust your strategy and content accordingly; this ensures that your website is performing well, especially relative to those of your competitors. Google Analytics and Google Search Console are two free tools that can generate reports and offer data on SEO performance. There are many other paid tools and agencies that specialize in SEO performance as well. ## What Does SEO Stand for? SEO stands for search engine optimization, and it refers to the strategies and tactics associated with helping your website and online content stand out and rank highly in search engine results. ## Why Is Local SEO Important for Small Businesses? Local SEO should be a major focus for small businesses, especially those that have a brick-and-mortar location, as it helps make businesses easy to find. In 2023, 28% of those who searched for something nearby ended up making a purchase, and 76% of those who used their smartphone to search for something nearby visited a business within a day. ## Is SEO Worth It for a Small Business? SEO is a valuable tool in any small business’s digital marketing toolkit. It’s a relatively inexpensive and accessible way to make your business easy to find online, and your website easy to use. ## What Tools Can Small Businesses Use to Measure and Track Their SEO Performance? There are many free and paid tools available for tracking and measuring SEO performance. Google offers several useful free tools, including Google Analytics, Google Search Console, and Google My Business. ## What Are the Key On-Page Elements to Optimize for SEO? On-page elements that should be optimized include page URLs, page titles (also known as title tags), headers (also known as body tags), alt text, meta descriptions, and page content. ## The Bottom Line Small businesses that implement and dedicate time to an SEO strategy can see many benefits. In 2023, it was reported that 53.3% of all website traffic came from organic searches, and 90.86% of global traffic came from Google Search, Google Images, and Google Maps. Taking advantage of SEO best practices involves a few steps, including setting up and optimizing a website, signing up for free tools to monitor and track performance, setting up free online business profiles, conducting keyword research, creating quality content, and creating a link-building strategy. However, these small investments can have a huge payoff for a small business through increased visibility and traffic, better online experience, new customers, and increased sales.

Search engine optimization (SEO) is the process of improving visibility on a search engine such as Google, Yahoo!, or Bing. SEO is an important aspect of any digital marketing strategy and online presence. For small businesses, improving SEO is a relatively inexpensive and accessible tactic to make information about the business and its offerings easier to find online. This, in turn, can help improve its web traffic and drive more customers to the business. In particular, optimizing for local SEO can be a powerful way to ensure a business reaches customers in the area, particularly for businesses with brick-and-mortar locations. Key Takeaways SEO is a key part of improving a business’s online visibility and attracting organic web traffic to drive more visitors and potential customers.Google Analytics, Google Search Console, Google Keyword Planner, and Google Business Profile are all tools that can help optimize a small business’s SEO.Keyword research can help small business owners identify the most relevant search terms for their business and improve the SEO ranking of their online content.SEO tactics include optimizing on-page content such as page URLs, title and body tags, alt text, meta descriptions, and keywords.Local SEO strategies and link building can further improve a small business’s online presence. SEO vs. Local SEO SEO describes the general process of improving online searchability, while local SEO is focused on making search ranking improvements in a local geographical area. Benefits of SEO for Small Businesses For small businesses, optimizing SEO can have many positive impacts, including: Increased web traffic: This is especially important for ecommerce businesses, but it can also indirectly lead to increased foot traffic to brick-and-mortar locations.Better online visibility: A higher SEO ranking can improve the position in which a business’s website is listed on a search engine. Listings that appear closer to the top and on the first page of search engine results are more likely to be visited by users. Only 0.63% of Google Search users clicked on results from the second page of Google in 2023.Improved user experience: SEO rankings are based on how useful the algorithm deems a result to be, so many of the best practices associated with SEO are also good for organizing and describing information on the web more generally. How to Improve SEO as a Small Business Although taking advantage of SEO best practices is a multistage and long-term process, here are some steps that any small business can take to improve its SEO ranking fairly quickly. 1. Make a Quality Website A website’s quality can be evaluated across different criteria, which will vary depending on the industry and nature of the business. However, most good websites will be clear, functional, and easy to use, and offer a true representation of the business’s brand. From an SEO perspective, a good website contains the information or solution that potential customers are looking for. 2. Set Up Google Analytics and Google Search Console Once you have a website, follow these steps to set up a free Google Analytics account. Create a Google Analytics account: This will include adjusting the settings for which data you decide to share with Google. Add a property to the account: This is essentially a category for the business in question. At this stage, you’ll add your reporting time zone, currency, industry category, and business size, and select how you intend to use Google Analytics. Add a data stream: This is your business’s website URL. Here, you can also enable or disable further data collection, referred to as “enhanced measurement.” Add tags to set up data collection: There are direct and indirect ways to do this, depending on how your website is built or hosted. Configure additional settings: Completing this extra step can help ensure that you collect the data you need to measure the results you seek. Google has a checklist of common configurations and their outcomes. After setting up a Google Analytics account, signing up for Google Search Console can help you measure search traffic for your website, determine and fix issues, and improve your performance in Google Search results, free of charge. Here’s how to do it. Make a Google account. Add your website to Search Console: You’ll also need to verify that you are the site’s owner, as it will display confidential information and allow you to make changes that impact how your site is displayed on Google. Get familiar with Search Console and Google Search: Google offers a basic guide to Search Console usage and Google Search, both of which it recommends getting acquainted with to understand the reports and data that Search Console generates. Check Search Console monthly and whenever your site content changes: Users will receive email alerts informing them of any unusual events occurring with their website (which may indicate hacking or other problems), so there’s no need to review data daily. However, Google recommends logging in to look at the Search Console dashboard every month as a health check of your website, as well as whenever new content is added to your site. 3. Set Up a Google Business Profile A Google Business Profile is another free tool that business owners can use to help people find their business on Google Search and Google Maps. Setting up a Google Business Profile is relatively easy and offers many useful pieces of information to potential customers. Here’s how to set one up. Sign up for a Google Business Profile.Verify your business on Google: Once you sign up, Google will ask you to verify your business through phone, text, email, and/or video. Often, it will also review verifications and will send a notification once the review is complete.Ensure your information is complete and up to date. Providing correct and comprehensive information about your business helps customers find and understand your business. 4. Do Basic Keyword Research Keyword research is the process of identifying keywords and phrases that are relevant to your business. These include words that people may use when searching for information about a business and its offerings online. Much of SEO is about optimizing for keywords, so ensuring that your website contains them will contribute to a more prominent online presence for your business. Many tools are available that assist with keyword analysis and research, both free and paid. Google Keyword Planner is one free tool that is useful for researching, identifying, and targeting keywords that are relevant to your business. Whichever tool you use, a keyword-targeting strategy should balance the competitiveness of ranking for a certain keyword or phrase with the number of monthly searches it gets. For example, certain keywords that are relevant to your business might have little competition associated with them, but a relatively good monthly search volume. These would be good candidates to include in your keyword strategy. 5. Optimize On-Page Elements On-page elements are different components of your website, including content, site architecture elements, and HTML elements. Here are some key on-page elements that every small business should strive to optimize for SEO. Page URLs: These should be simple and short, and contain relevant keywords.Page titles: Also referred to as title tags, these indicate to visitors and search engines what the page is about. The main keyword for each page should be included in the page title.Headers: Also called body tags, these help organize and structure a page’s content for readers and search engines. Headers should be relevant to the content and include keywords when possible.Alt text: Adding alt text to images helps search engines and those using screen reader software understand what your images are about.Meta descriptions: These appear underneath a title in search engine results. Meta descriptions should both accurately describe the page and entice users to click on it, and they are a good place to include relevant keywords.Content: SEO-optimized content includes keywords that are relevant to the business throughout text and alt text. Images, videos, and other visual content also contribute to SEO ranking, as they make the content more scannable and enhance the website’s visual appeal. 6. Create Relevant, High-Quality Content Search engines use several other criteria to assess and rank websites: expertise, experience, authoritativeness, and trustworthiness (EEAT). Examples of how high-quality, relevant content might incorporate and demonstrate these criteria include: Expertise: bios; credentialsExperience: photos; real-life examplesAuthoritativeness: good-quality backlinks; regular posting of new information on a subject; bios; credentialsTrustworthiness: transparent crediting and citing; accurate information; user reviews or testimonials on third-party sites; good site security SEO-optimized content will also include relevant keywords in page URLs, page titles, headers, alt text, meta descriptions, and body paragraphs. It’s recommended to break up long sections of text with relevant headers as well as into sections and lists to make content easy to read, understand, and scan. It’s also good practice to avoid publishing duplicate content across different pages. 7. Incorporate a Link-Building Strategy Link building is another tactic that can improve a small business’s search engine ranking. There are two types of link building: Internal link building means including links to pages within your own website. It offers a good experience to users and demonstrates to search engines that your website has hierarchy and structure.External link building is the practice of getting other websites to link to your website. Search engines evaluate backlinks as an indicator of credibility and authority, so it’s important to choose high-quality, trusted websites and avoid purchasing links, as using low-quality backlinks can negatively affect your SEO score. There are many strategies for acquiring good-quality backlinks, some of which could be considered part of a wider digital public relations strategy. Some relatively easy ones include: Applying or asking for your website to be listed on a resources, directory, or business association members pageCreating high-quality content, sharing it with people who might be interested in it, and asking for them to link to itProviding testimonials to other businesses and letting them know so they can link to your contentReaching out to suppliers that have a “retailers” or “dealers” page and asking for your business’s website to be listed there 8. Take Advantage of Local SEO Local SEO is an important tool for any small business that wants to attract local customers. In 2023, 76% of those who searched on their smartphones for something nearby visited a business within a day, and 28% of searches for something nearby resulted in a purchase. The most important techniques and tools when optimizing for local search include: A Google My Business profileOnline reviewsComprehensive, consistent, and up-to-date business information in online directoriesLocation pages on your website (for brick-and-mortar locations)Locally focused contentA mobile-friendly website and content. Many people use their phones to look up business information such as reviews, location, and contact details. 9. Measure and Track SEO Performance Although many SEO changes can be implemented quite quickly, it can take a while for these changes to pay off. Also, SEO rankings are not static, as new content is constantly being published online. As such, it’s important to monitor, measure, and track SEO performance and adjust your strategy and content accordingly; this ensures that your website is performing well, especially relative to those of your competitors. Google Analytics and Google Search Console are two free tools that can generate reports and offer data on SEO performance. There are many other paid tools and agencies that specialize in SEO performance as well. What Does SEO Stand for? SEO stands for search engine optimization, and it refers to the strategies and tactics associated with helping your website and online content stand out and rank highly in search engine results. Why Is Local SEO Important for Small Businesses? Local SEO should be a major focus for small businesses, especially those that have a brick-and-mortar location, as it helps make businesses easy to find. In 2023, 28% of those who searched for something nearby ended up making a purchase, and 76% of those who used their smartphone to search for something nearby visited a business within a day. Is SEO Worth It for a Small Business? SEO is a valuable tool in any small business’s digital marketing toolkit. It’s a relatively inexpensive and accessible way to make your business easy to find online, and your website easy to use. What Tools Can Small Businesses Use to Measure and Track Their SEO Performance? There are many free and paid tools available for tracking and measuring SEO performance. Google offers several useful free tools, including Google Analytics, Google Search Console, and Google My Business. What Are the Key On-Page Elements to Optimize for SEO? On-page elements that should be optimized include page URLs, page titles (also known as title tags), headers (also known as body tags), alt text, meta descriptions, and page content. The Bottom Line Small businesses that implement and dedicate time to an SEO strategy can see many benefits. In 2023, it was reported that 53.3% of all website traffic came from organic searches, and 90.86% of global traffic came from Google Search, Google Images, and Google Maps. Taking advantage of SEO best practices involves a few steps, including setting up and optimizing a website, signing up for free tools to monitor and track performance, setting up free online business profiles, conducting keyword research, creating quality content, and creating a link-building strategy. However, these small investments can have a huge payoff for a small business through increased visibility and traffic, better online experience, new customers, and increased sales.

https://www.investopedia.com/best-loans-for-beauty-salons-5096106

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Finding the best loan for your beauty salon depends on how you want to spend the funds and whether you are buying an existing salon or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/startup.asp">starting your own</a> from scratch. Different loan products can serve you differently, depending on your need. Typical expenses include buying salon chairs and shampoo stations, hair care products and colors to use in your salon or sell to your customers, marketing expenses, and emergency fund cushions. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> Options like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-startup-business-loans-5112018">startup loans</a>, business credit cards, equipment financing programs, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lineofcredit.asp">credit lines</a>, and  <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">SBA 7(a) term loans</a> can help you manage your business. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> We reviewed 12 lenders to arrive at the six best loans for beauty salons. We examined how fast they fund, their application process, rates, and financing options. Here's what we found. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The Best Loans for Beauty Salons of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=uc&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Upwise Capital</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Buying a Salon:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=yoursba&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> YourSBA.com</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Big Salons:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=chase&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> Chase</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Small Salons:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&amp;link_id=77743&amp;site_id=10199&amp;bi%5Bblrs%5D=77743&amp;bi%5Bp%5D=3412&amp;utm_source=dotdashmeredith&amp;vertid=5fe352b14e39dc2cce94d6fb&amp;nrf=1&amp;wid_id=63a2dbc4b31f4f86b6febcc8&amp;tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08" rel="nofollow noskim noopener nocaes" target="_blank"> National Funding</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Salon Equipment Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ondeck&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow noskim noopener nocaes" target="_blank"> OnDeck</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> <div class="comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block" id="even-loan-block_1-0"></div><!-- end: comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Loans for Beauty Salons</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Loans for Beauty Salons" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Loans for Beauty Salons</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Upwise Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Upwise Capital" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-upwise-capital" rel="nocaes"> <span class="link__wrapper">Upwise Capital</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-YourSBA.com" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-YourSBA.com" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-buying-a-salon-yoursbacom" rel="nocaes"> <span class="link__wrapper">YourSBA.com</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Chase" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Chase" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-big-salons-chase" rel="nocaes"> <span class="link__wrapper">Chase</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-National Funding" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-National Funding" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-salons-national-funding" rel="nocaes"> <span class="link__wrapper">National Funding</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-OnDeck" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-OnDeck" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-salon-equipment-loans-ondeck" rel="nocaes"> <span class="link__wrapper">OnDeck</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (2)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare the Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-providers" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare the Providers</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How Do You Finance a Salon?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-do-you-finance-a-salon" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">How Do You Finance a Salon?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Credit Score Is Needed to Get a Salon Loan?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-credit-score-is-needed-to-get-a-salon-loan" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">What Credit Score Is Needed to Get a Salon Loan?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How Much Does It Cost to Finance a Beauty Salon?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-much-does-it-cost-to-finance-a-beauty-salon" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">How Much Does It Cost to Finance a Beauty Salon?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-loans-for-beauty-salons" id="mntl-toc__list-item-link_1-0-6" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-upwise-capital"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Upwise Capital</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 839px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Upwise Capital" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/ndv7eVcrFnED8tTeQI1r0nEZL-Q=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Upwise_Capital-45b5c59c590d4ae5a7fb40415a923fd6.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Upwise Capital" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/ndv7eVcrFnED8tTeQI1r0nEZL-Q=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Upwise_Capital-45b5c59c590d4ae5a7fb40415a923fd6.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> Upwise Capital</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=uc&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://upwisecapital.com/?utm_source=AcreTrust&amp;utm_medium=BeautySalons&amp;utm_campaign=Investopedia" rel="sponsored nofollow">Upwise Capital</a> offers a wide range of funding products under one roof, enabling salon owners to seek new types of loans as they grow, making them our best overall choice for beauty salons. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Range of products to serve salon owners with high and low credit scores</p></li> <li><p>Low down payment options</p></li> <li><p>Products for many different growth needs</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>The Small Business Administration (SBA) loan is a lot of paperwork and a lengthy process</p></li> <li><p>Online lender, no physical location to visit</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Even with online lenders, relationships matter, so when you find a lender that offers as many loan products that can help you at different stages of your salon’s growth as Upwise Capital does, you’ll want to keep them close, so they are your first call when you need funds. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> With Upwise Capital, you may qualify for one of the following depending on your credit, time in business, and collateral: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> <li>Business line of credit</li><li>SBA loan</li><li>Equipment financing</li><li>Short-term loan</li><li>Business term loans</li><li>Relief loans due to pandemic shutdowns</li><li>Working capital</li><li>Invoice and A/R financing</li><li>Real estate loans</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Upwise Capital has the best website of any lender we’ve seen. Each loan product has its own webpage that explains how the funds can be used, typical rates and terms, and its requirements. You’ll even find a list of which documents they will need to get you approved and funded. You’ll start the process with a short online intake form, and their loan specialists will contact you within 24-48 hours. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> With Upwise Capital, there are many flexible options with loan amounts ranging from $5,000 to $200 million. Depending on the loan type, you might get funded as soon as one day. However, most products average around two weeks, with SBA loans taking even longer than a month in some cases. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Short-term working capital loans may have a term length as short as three months, whereas an SBA loan can last 30 years. Their other loan types are in the one to 10-year range. The interest rates start as low as 4%, depending on your time in business, credit history, and loan type.<span class="ql-inline-citation" data-cite="1"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-buying-a-salon-yoursbacom"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Buying a Salon</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> YourSBA.com</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-10" style="--imgWidth: 334px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="YourSBA.com" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/CkhhZy63ADTXU7fnhEp_D_W7Esc=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/YourSBA-68b6847eacb54fc9aad185150a39fc78.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="YourSBA.com" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/CkhhZy63ADTXU7fnhEp_D_W7Esc=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/YourSBA-68b6847eacb54fc9aad185150a39fc78.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>YourSBA.com</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-11"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=yoursba&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> With SBA business acquisition loans from $150,000 to $5 million, and online pre-qualification with no credit check, YourSBA.com is best for buying a salon. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-13"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No broker or origination fees</p></li> <li><p>SBA acquisition loans from $150k to $5 million</p></li> <li><p>Business owners can be pre-qualified without a hard credit check, so your credit score isn't affected by applying.</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Business owners must have a minimum of $70,000 cash for a down payment</p></li> <li><p>Online lender, no physical location to visit</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Buying an existing salon can come with a high price tag, which will typically impact the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/origination-fee.asp">origination</a> and broker fees you’ll be charged. YourSBA.com fixes this problem by not charging origination or broker fees, making them our best option for buying a salon. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> Pre-qualifying online puts your loan request with lenders ready to serve you and increases your approval chances, making it a good choice for someone applying for a business loan for the first time. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> Like other SBA loans, YourSBA.com offers longer terms and lower rates than non-SBA loan products, and they are approved for business acquisitions. Loans can also be used for business expansion, new construction, the purchase of land or buildings, as well as buying inventory, equipment, machinery, furniture, fixtures, supplies, and materials. This makes YourSBA.com the right choice for those looking to buy and build out an existing salon. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> It can also be used for working capital, a partner buyout, debt financing, and franchise financing. The term length for equipment, refinance, or business acquisition is 10 years, and for buying real estate, you can qualify for up to 25 years.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> There is no down payment required for a business expansion or a working capital loan; however, you’ll need to put down $70,000 in liquid cash to purchase a business. YourSBA.com can offer large loans for those needing it for acquisition with amounts ranging from $150,000 to $5 million.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> YourSBA.com can pre-qualify you quickly, and the underwriting process for the SBA 7(a) loan takes between 45 and 90 days. There are no set credit score minimums for the SBA program because your credit character, in other words, your full credit profile, is more important. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> Other business requirements include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> <li>Must be a legal U.S. business</li><li>Must have positive cash flow for the last two years</li><li>If no cash flow or no positive cash flow, the loan will be considered a “projection” loan or “startup” loan and require a 30% down payment</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/funding-programs/loans/7a-loans">maximum allowable interest rate</a> is The Wall Street Journal prime rate plus 2.75%.<span class="ql-inline-citation" data-cite="2"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-big-salons-chase"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Big Salons</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Chase</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-23" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Chase" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/EDuwEAvOOoPv--sILFIfLjYAfdU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-8e74322c2fec4c949fb154ecbd1eb22c.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Chase" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/EDuwEAvOOoPv--sILFIfLjYAfdU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-8e74322c2fec4c949fb154ecbd1eb22c.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Chase</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-24"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=chase&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> If you own a large salon, you’ll likely need large credit lines to manage and grow your business. Chase’s $500,000 credit line gives owners the best flexibility for their big salon’s needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-26"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Credit lines up to $500,000</p></li> <li><p>Annual fee is waived when your average line use is above 40%</p></li> <li><p>Renewable five-year revolving term</p></li> <li><p>You pay interest only on the amount of credit you actually use.</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>At the end of the five-year revolving term, no further advances are available</p></li> <li><p>Slower process and more documentation required than online lenders</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> A larger salon may require more money to expand or to buy equipment. In that case, a larger bank like Chase earned our top spot for best lender for big salons. Chase has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chase-business-loan-review-7507442">business and commercial lines of credit</a> for your business to have working capital when it’s needed. It is a well-recognized brand, so those who aren’t familiar with business loans can feel safe knowing they are working with a reputable bank to fulfill their business dreams. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> Chase offers a commercial line of credit for up to $500,000 with initial terms of 12 to 24 months, which can be renewed and allows for interest-only payments. Business owners can also request an advance or make payments online.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Chase also offers other banking products that could help a beauty salon grow, including checking accounts, merchant services, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582">business credit cards</a>, and numerous other financial business services. With Chase’s size and capability, a business owner can easily have all their needs met in one place. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> To start your application, you’ll <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chase.com/meeting-scheduler/getstarted" rel="sponsored nofollow">schedule a meeting online</a>. Plan on the application process taking 30 days. To qualify, Chase does not have a stated credit score minimum; rather, they look at the full credit report to review your history. Chase states that rates can vary by region and can be influenced by your banking relationship, credit history, and collateral. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-small-salons-national-funding"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Small Salons</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> National Funding</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-31" style="--imgWidth: 431px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="National Funding" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/e5fxwpr4xFPrMm5I92rSTDU6IBo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="National Funding" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/e5fxwpr4xFPrMm5I92rSTDU6IBo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>National Funding</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-32"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at National Funding" data-retailer-type="other" data-tracking-container="true" href="https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&amp;link_id=77743&amp;site_id=10199&amp;bi%5Bblrs%5D=77743&amp;bi%5Bp%5D=3412&amp;utm_source=dotdashmeredith&amp;vertid=5fe352b14e39dc2cce94d6fb&amp;nrf=1&amp;wid_id=63a2dbc4b31f4f86b6febcc8&amp;tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> National Funding, our top choice for small salons, specializes in smaller loans from $5,000 to $500,000 and equipment financing and leasing loans up to $150,000, with a simple application, speedy approval, and personalized customer care. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-34"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Loans range from $5,000 to $500,000</p></li> <li><p>Equipment financing and leasing up to $150,000</p></li> <li><p>Can be used for payroll</p></li> <li><p>Funding in as few as 24 hours</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fewer financing products than other lenders</p></li> <li><p>No acquisition financing</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> National Funding’s loans have no collateral requirements, simple automatic payments, and fast funding, making them ideal for small salons. They provide small business loans and equipment financing and leasing, so owners can purchase inventory, hire employees, fund payroll, pay utility bills, and upgrade their beauty equipment. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> National Funding has a relatively easy approval process compared to other small business loan options. Applications can be made online, and a loan specialist connects the business owner to the right loan to suit their needs. If you submit the documents they request, funds can be in your bank account as soon as the next business day. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> There are no credit score requirements, although credit history and the full report will be reviewed and considered to set an interest rate and term length. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-salon-equipment-loans-ondeck"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Salon Equipment Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> OnDeck</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-38" style="--imgWidth: 18px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="OnDeck" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/zbpiSN28eGZzQCC6ay8zwoprGL4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/On_Deck-51d13272b8e747f1a17cf922cf1d1139.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="OnDeck" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/zbpiSN28eGZzQCC6ay8zwoprGL4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/On_Deck-51d13272b8e747f1a17cf922cf1d1139.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> OnDeck</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-39"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BestMoney" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ondeck&amp;bwid_id=6388b14276b3780decf128fd" id="button_1-0-4" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> OnDeck comes out on top for the best option for equipment loans for salon owners because they have both a credit line and a term loan option, and both fund within three days and allow credit scores as low as 625. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-41"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Funds in your account between two and three days</p></li> <li><p>Credit score minimum of 625</p></li> <li><p>Online application</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>One year in business required</p></li> <li><p>Annual revenues of $100,000 required</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> OnDeck’s loan options help salons stay agile by providing a variety of ways to finance their equipment purchases with a low credit score requirement, making them our best for salon equipment loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> Loan options include an unsecured business line of credit and short-term loans. The online application will ask you how much funding you need, how soon you need it, and how you plan to use it. Then it will ask you about the size and age of your business and your personal credit history. You’ll even upload documents at this stage, moving you closer to the approval decision. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> With OnDeck, you’ll receive funding within three days. Their business credit line funds up to $100,000, and their short-term secured loans have a $250,000 funding limit. Credit score minimums for both products is just 625. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> You must have been in business for at least one year and have more than $100,000 in annual revenues to qualify. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Finding the best loan for your beauty salon depends on how you plan to use the money, how long your business has been open, your revenues, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a>, and credit history. Therefore, since your relationship with your lender can also influence your rates and terms, we suggest choosing a lender that can help you with various loan products as your salon grows. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> If you qualify, the best rates and terms will typically come from the SBA 7(a) program. You can find those through banks, credit unions, and online lenders. Next, non-SBA loans from banks and credit unions will be your second-best option for rates and terms, usually. But online lenders score big with us because of their advantages over the more conservative banks and credit unions. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> Online lenders can often finance people who banks turned down. Their process is almost always easier, requires far less paperwork, and funds within days instead of weeks or months. Those features are more important than shopping for the lowest rate for many small business owners. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://upwisecapital.com/?utm_source=AcreTrust&amp;utm_medium=BeautySalons&amp;utm_campaign=Investopedia" rel="sponsored nofollow">Upwise Capital</a> earned our overall best score because it has all of these options and features and can serve most salon owners no matter their stage of growth. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> Compare the Providers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-6"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Lender</b></th> <th><b>Why We Picked It</b></th> <th><b>Best Features</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=uc&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">Upwise Capital</a></td> <td>Best Overall</td> <td>Many loan products; funding as high as $200 million</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=yoursba&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">YourSBA.com</a></td> <td>Best for Buying a Salon</td> <td>Simplifies the SBA loan application process; loans up to $5 million; no origination fees</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=chase&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">Chase</a></td> <td>Best for Big Salons</td> <td>“Big bank” complementary products like checking and more; renewable business credit line up to $500,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&amp;link_id=77743&amp;site_id=10199&amp;bi%5Bblrs%5D=77743&amp;bi%5Bp%5D=3412&amp;utm_source=dotdashmeredith&amp;vertid=5fe352b14e39dc2cce94d6fb&amp;nrf=1&amp;wid_id=63a2dbc4b31f4f86b6febcc8&amp;tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08" rel="nofollow">National Funding</a></td> <td>Best for Small Salons</td> <td>Funds as fast as 24 hours; loans up to $500,000, leases up to $150,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ondeck&amp;bwid_id=6388b14276b3780decf128fd" rel="nofollow">OnDeck</a></td> <td>Best for Salon Equipment Loans</td> <td>Can fund a 625 credit score and above; funds in three days; unsecured credit line, secured short-term loan, and SBA loan options</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-frequently-asked-questions"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-7"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-8"> <span class="heading-toc" id="toc-how-do-you-finance-a-salon"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Finance a Salon?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you are buying an existing salon priced between $350,000 and $5 million, you’ll want to look at the SBA 7(a) program first. If you qualify, you’ll be able to get a longer repayment term, which will keep your monthly payments lower than a short-term loan.</p><p>An equipment term loan will likely be your best option for faster approval and funding to finance equipment like new chairs, shampoo stations, a reception desk, and washer and dryer. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/102315/what-can-working-capital-be-used.asp">Working capital</a> loans and lines of credit can be good choices for seasonal dips in revenue, covering payroll, and buying personal care products for resale in your salon.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-9"> <span class="heading-toc" id="toc-what-credit-score-is-needed-to-get-a-salon-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Credit Score Is Needed to Get a Salon Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA does not set a credit score requirement. This is why applicants who get turned down by banks for an SBA loan can sometimes find success for the same loan with an online lender. Some of the online lenders on our list will accept credit scores as low as 600. As always, higher credit scores with better credit histories, and a lower debt to income ratio, will qualify you for lower rates and longer payback terms.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-10"> <span class="heading-toc" id="toc-how-much-does-it-cost-to-finance-a-beauty-salon"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does It Cost to Finance a Beauty Salon?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Whether you are buying an existing salon or starting one yourself, you’re looking at $100,000 in expenses, if not more. Some of those costs include rent, equipment, inventory for your supplies, licensing, marketing, legal and accounting fees, utilities, cleaning, and payroll. </p><p>Unless you have that much in your savings account, you’ll most likely need to finance most of these expenses. This will help you to manage your cash flow, cover your expenses, and also pay yourself so that you can survive.</p><p>But financing does cost you additional money, and you’ll be paying back more than you actually borrowed. You’ll find the best rates from banks, credit unions, and SBA loan programs, which start between 4% and 6%. Online lenders will range from 6% to over 10%, but they will require less paperwork and fund weeks faster.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-how-we-chose-the-best-loans-for-beauty-salons"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> How We Chose the Best Loans for Beauty Salons </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> We researched 12 lenders with experience financing beauty salons before deciding on the six best. We chose lenders who had many funding solutions because the use and amount of financing you’ll need will depend on where your salon is in its lifecycle.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> Lenders scored best if they had a streamlined application process with minimal paperwork burden on their borrowers. Since salon owners sometimes need money quickly to meet unexpected circumstances and opportunities, we chose lenders known for putting money in your account within days, not months. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-14"> Finally, the best lenders offered wide ranges of financing amounts, competitive rates, low fees, lenient credit qualifications, and required less than two years (in some cases less than one year) in business. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Clients having their hair cut in barber shop" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/N5lz-FX-cmhMzerK9kh78DmlQVk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg" srcset="https://www.investopedia.com/thmb/dK2Ba3d_grXtI6zx6B0dJN7BsGs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="Clients having their hair cut in barber shop" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/N5lz-FX-cmhMzerK9kh78DmlQVk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg" srcset="https://www.investopedia.com/thmb/dK2Ba3d_grXtI6zx6B0dJN7BsGs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Thomas Barwick / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>Upwise. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://upwisecapital.com/?utm_source=AcreTrust&amp;utm_medium=BeautySalons&amp;utm_campaign=Investopedia" rel="nofollow sponsored">Upwise Business Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>YourSBA. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://yoursba.com/frequently-asked-questions/" rel="nofollow sponsored">Frequently Asked Questions</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="4231545" data-ordinal="1" data-tax-levels="" 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Finding the best loan for your beauty salon depends on how you want to spend the funds and whether you are buying an existing salon or [starting your own](https://www.investopedia.com/terms/s/startup.asp) from scratch. Different loan products can serve you differently, depending on your need. Typical expenses include buying salon chairs and shampoo stations, hair care products and colors to use in your salon or sell to your customers, marketing expenses, and emergency fund cushions. Options like [startup loans](https://www.investopedia.com/best-startup-business-loans-5112018), business credit cards, equipment financing programs, [credit lines](https://www.investopedia.com/terms/l/lineofcredit.asp), and  [SBA 7(a) term loans](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp) can help you manage your business. We reviewed 12 lenders to arrive at the six best loans for beauty salons. We examined how fast they fund, their application process, rates, and financing options. Here's what we found. ## The Best Loans for Beauty Salons of 2024 * **Best Overall:** [Upwise Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=uc&bwid_id=6388b14276b3780decf128fd) * **Best for Buying a Salon:** [YourSBA.com](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=yoursba&bwid_id=6388b14276b3780decf128fd) * **Best for Big Salons:** [Chase](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=chase&bwid_id=6388b14276b3780decf128fd) * **Best for Small Salons:** [National Funding](https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08) * **Best for Salon Equipment Loans:** [OnDeck](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ondeck&bwid_id=6388b14276b3780decf128fd) Best Loans for Beauty Salons Expand Best Loans for Beauty Salons * [Our Top Picks](#summary-list) * [Upwise Capital](#toc-best-overall-upwise-capital) * [YourSBA.com](#toc-best-for-buying-a-salon-yoursbacom) * [Chase](#toc-best-for-big-salons-chase) * [National Funding](#toc-best-for-small-salons-national-funding) * [OnDeck](#toc-best-for-salon-equipment-loans-ondeck) * See More (2) * [The Bottom Line](#toc-the-bottom-line) * [Compare the Providers](#toc-compare-the-providers) * [Frequently Asked Questions](#toc-frequently-asked-questions) * [How Do You Finance a Salon?](#toc-how-do-you-finance-a-salon) * [What Credit Score Is Needed to Get a Salon Loan?](#toc-what-credit-score-is-needed-to-get-a-salon-loan) * [How Much Does It Cost to Finance a Beauty Salon?](#toc-how-much-does-it-cost-to-finance-a-beauty-salon) * [Methodology](#toc-how-we-chose-the-best-loans-for-beauty-salons) ### Best Overall : Upwise Capital --- ![Upwise Capital]() :fill(white):max_bytes(150000):strip_icc()/Upwise_Capital-45b5c59c590d4ae5a7fb40415a923fd6.jpg)  Upwise Capital [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=uc&bwid_id=6388b14276b3780decf128fd) [Upwise Capital](https://upwisecapital.com/?utm_source=AcreTrust&utm_medium=BeautySalons&utm_campaign=Investopedia) offers a wide range of funding products under one roof, enabling salon owners to seek new types of loans as they grow, making them our best overall choice for beauty salons. Pros * Range of products to serve salon owners with high and low credit scores * Low down payment options * Products for many different growth needs Cons * The Small Business Administration (SBA) loan is a lot of paperwork and a lengthy process * Online lender, no physical location to visit Even with online lenders, relationships matter, so when you find a lender that offers as many loan products that can help you at different stages of your salon’s growth as Upwise Capital does, you’ll want to keep them close, so they are your first call when you need funds. With Upwise Capital, you may qualify for one of the following depending on your credit, time in business, and collateral: * Business line of credit * SBA loan * Equipment financing * Short-term loan * Business term loans * Relief loans due to pandemic shutdowns * Working capital * Invoice and A/R financing * Real estate loans Upwise Capital has the best website of any lender we’ve seen. Each loan product has its own webpage that explains how the funds can be used, typical rates and terms, and its requirements. You’ll even find a list of which documents they will need to get you approved and funded. You’ll start the process with a short online intake form, and their loan specialists will contact you within 24-48 hours. With Upwise Capital, there are many flexible options with loan amounts ranging from $5,000 to $200 million. Depending on the loan type, you might get funded as soon as one day. However, most products average around two weeks, with SBA loans taking even longer than a month in some cases. Short-term working capital loans may have a term length as short as three months, whereas an SBA loan can last 30 years. Their other loan types are in the one to 10-year range. The interest rates start as low as 4%, depending on your time in business, credit history, and loan type. ### Best for Buying a Salon : YourSBA.com --- ![YourSBA.com]() :fill(white):max_bytes(150000):strip_icc()/YourSBA-68b6847eacb54fc9aad185150a39fc78.jpg) YourSBA.com [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=yoursba&bwid_id=6388b14276b3780decf128fd) With SBA business acquisition loans from $150,000 to $5 million, and online pre-qualification with no credit check, YourSBA.com is best for buying a salon. Pros * No broker or origination fees * SBA acquisition loans from $150k to $5 million * Business owners can be pre-qualified without a hard credit check, so your credit score isn't affected by applying. Cons * Business owners must have a minimum of $70,000 cash for a down payment * Online lender, no physical location to visit Buying an existing salon can come with a high price tag, which will typically impact the [origination](https://www.investopedia.com/terms/o/origination-fee.asp) and broker fees you’ll be charged. YourSBA.com fixes this problem by not charging origination or broker fees, making them our best option for buying a salon. Pre-qualifying online puts your loan request with lenders ready to serve you and increases your approval chances, making it a good choice for someone applying for a business loan for the first time. Like other SBA loans, YourSBA.com offers longer terms and lower rates than non-SBA loan products, and they are approved for business acquisitions. Loans can also be used for business expansion, new construction, the purchase of land or buildings, as well as buying inventory, equipment, machinery, furniture, fixtures, supplies, and materials. This makes YourSBA.com the right choice for those looking to buy and build out an existing salon. It can also be used for working capital, a partner buyout, debt financing, and franchise financing. The term length for equipment, refinance, or business acquisition is 10 years, and for buying real estate, you can qualify for up to 25 years.  There is no down payment required for a business expansion or a working capital loan; however, you’ll need to put down $70,000 in liquid cash to purchase a business. YourSBA.com can offer large loans for those needing it for acquisition with amounts ranging from $150,000 to $5 million.  YourSBA.com can pre-qualify you quickly, and the underwriting process for the SBA 7(a) loan takes between 45 and 90 days. There are no set credit score minimums for the SBA program because your credit character, in other words, your full credit profile, is more important. Other business requirements include: * Must be a legal U.S. business * Must have positive cash flow for the last two years * If no cash flow or no positive cash flow, the loan will be considered a “projection” loan or “startup” loan and require a 30% down payment The [maximum allowable interest rate](https://www.sba.gov/funding-programs/loans/7a-loans) is The Wall Street Journal prime rate plus 2.75%. ### Best for Big Salons : Chase --- ![Chase]() :fill(white):max_bytes(150000):strip_icc()/Chase-8e74322c2fec4c949fb154ecbd1eb22c.jpg)  Chase [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=chase&bwid_id=6388b14276b3780decf128fd) If you own a large salon, you’ll likely need large credit lines to manage and grow your business. Chase’s $500,000 credit line gives owners the best flexibility for their big salon’s needs. Pros * Credit lines up to $500,000 * Annual fee is waived when your average line use is above 40% * Renewable five-year revolving term * You pay interest only on the amount of credit you actually use. Cons * At the end of the five-year revolving term, no further advances are available * Slower process and more documentation required than online lenders A larger salon may require more money to expand or to buy equipment. In that case, a larger bank like Chase earned our top spot for best lender for big salons. Chase has [business and commercial lines of credit](https://www.investopedia.com/chase-business-loan-review-7507442) for your business to have working capital when it’s needed. It is a well-recognized brand, so those who aren’t familiar with business loans can feel safe knowing they are working with a reputable bank to fulfill their business dreams. Chase offers a commercial line of credit for up to $500,000 with initial terms of 12 to 24 months, which can be renewed and allows for interest-only payments. Business owners can also request an advance or make payments online.   Chase also offers other banking products that could help a beauty salon grow, including checking accounts, merchant services, [business credit cards](https://www.investopedia.com/best-credit-cards-4801582), and numerous other financial business services. With Chase’s size and capability, a business owner can easily have all their needs met in one place. To start your application, you’ll [schedule a meeting online](https://www.chase.com/meeting-scheduler/getstarted). Plan on the application process taking 30 days. To qualify, Chase does not have a stated credit score minimum; rather, they look at the full credit report to review your history. Chase states that rates can vary by region and can be influenced by your banking relationship, credit history, and collateral. ### Best for Small Salons : National Funding --- ![National Funding]() :fill(white):max_bytes(150000):strip_icc()/National_Funding-5e4ae8b61ded4268b99131f5d5112df6.jpg) National Funding [Apply Now](https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08) National Funding, our top choice for small salons, specializes in smaller loans from $5,000 to $500,000 and equipment financing and leasing loans up to $150,000, with a simple application, speedy approval, and personalized customer care. Pros * Loans range from $5,000 to $500,000 * Equipment financing and leasing up to $150,000 * Can be used for payroll * Funding in as few as 24 hours Cons * Fewer financing products than other lenders * No acquisition financing National Funding’s loans have no collateral requirements, simple automatic payments, and fast funding, making them ideal for small salons. They provide small business loans and equipment financing and leasing, so owners can purchase inventory, hire employees, fund payroll, pay utility bills, and upgrade their beauty equipment. National Funding has a relatively easy approval process compared to other small business loan options. Applications can be made online, and a loan specialist connects the business owner to the right loan to suit their needs. If you submit the documents they request, funds can be in your bank account as soon as the next business day. There are no credit score requirements, although credit history and the full report will be reviewed and considered to set an interest rate and term length. ### Best for Salon Equipment Loans : OnDeck --- ![OnDeck]() :fill(white):max_bytes(150000):strip_icc()/On_Deck-51d13272b8e747f1a17cf922cf1d1139.jpg)  OnDeck [Apply Now](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ondeck&bwid_id=6388b14276b3780decf128fd) OnDeck comes out on top for the best option for equipment loans for salon owners because they have both a credit line and a term loan option, and both fund within three days and allow credit scores as low as 625. Pros * Funds in your account between two and three days * Credit score minimum of 625 * Online application Cons * One year in business required * Annual revenues of $100,000 required OnDeck’s loan options help salons stay agile by providing a variety of ways to finance their equipment purchases with a low credit score requirement, making them our best for salon equipment loans. Loan options include an unsecured business line of credit and short-term loans. The online application will ask you how much funding you need, how soon you need it, and how you plan to use it. Then it will ask you about the size and age of your business and your personal credit history. You’ll even upload documents at this stage, moving you closer to the approval decision. With OnDeck, you’ll receive funding within three days. Their business credit line funds up to $100,000, and their short-term secured loans have a $250,000 funding limit. Credit score minimums for both products is just 625. You must have been in business for at least one year and have more than $100,000 in annual revenues to qualify. ## The Bottom Line Finding the best loan for your beauty salon depends on how you plan to use the money, how long your business has been open, your revenues, [collateral](https://www.investopedia.com/terms/c/collateral.asp), and credit history. Therefore, since your relationship with your lender can also influence your rates and terms, we suggest choosing a lender that can help you with various loan products as your salon grows. If you qualify, the best rates and terms will typically come from the SBA 7(a) program. You can find those through banks, credit unions, and online lenders. Next, non-SBA loans from banks and credit unions will be your second-best option for rates and terms, usually. But online lenders score big with us because of their advantages over the more conservative banks and credit unions. Online lenders can often finance people who banks turned down. Their process is almost always easier, requires far less paperwork, and funds within days instead of weeks or months. Those features are more important than shopping for the lowest rate for many small business owners. [Upwise Capital](https://upwisecapital.com/?utm_source=AcreTrust&utm_medium=BeautySalons&utm_campaign=Investopedia) earned our overall best score because it has all of these options and features and can serve most salon owners no matter their stage of growth. ## Compare the Providers | **Lender** | **Why We Picked It** | **Best Features** | | --- | --- | --- | | [Upwise Capital](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=uc&bwid_id=6388b14276b3780decf128fd) | Best Overall | Many loan products; funding as high as $200 million | | [YourSBA.com](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=yoursba&bwid_id=6388b14276b3780decf128fd) | Best for Buying a Salon | Simplifies the SBA loan application process; loans up to $5 million; no origination fees | | [Chase](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=chase&bwid_id=6388b14276b3780decf128fd) | Best for Big Salons | “Big bank” complementary products like checking and more; renewable business credit line up to $500,000 | | [National Funding](https://funnel.naturaltracking.com/v2?url=https%3A%2F%2Fnationalfunding.pxf.io%2Fc%2F34020%2F1591774%2F15709%3FsubId1%3D%5Btracking-subid%5D&link_id=77743&site_id=10199&bi%5Bblrs%5D=77743&bi%5Bp%5D=3412&utm_source=dotdashmeredith&vertid=5fe352b14e39dc2cce94d6fb&nrf=1&wid_id=63a2dbc4b31f4f86b6febcc8&tkn=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJ0eXBlIjoiYWZmaWxpYXRlIiwidmVyc2lvbiI6MSwiaGFzaCI6IkxJLzdxZi9Hbm9vaWd6aDM2a0hyV3BiU05aVT0iLCJpYXQiOjE2ODE4MTI0MzR9.Thunxp4L7PPKepRMcgO5CKwJcHfZuHx8U79s7FEgJ08) | Best for Small Salons | Funds as fast as 24 hours; loans up to $500,000, leases up to $150,000 | | [OnDeck](https://www.bestmoney.com/business-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ondeck&bwid_id=6388b14276b3780decf128fd) | Best for Salon Equipment Loans | Can fund a 625 credit score and above; funds in three days; unsecured credit line, secured short-term loan, and SBA loan options | ## Frequently Asked Questions ## How Do You Finance a Salon? If you are buying an existing salon priced between $350,000 and $5 million, you’ll want to look at the SBA 7(a) program first. If you qualify, you’ll be able to get a longer repayment term, which will keep your monthly payments lower than a short-term loan. An equipment term loan will likely be your best option for faster approval and funding to finance equipment like new chairs, shampoo stations, a reception desk, and washer and dryer. [Working capital](https://www.investopedia.com/ask/answers/102315/what-can-working-capital-be-used.asp) loans and lines of credit can be good choices for seasonal dips in revenue, covering payroll, and buying personal care products for resale in your salon. ## What Credit Score Is Needed to Get a Salon Loan? The SBA does not set a credit score requirement. This is why applicants who get turned down by banks for an SBA loan can sometimes find success for the same loan with an online lender. Some of the online lenders on our list will accept credit scores as low as 600. As always, higher credit scores with better credit histories, and a lower debt to income ratio, will qualify you for lower rates and longer payback terms. ## How Much Does It Cost to Finance a Beauty Salon? Whether you are buying an existing salon or starting one yourself, you’re looking at $100,000 in expenses, if not more. Some of those costs include rent, equipment, inventory for your supplies, licensing, marketing, legal and accounting fees, utilities, cleaning, and payroll.  Unless you have that much in your savings account, you’ll most likely need to finance most of these expenses. This will help you to manage your cash flow, cover your expenses, and also pay yourself so that you can survive. But financing does cost you additional money, and you’ll be paying back more than you actually borrowed. You’ll find the best rates from banks, credit unions, and SBA loan programs, which start between 4% and 6%. Online lenders will range from 6% to over 10%, but they will require less paperwork and fund weeks faster. ## How We Chose the Best Loans for Beauty Salons We researched 12 lenders with experience financing beauty salons before deciding on the six best. We chose lenders who had many funding solutions because the use and amount of financing you’ll need will depend on where your salon is in its lifecycle.  Lenders scored best if they had a streamlined application process with minimal paperwork burden on their borrowers. Since salon owners sometimes need money quickly to meet unexpected circumstances and opportunities, we chose lenders known for putting money in your account within days, not months. Finally, the best lenders offered wide ranges of financing amounts, competitive rates, low fees, lenient credit qualifications, and required less than two years (in some cases less than one year) in business. :max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-loans-for-beauty-salons-5096106-e4dc27513b3f4f898097268f21021575.jpg) Thomas Barwick / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Upwise. "[Upwise Business Loans](https://upwisecapital.com/?utm_source=AcreTrust&utm_medium=BeautySalons&utm_campaign=Investopedia)." 2. YourSBA. "[Frequently Asked Questions](https://yoursba.com/frequently-asked-questions/)." 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[more](https://www.investopedia.com/no-doc-business-loan-7500908) [Personal Loan: Definition, Types, and How to Get One](https://www.investopedia.com/personal-loan-5076027) A personal loan allows you to borrow money and repay it over time. Here’s what a personal loan is, how it works, and how to use one. [more](https://www.investopedia.com/personal-loan-5076027) [Inventory Financing: Definition, How It Works, Pros, and Cons](https://www.investopedia.com/terms/i/inventory-financing.asp) Inventory financing is a revolving line of credit or a short-term loan used primarily by small to medium-sized retail businesses to buy stock. [more](https://www.investopedia.com/terms/i/inventory-financing.asp) [Term Loan Definition, Types, and Common Attributes](https://www.investopedia.com/terms/t/termloan.asp) A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. [more](https://www.investopedia.com/terms/t/termloan.asp) [Small Business Administration (SBA): Definition and What It Does](https://www.investopedia.com/terms/s/small-business-administration.asp) The Small Business Administration (SBA) is a U.S. government agency established to promote and strengthen the overall economy by assisting small businesses. [more](https://www.investopedia.com/terms/s/small-business-administration.asp) [What Is a Secured Loan? How They Work, Types, and How to Get One](https://www.investopedia.com/secured-loans-5076025) Secured loans are loans that require collateral to borrow. Here’s how secured loans work and where to find them. [more](https://www.investopedia.com/secured-loans-5076025)

Finding the best loan for your beauty salon depends on how you want to spend the funds and whether you are buying an existing salon or starting your own from scratch. Different loan products can serve you differently, depending on your need. Typical expenses include buying salon chairs and shampoo stations, hair care products and colors to use in your salon or sell to your customers, marketing expenses, and emergency fund cushions. Options like startup loans, business credit cards, equipment financing programs, credit lines, and  SBA 7(a) term loans can help you manage your business. We reviewed 12 lenders to arrive at the six best loans for beauty salons. We examined how fast they fund, their application process, rates, and financing options. Here's what we found. The Best Loans for Beauty Salons of 2024 Best Overall: Upwise Capital Best for Buying a Salon: YourSBA.com Best for Big Salons: Chase Best for Small Salons: National Funding Best for Salon Equipment Loans: OnDeck Best Loans for Beauty Salons Expand Best Loans for Beauty Salons Our Top Picks Upwise Capital YourSBA.com Chase National Funding OnDeck See More (2) The Bottom Line Compare the Providers Frequently Asked Questions How Do You Finance a Salon? What Credit Score Is Needed to Get a Salon Loan? How Much Does It Cost to Finance a Beauty Salon? Methodology Best Overall : Upwise Capital  Upwise Capital Apply Now Upwise Capital offers a wide range of funding products under one roof, enabling salon owners to seek new types of loans as they grow, making them our best overall choice for beauty salons. Pros Range of products to serve salon owners with high and low credit scores Low down payment options Products for many different growth needs Cons The Small Business Administration (SBA) loan is a lot of paperwork and a lengthy process Online lender, no physical location to visit Even with online lenders, relationships matter, so when you find a lender that offers as many loan products that can help you at different stages of your salon’s growth as Upwise Capital does, you’ll want to keep them close, so they are your first call when you need funds. With Upwise Capital, you may qualify for one of the following depending on your credit, time in business, and collateral: Business line of creditSBA loanEquipment financingShort-term loanBusiness term loansRelief loans due to pandemic shutdownsWorking capitalInvoice and A/R financingReal estate loans Upwise Capital has the best website of any lender we’ve seen. Each loan product has its own webpage that explains how the funds can be used, typical rates and terms, and its requirements. You’ll even find a list of which documents they will need to get you approved and funded. You’ll start the process with a short online intake form, and their loan specialists will contact you within 24-48 hours. With Upwise Capital, there are many flexible options with loan amounts ranging from $5,000 to $200 million. Depending on the loan type, you might get funded as soon as one day. However, most products average around two weeks, with SBA loans taking even longer than a month in some cases. Short-term working capital loans may have a term length as short as three months, whereas an SBA loan can last 30 years. Their other loan types are in the one to 10-year range. The interest rates start as low as 4%, depending on your time in business, credit history, and loan type. Best for Buying a Salon : YourSBA.com YourSBA.com Apply Now With SBA business acquisition loans from $150,000 to $5 million, and online pre-qualification with no credit check, YourSBA.com is best for buying a salon. Pros No broker or origination fees SBA acquisition loans from $150k to $5 million Business owners can be pre-qualified without a hard credit check, so your credit score isn't affected by applying. Cons Business owners must have a minimum of $70,000 cash for a down payment Online lender, no physical location to visit Buying an existing salon can come with a high price tag, which will typically impact the origination and broker fees you’ll be charged. YourSBA.com fixes this problem by not charging origination or broker fees, making them our best option for buying a salon. Pre-qualifying online puts your loan request with lenders ready to serve you and increases your approval chances, making it a good choice for someone applying for a business loan for the first time. Like other SBA loans, YourSBA.com offers longer terms and lower rates than non-SBA loan products, and they are approved for business acquisitions. Loans can also be used for business expansion, new construction, the purchase of land or buildings, as well as buying inventory, equipment, machinery, furniture, fixtures, supplies, and materials. This makes YourSBA.com the right choice for those looking to buy and build out an existing salon. It can also be used for working capital, a partner buyout, debt financing, and franchise financing. The term length for equipment, refinance, or business acquisition is 10 years, and for buying real estate, you can qualify for up to 25 years.  There is no down payment required for a business expansion or a working capital loan; however, you’ll need to put down $70,000 in liquid cash to purchase a business. YourSBA.com can offer large loans for those needing it for acquisition with amounts ranging from $150,000 to $5 million.  YourSBA.com can pre-qualify you quickly, and the underwriting process for the SBA 7(a) loan takes between 45 and 90 days. There are no set credit score minimums for the SBA program because your credit character, in other words, your full credit profile, is more important. Other business requirements include: Must be a legal U.S. businessMust have positive cash flow for the last two yearsIf no cash flow or no positive cash flow, the loan will be considered a “projection” loan or “startup” loan and require a 30% down payment The maximum allowable interest rate is The Wall Street Journal prime rate plus 2.75%. Best for Big Salons : Chase  Chase Apply Now If you own a large salon, you’ll likely need large credit lines to manage and grow your business. Chase’s $500,000 credit line gives owners the best flexibility for their big salon’s needs. Pros Credit lines up to $500,000 Annual fee is waived when your average line use is above 40% Renewable five-year revolving term You pay interest only on the amount of credit you actually use. Cons At the end of the five-year revolving term, no further advances are available Slower process and more documentation required than online lenders A larger salon may require more money to expand or to buy equipment. In that case, a larger bank like Chase earned our top spot for best lender for big salons. Chase has business and commercial lines of credit for your business to have working capital when it’s needed. It is a well-recognized brand, so those who aren’t familiar with business loans can feel safe knowing they are working with a reputable bank to fulfill their business dreams. Chase offers a commercial line of credit for up to $500,000 with initial terms of 12 to 24 months, which can be renewed and allows for interest-only payments. Business owners can also request an advance or make payments online.   Chase also offers other banking products that could help a beauty salon grow, including checking accounts, merchant services, business credit cards, and numerous other financial business services. With Chase’s size and capability, a business owner can easily have all their needs met in one place. To start your application, you’ll schedule a meeting online. Plan on the application process taking 30 days. To qualify, Chase does not have a stated credit score minimum; rather, they look at the full credit report to review your history. Chase states that rates can vary by region and can be influenced by your banking relationship, credit history, and collateral. Best for Small Salons : National Funding National Funding Apply Now National Funding, our top choice for small salons, specializes in smaller loans from $5,000 to $500,000 and equipment financing and leasing loans up to $150,000, with a simple application, speedy approval, and personalized customer care. Pros Loans range from $5,000 to $500,000 Equipment financing and leasing up to $150,000 Can be used for payroll Funding in as few as 24 hours Cons Fewer financing products than other lenders No acquisition financing National Funding’s loans have no collateral requirements, simple automatic payments, and fast funding, making them ideal for small salons. They provide small business loans and equipment financing and leasing, so owners can purchase inventory, hire employees, fund payroll, pay utility bills, and upgrade their beauty equipment. National Funding has a relatively easy approval process compared to other small business loan options. Applications can be made online, and a loan specialist connects the business owner to the right loan to suit their needs. If you submit the documents they request, funds can be in your bank account as soon as the next business day. There are no credit score requirements, although credit history and the full report will be reviewed and considered to set an interest rate and term length. Best for Salon Equipment Loans : OnDeck  OnDeck Apply Now OnDeck comes out on top for the best option for equipment loans for salon owners because they have both a credit line and a term loan option, and both fund within three days and allow credit scores as low as 625. Pros Funds in your account between two and three days Credit score minimum of 625 Online application Cons One year in business required Annual revenues of $100,000 required OnDeck’s loan options help salons stay agile by providing a variety of ways to finance their equipment purchases with a low credit score requirement, making them our best for salon equipment loans. Loan options include an unsecured business line of credit and short-term loans. The online application will ask you how much funding you need, how soon you need it, and how you plan to use it. Then it will ask you about the size and age of your business and your personal credit history. You’ll even upload documents at this stage, moving you closer to the approval decision. With OnDeck, you’ll receive funding within three days. Their business credit line funds up to $100,000, and their short-term secured loans have a $250,000 funding limit. Credit score minimums for both products is just 625. You must have been in business for at least one year and have more than $100,000 in annual revenues to qualify. The Bottom Line Finding the best loan for your beauty salon depends on how you plan to use the money, how long your business has been open, your revenues, collateral, and credit history. Therefore, since your relationship with your lender can also influence your rates and terms, we suggest choosing a lender that can help you with various loan products as your salon grows. If you qualify, the best rates and terms will typically come from the SBA 7(a) program. You can find those through banks, credit unions, and online lenders. Next, non-SBA loans from banks and credit unions will be your second-best option for rates and terms, usually. But online lenders score big with us because of their advantages over the more conservative banks and credit unions. Online lenders can often finance people who banks turned down. Their process is almost always easier, requires far less paperwork, and funds within days instead of weeks or months. Those features are more important than shopping for the lowest rate for many small business owners. Upwise Capital earned our overall best score because it has all of these options and features and can serve most salon owners no matter their stage of growth. Compare the Providers Lender Why We Picked It Best Features Upwise Capital Best Overall Many loan products; funding as high as $200 million YourSBA.com Best for Buying a Salon Simplifies the SBA loan application process; loans up to $5 million; no origination fees Chase Best for Big Salons “Big bank” complementary products like checking and more; renewable business credit line up to $500,000 National Funding Best for Small Salons Funds as fast as 24 hours; loans up to $500,000, leases up to $150,000 OnDeck Best for Salon Equipment Loans Can fund a 625 credit score and above; funds in three days; unsecured credit line, secured short-term loan, and SBA loan options Frequently Asked Questions How Do You Finance a Salon? If you are buying an existing salon priced between $350,000 and $5 million, you’ll want to look at the SBA 7(a) program first. If you qualify, you’ll be able to get a longer repayment term, which will keep your monthly payments lower than a short-term loan.An equipment term loan will likely be your best option for faster approval and funding to finance equipment like new chairs, shampoo stations, a reception desk, and washer and dryer. Working capital loans and lines of credit can be good choices for seasonal dips in revenue, covering payroll, and buying personal care products for resale in your salon. What Credit Score Is Needed to Get a Salon Loan? The SBA does not set a credit score requirement. This is why applicants who get turned down by banks for an SBA loan can sometimes find success for the same loan with an online lender. Some of the online lenders on our list will accept credit scores as low as 600. As always, higher credit scores with better credit histories, and a lower debt to income ratio, will qualify you for lower rates and longer payback terms. How Much Does It Cost to Finance a Beauty Salon? Whether you are buying an existing salon or starting one yourself, you’re looking at $100,000 in expenses, if not more. Some of those costs include rent, equipment, inventory for your supplies, licensing, marketing, legal and accounting fees, utilities, cleaning, and payroll. Unless you have that much in your savings account, you’ll most likely need to finance most of these expenses. This will help you to manage your cash flow, cover your expenses, and also pay yourself so that you can survive.But financing does cost you additional money, and you’ll be paying back more than you actually borrowed. You’ll find the best rates from banks, credit unions, and SBA loan programs, which start between 4% and 6%. Online lenders will range from 6% to over 10%, but they will require less paperwork and fund weeks faster. How We Chose the Best Loans for Beauty Salons We researched 12 lenders with experience financing beauty salons before deciding on the six best. We chose lenders who had many funding solutions because the use and amount of financing you’ll need will depend on where your salon is in its lifecycle.  Lenders scored best if they had a streamlined application process with minimal paperwork burden on their borrowers. Since salon owners sometimes need money quickly to meet unexpected circumstances and opportunities, we chose lenders known for putting money in your account within days, not months. Finally, the best lenders offered wide ranges of financing amounts, competitive rates, low fees, lenient credit qualifications, and required less than two years (in some cases less than one year) in business. Thomas Barwick / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Upwise. "Upwise Business Loans." YourSBA. "Frequently Asked Questions." Related Articles 4 Steps to Getting a Small Business Loan Without Collateral The Best Small Business Loans for Bad Credit for May 2024 Best Startup Business Loans for May 2024 Funding Circle Business Loans Review for 2024 Business Loan vs. Personal Loan: What’s the Difference? How Do Business Loans Work? Related Terms What Is a No-Doc Business Loan, and Is One Right for Your Business? A no-doc business loan can be a quick way for business owners to secure financing that they may not be able to access through a traditional bank loan. more Personal Loan: Definition, Types, and How to Get One A personal loan allows you to borrow money and repay it over time. Here’s what a personal loan is, how it works, and how to use one. more Inventory Financing: Definition, How It Works, Pros, and Cons Inventory financing is a revolving line of credit or a short-term loan used primarily by small to medium-sized retail businesses to buy stock. more Term Loan Definition, Types, and Common Attributes A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. more Small Business Administration (SBA): Definition and What It Does The Small Business Administration (SBA) is a U.S. government agency established to promote and strengthen the overall economy by assisting small businesses. more What Is a Secured Loan? How They Work, Types, and How to Get One Secured loans are loans that require collateral to borrow. Here’s how secured loans work and where to find them. more

https://www.investopedia.com/terms/p/product-life-cycle.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-product-life-cycle"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Product Life Cycle? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term product life cycle refers to the length of time from when a product is introduced to consumers into the market until it's removed from the shelves. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging. The process of strategizing ways to continuously support and maintain a product is called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/product-life-cycle-management.asp">product life cycle management</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A product life cycle is the amount of time a product goes from being introduced into the market until it's taken off the shelves.</li><li>There are four stages in a product's life cycle—introduction, growth, maturity, and decline.</li><li>A company often incurs higher marketing costs when introducing a product to the market but experiences higher sales as product adoption grows. </li><li>Sales stabilize and peak when the product's adoption matures, though competition and obsolescence may cause its decline. </li><li>The concept of product life cycle helps inform business decision-making, from pricing and promotion to expansion or cost-cutting.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_6-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Product Life Cycle" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/nmOhRY-l_pFlcnXxZy4vK7u2awY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/nmOhRY-l_pFlcnXxZy4vK7u2awY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png" data-srcset="https://www.investopedia.com/thmb/fbKGg_tIH0YMKoP6Il1l8soGLXQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Product Life Cycle" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/nmOhRY-l_pFlcnXxZy4vK7u2awY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png" srcset="https://www.investopedia.com/thmb/fbKGg_tIH0YMKoP6Il1l8soGLXQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Xiaojie Liu</p></span> </figcaption></figure> <span class="heading-toc" id="toc-how-the-product-life-cycle-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How the Product Life Cycle Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Products, like people, have life cycles. The life cycle of a product is broken into four stages—introduction, growth, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturity.asp">maturity</a>, and decline. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> A product begins with an idea, and within the confines of modern business, it isn't likely to go further until it undergoes <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/randd.asp">research and development (R&amp;D)</a> and is found to be <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/feasibility-study.asp">feasible</a> and potentially profitable. At that point, the product is produced, marketed, and rolled out. Some product life cycle models include product development as a stage, though at this point, the product has not yet been brought to customers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> As mentioned above, there are four generally accepted stages in the life cycle of a product. Here are details about each one. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-subheading__text"> Introduction Stage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The introduction phase is the first time customers are introduced to the new product. A company must generally includes a substantial investment in advertising and a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing-campaign.asp">marketing campaign</a> focused on making consumers aware of the product and its benefits, especially if it is broadly unknown what the item will do. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> During the introduction stage, there is often little-to-no competition for a product, as competitors may just be getting a first look at the new offering. However, companies still often experience negative financial results at this stage as sales tend to be lower, promotional pricing may be low to drive customer engagement, and the sales strategy is still being evaluated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Growth Stage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> If the product is successful, it then moves to the growth stage. This is characterized by growing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/demand.asp">demand</a>, an increase in production, and expansion in its availability. The amount of time spent in the introduction phase before a company's product experiences strong growth will vary from between industries and products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> During the growth phase, the product becomes more popular and recognizable. A company may still choose to invest heavily in advertising if the product faces heavy competition. However, marketing campaigns will likely be geared towards differentiating its product from others as opposed to introducing the goods to the market. A company may also refine its product by improving functionality based on customer feedback. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Financially, the growth period of the product life cycle results in increased sales and higher revenue. As competition begins to offer rival products, competition increases, potentially forcing the company to decrease prices and experience lower margins. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Maturity Stage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The maturity stage of the product life cycle is the most profitable stage, the time when the costs of producing and marketing decline. With the market saturated with the product, competition now higher than at other stages, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/profitmargin.asp">profit margins</a> starting to shrink, some analysts refer to the maturity stage as when sales volume is "maxed out". </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Depending on the good, a company may begin deciding how to innovate its product or introduce new ways to capture a larger market presence. This includes getting more feedback from customers, and researching their demographics and their needs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> During the maturity stage, competition is at the highest level. Rival companies have had enough time to introduce competing and improved products, and competition for customers is usually highest. Sales levels stabilize, and a company strives to have its product exist in this maturity stage for as long as possible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>A new product needs to be explained, while a mature product needs to be differentiated.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Decline Stage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> As the product takes on increased competition as other companies emulate its success, the product may lose <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketshare.asp">market share</a> and begin its decline. Product sales begin to drop due to market saturation and alternative products, and the company may choose to not pursue additional marketing efforts as customers may already have determined whether they are loyal to the company's products or not. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Should a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/1110/5-companies-that-changed-their-core-products.aspx">product be entirely retired</a>, the company will stop generating support for it and will entirely phase out marketing endeavors. Alternatively, the company may decide to revamp the product or introduce a next-generation, completely overhauled model. If the upgrade is substantial enough, the company may choose to re-enter the product life cycle by introducing the new version to the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The stage of a product's life cycle impacts the way in which it is marketed to consumers. A new product needs to be explained, while a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/062415/why-product-differentiation-important-todays-financial-climate.asp">mature product needs to be differentiated</a> from its competitors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-advantages-of-using-the-product-life-cycle"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Advantages of Using the Product Life Cycle </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The product life cycle better allows marketers and business developers to better understand how each product or brand sits with a company's portfolio. This enables the company to internally shift resources to specific products based on those products' positioning within the product life cycle. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> For example, a company may decide to reallocate market staff time to products entering the introduction or growth stages. Alternatively, it may need to invest more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cost-of-labor.asp">cost of labor</a> in engineers or customer service technicians as the product matures. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The product life cycle naturally tends to have a positive impact on economic growth, as it promotes innovation and discourages supporting outdated products. As products move through the life cycle stages, companies that use the product life cycle can realize the need to make their products more effective, safer, efficient, faster, cheaper, or better suited to client needs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-limitations-of-using-the-product-life-cycle"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Limitations of Using the Product Life Cycle </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Despite its utility for planning and analysis, the product life cycle doesn't pertain to every industry and doesn't work consistently across all products. Consider popular beverage lines whose primary products have been in the maturity stage for decades, while spin-offs or variations of these drinks from the same company have failed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> The product life cycle also may be artificial in industries with legal or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trademark.asp">trademark </a>restrictions. Consider the new patent term of 20 years from which the application for the patent was filed in the United States.<span class="ql-inline-citation" data-cite="2"></span> Though a drug may be just entering their growth stage, it may be adversely impacted by competition when its patent ends regardless of which stage it is in. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Another unfortunate side effect of the product life cycle is prospective planned obsolescence. When a product enters the maturity stage, a company may be tempted to begin planning its replacement. This may be the case even if the existing product still holds many benefits for customers and still has a long shelf life. For producers who tend to introduce new products every few years, this may lead to product waste and inefficient use of product development resources. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_56-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_57-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Notification messages such as Microsoft's alert that Windows 8.1 will sunset on January 2023 is an example of decline.<span class="ql-inline-citation" data-cite="5"></span> Due to obsolescence of the operating system, Microsoft is choosing to no longer support the product and instead focus resources on newer technologies.</p></div></div></div> <span class="heading-toc" id="toc-product-life-cycle-vs-bcg-matrix"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Product Life Cycle vs. BCG Matrix </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> A similar analytical tool to determine the market positioning of a product is the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bcg.asp">Boston Consulting Group (BCG) Matrix</a>. This four-square table defines products based on their market growth and market share: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> <li>"Stars" are products with high market growth and high market share.</li> <li>"Cash cows" are products with low market growth and high market share.</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/problemchild.asp">"Question marks," also known as "problem children,"</a> are products with high market growth and low market share.</li> <li>"Dogs" are products with low market growth and low market share.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Although there is no direct relationship between the matrix and the product life cycle concept, both analyze a product's market growth and saturation. However, the BCG Matrix does not traditionally communicate the direction in which a product will move. For example, a product that has entered the maturity stage of the product life cycle will likely experience decline next; the BCG Matrix does not communicate this product flow in its visual depiction. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <span class="heading-toc" id="toc-introduction-and-maturity-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-heading__text"> Introduction and Maturity: Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Companies that have a good handle on all four stages can increase <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/012715/what-difference-between-profitability-and-profit.asp">profitability</a> and maximize their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a>. Those that aren't able to may experience an increase in their marketing and production costs, ultimately leading to the limited shelf life for their product(s). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Back in 1965, Theodore Levitt, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">marketing</a> professor, wrote in the <em>Harvard Business Review</em> that the innovator is the one with the most to lose because so many truly new products fail at the first phase of their life cycle—the introductory stage. The failure comes only after the investment of substantial money and time into research, development, and production. This fact prevents many companies from even trying anything really new. Instead, he said, they wait for someone else to succeed and then clone the success.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> To cite an established and still-thriving industry, television program distribution has related products in all stages of the product life cycle. OLED TVs are in the mature phase, programming-on-demand is in the growth stage, DVDs are in decline, and the videocassette is extinct. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Many of the most successful products on earth are suspended in the mature stage for as long as possible, undergoing minor updates and redesigns to keep them differentiated. Examples include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insights/what-makes-aapl-valuable-company/">Apple</a> computers and iPhones, Ford's best-selling trucks, and Starbucks' coffee—all of which undergo minor changes accompanied by marketing efforts—are designed to keep them feeling unique and special in the eyes of consumers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <span class="heading-toc" id="toc-examples-of-product-life-cycles"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-heading__text"> Examples of Product Life Cycles </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Many <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brand.asp">brands</a> that were American icons have dwindled and died. Better management of product life cycles might have saved some of them—or perhaps their time had just come. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-subheading__text"> Oldsmobile </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> Oldsmobile began producing cars in 1897. After merging with General Motors in 1908, the company used the first V-8 engine in 1916. By 1935, the one millionth Oldsmobile had been built. In 1984, Oldsmobile sales peaked, selling more cars in that year than any other year. By 2000, General Motors announced it would phase out the automobile and, on April 29th, 2004, the last Oldsmobile was built.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-subheading__text"> Woolworth Co. </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> In 1905, Frank Winfield Woolworth incorporated F.W. Woolworth Co., a general merchandise retail store. By 1929, Woolworth had about 2,250 outlet stores across the United States and Britain, Decades later, due to increased competition from other discount retailors, Woolworth closed the last of its variety stores in the United States in 1997 to increasingly focus on sporting goods.<span class="ql-inline-citation" data-cite="4"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_83-0"> <span class="mntl-sc-block-subheading__text"> Coca-Cola </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> On April 23, 1985, Coca-Cola announced a new formula for its popular beverage, referred to as "new Coke." Coca-Cola's market-share lead had been decreasing over the past 15 years, and the company decided to launch a new recipe in hopes of reinvigorating product interest. After its launch, Coca-Cola's phone line began receiving 1,500 calls per day, many of which were to complain about the change. Protest groups recruited 100,000 individuals to support their cause of bringing "old" Coke back.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> A stunning 79 days after its launch, "new Coke's" <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0111/5-products-that-failed-and-why.aspx">full product life cycle</a> was complete. Though the product didn't experience much growth or maturity, its introduction to the market was met with heavy protest. Less than three months after it announced its new recipe, Coca-Cola announced it would revert its product back to the original recipe.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-what-are-the-stages-of-the-product-life-cycle"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Stages of the Product Life Cycle?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The product life cycle is defined as four distinct stages: product introduction, growth, maturity, and decline. The amount of time spent in each stage will vary from product to product, and different companies have different strategic approaches to transitioning from one phase to the next.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-what-are-product-life-cycle-strategies"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Product Life Cycle Strategies?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Depending on the stage a product is in, a company may adopt different strategies along the product life cycle. For example, a company is more likely to incur heavy marketing and R&amp;D costs in the introduction stage. As the product becomes more mature, companies may then turn to improving product quality, entering new segments, or increasing distribution channels. Companies also strategically approach divesting from product lines including the sale of divisions or discontinuation of goods.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_92-0"><span class="heading-toc" id="toc-what-is-product-life-cycle-management"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Product Life Cycle Management?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Product life cycle management is the act of overseeing a product's performance over the course of its life. Throughout the different stages of product life cycle, a company enacts strategies and changes based on how the market is receiving a good.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_94-0"><span class="heading-toc" id="toc-why-is-product-life-cycle-important"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is Product Life Cycle Important?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Product life cycle is important because it informs management of how its product is performing and what strategic approaches it may take. By being informed of which stage its product(s) are in, a company can change how it spends resources, which products to push, how to allocate staff time, and what innovations they want to research next.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_96-0"><span class="heading-toc" id="toc-which-factors-impact-a-products-life-cycle"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Factors Impact a Product's Life Cycle?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Countless factors can affect how a product performs and where it lies within the product life cycle. In general, the product life cycle is heavily impacted by market adoption, ease of competitive entry, rate of industry innovation, and changes to consumer preferences. If it is easier for competitors to enter markets, consumers change their mind frequently about the goods they consume or the market becomes quickly saturated. Then, products are more likely to have shorter lives throughout a product life cycle.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_97-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_98-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> Broadly speaking, almost every product sold undergoes the product life cycle. This cycle of market introduction, growth, maturity, and decline may vary from product to product—or industry to industry. However, this cycle informs a company of how to best utilize its resources, what the future outlook of their product is, and how to strategically plan for bringing new products to market. </p></div>

## What Is the Product Life Cycle? The term product life cycle refers to the length of time from when a product is introduced to consumers into the market until it's removed from the shelves. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging. The process of strategizing ways to continuously support and maintain a product is called [product life cycle management](https://www.investopedia.com/terms/p/product-life-cycle-management.asp). ### Key Takeaways * A product life cycle is the amount of time a product goes from being introduced into the market until it's taken off the shelves. * There are four stages in a product's life cycle—introduction, growth, maturity, and decline. * A company often incurs higher marketing costs when introducing a product to the market but experiences higher sales as product adoption grows. * Sales stabilize and peak when the product's adoption matures, though competition and obsolescence may cause its decline. * The concept of product life cycle helps inform business decision-making, from pricing and promotion to expansion or cost-cutting. ![Product Life Cycle]() :max_bytes(150000):strip_icc()/Product-Life-Cycle-a8eb8c754345415db3d837dec4a14276.png) Investopedia / Xiaojie Liu ## How the Product Life Cycle Works Products, like people, have life cycles. The life cycle of a product is broken into four stages—introduction, growth, [maturity](https://www.investopedia.com/terms/m/maturity.asp), and decline. A product begins with an idea, and within the confines of modern business, it isn't likely to go further until it undergoes [research and development (R&D)](https://www.investopedia.com/terms/r/randd.asp) and is found to be [feasible](https://www.investopedia.com/terms/f/feasibility-study.asp) and potentially profitable. At that point, the product is produced, marketed, and rolled out. Some product life cycle models include product development as a stage, though at this point, the product has not yet been brought to customers. As mentioned above, there are four generally accepted stages in the life cycle of a product. Here are details about each one. ### Introduction Stage The introduction phase is the first time customers are introduced to the new product. A company must generally includes a substantial investment in advertising and a [marketing campaign](https://www.investopedia.com/terms/m/marketing-campaign.asp) focused on making consumers aware of the product and its benefits, especially if it is broadly unknown what the item will do. During the introduction stage, there is often little-to-no competition for a product, as competitors may just be getting a first look at the new offering. However, companies still often experience negative financial results at this stage as sales tend to be lower, promotional pricing may be low to drive customer engagement, and the sales strategy is still being evaluated. ### Growth Stage If the product is successful, it then moves to the growth stage. This is characterized by growing [demand](https://www.investopedia.com/terms/d/demand.asp), an increase in production, and expansion in its availability. The amount of time spent in the introduction phase before a company's product experiences strong growth will vary from between industries and products. During the growth phase, the product becomes more popular and recognizable. A company may still choose to invest heavily in advertising if the product faces heavy competition. However, marketing campaigns will likely be geared towards differentiating its product from others as opposed to introducing the goods to the market. A company may also refine its product by improving functionality based on customer feedback. Financially, the growth period of the product life cycle results in increased sales and higher revenue. As competition begins to offer rival products, competition increases, potentially forcing the company to decrease prices and experience lower margins. ### Maturity Stage The maturity stage of the product life cycle is the most profitable stage, the time when the costs of producing and marketing decline. With the market saturated with the product, competition now higher than at other stages, and [profit margins](https://www.investopedia.com/terms/p/profitmargin.asp) starting to shrink, some analysts refer to the maturity stage as when sales volume is "maxed out". Depending on the good, a company may begin deciding how to innovate its product or introduce new ways to capture a larger market presence. This includes getting more feedback from customers, and researching their demographics and their needs. During the maturity stage, competition is at the highest level. Rival companies have had enough time to introduce competing and improved products, and competition for customers is usually highest. Sales levels stabilize, and a company strives to have its product exist in this maturity stage for as long as possible. ### A new product needs to be explained, while a mature product needs to be differentiated. ### Decline Stage As the product takes on increased competition as other companies emulate its success, the product may lose [market share](https://www.investopedia.com/terms/m/marketshare.asp) and begin its decline. Product sales begin to drop due to market saturation and alternative products, and the company may choose to not pursue additional marketing efforts as customers may already have determined whether they are loyal to the company's products or not. Should a [product be entirely retired](https://www.investopedia.com/financial-edge/1110/5-companies-that-changed-their-core-products.aspx), the company will stop generating support for it and will entirely phase out marketing endeavors. Alternatively, the company may decide to revamp the product or introduce a next-generation, completely overhauled model. If the upgrade is substantial enough, the company may choose to re-enter the product life cycle by introducing the new version to the market. The stage of a product's life cycle impacts the way in which it is marketed to consumers. A new product needs to be explained, while a [mature product needs to be differentiated](https://www.investopedia.com/ask/answers/062415/why-product-differentiation-important-todays-financial-climate.asp) from its competitors. ## Advantages of Using the Product Life Cycle The product life cycle better allows marketers and business developers to better understand how each product or brand sits with a company's portfolio. This enables the company to internally shift resources to specific products based on those products' positioning within the product life cycle. For example, a company may decide to reallocate market staff time to products entering the introduction or growth stages. Alternatively, it may need to invest more [cost of labor](https://www.investopedia.com/terms/c/cost-of-labor.asp) in engineers or customer service technicians as the product matures. The product life cycle naturally tends to have a positive impact on economic growth, as it promotes innovation and discourages supporting outdated products. As products move through the life cycle stages, companies that use the product life cycle can realize the need to make their products more effective, safer, efficient, faster, cheaper, or better suited to client needs. ## Limitations of Using the Product Life Cycle Despite its utility for planning and analysis, the product life cycle doesn't pertain to every industry and doesn't work consistently across all products. Consider popular beverage lines whose primary products have been in the maturity stage for decades, while spin-offs or variations of these drinks from the same company have failed. The product life cycle also may be artificial in industries with legal or [trademark](https://www.investopedia.com/terms/t/trademark.asp) restrictions. Consider the new patent term of 20 years from which the application for the patent was filed in the United States. Though a drug may be just entering their growth stage, it may be adversely impacted by competition when its patent ends regardless of which stage it is in. Another unfortunate side effect of the product life cycle is prospective planned obsolescence. When a product enters the maturity stage, a company may be tempted to begin planning its replacement. This may be the case even if the existing product still holds many benefits for customers and still has a long shelf life. For producers who tend to introduce new products every few years, this may lead to product waste and inefficient use of product development resources. ### Notification messages such as Microsoft's alert that Windows 8.1 will sunset on January 2023 is an example of decline. Due to obsolescence of the operating system, Microsoft is choosing to no longer support the product and instead focus resources on newer technologies. ## Product Life Cycle vs. BCG Matrix A similar analytical tool to determine the market positioning of a product is the [Boston Consulting Group (BCG) Matrix](https://www.investopedia.com/terms/b/bcg.asp). This four-square table defines products based on their market growth and market share: * "Stars" are products with high market growth and high market share. * "Cash cows" are products with low market growth and high market share. * ["Question marks," also known as "problem children,"](https://www.investopedia.com/terms/p/problemchild.asp) are products with high market growth and low market share. * "Dogs" are products with low market growth and low market share. Although there is no direct relationship between the matrix and the product life cycle concept, both analyze a product's market growth and saturation. However, the BCG Matrix does not traditionally communicate the direction in which a product will move. For example, a product that has entered the maturity stage of the product life cycle will likely experience decline next; the BCG Matrix does not communicate this product flow in its visual depiction. ## Introduction and Maturity: Special Considerations Companies that have a good handle on all four stages can increase [profitability](https://www.investopedia.com/ask/answers/012715/what-difference-between-profitability-and-profit.asp) and maximize their [returns](https://www.investopedia.com/terms/r/return.asp). Those that aren't able to may experience an increase in their marketing and production costs, ultimately leading to the limited shelf life for their product(s). Back in 1965, Theodore Levitt, a [marketing](https://www.investopedia.com/terms/m/marketing.asp) professor, wrote in the *Harvard Business Review* that the innovator is the one with the most to lose because so many truly new products fail at the first phase of their life cycle—the introductory stage. The failure comes only after the investment of substantial money and time into research, development, and production. This fact prevents many companies from even trying anything really new. Instead, he said, they wait for someone else to succeed and then clone the success. To cite an established and still-thriving industry, television program distribution has related products in all stages of the product life cycle. OLED TVs are in the mature phase, programming-on-demand is in the growth stage, DVDs are in decline, and the videocassette is extinct. Many of the most successful products on earth are suspended in the mature stage for as long as possible, undergoing minor updates and redesigns to keep them differentiated. Examples include [Apple](https://www.investopedia.com/insights/what-makes-aapl-valuable-company/) computers and iPhones, Ford's best-selling trucks, and Starbucks' coffee—all of which undergo minor changes accompanied by marketing efforts—are designed to keep them feeling unique and special in the eyes of consumers. ## Examples of Product Life Cycles Many [brands](https://www.investopedia.com/terms/b/brand.asp) that were American icons have dwindled and died. Better management of product life cycles might have saved some of them—or perhaps their time had just come. ### Oldsmobile Oldsmobile began producing cars in 1897. After merging with General Motors in 1908, the company used the first V-8 engine in 1916. By 1935, the one millionth Oldsmobile had been built. In 1984, Oldsmobile sales peaked, selling more cars in that year than any other year. By 2000, General Motors announced it would phase out the automobile and, on April 29th, 2004, the last Oldsmobile was built. ### Woolworth Co. In 1905, Frank Winfield Woolworth incorporated F.W. Woolworth Co., a general merchandise retail store. By 1929, Woolworth had about 2,250 outlet stores across the United States and Britain, Decades later, due to increased competition from other discount retailors, Woolworth closed the last of its variety stores in the United States in 1997 to increasingly focus on sporting goods. ### Coca-Cola On April 23, 1985, Coca-Cola announced a new formula for its popular beverage, referred to as "new Coke." Coca-Cola's market-share lead had been decreasing over the past 15 years, and the company decided to launch a new recipe in hopes of reinvigorating product interest. After its launch, Coca-Cola's phone line began receiving 1,500 calls per day, many of which were to complain about the change. Protest groups recruited 100,000 individuals to support their cause of bringing "old" Coke back. A stunning 79 days after its launch, "new Coke's" [full product life cycle](https://www.investopedia.com/financial-edge/0111/5-products-that-failed-and-why.aspx) was complete. Though the product didn't experience much growth or maturity, its introduction to the market was met with heavy protest. Less than three months after it announced its new recipe, Coca-Cola announced it would revert its product back to the original recipe. ## What Are the Stages of the Product Life Cycle? The product life cycle is defined as four distinct stages: product introduction, growth, maturity, and decline. The amount of time spent in each stage will vary from product to product, and different companies have different strategic approaches to transitioning from one phase to the next. ## What Are Product Life Cycle Strategies? Depending on the stage a product is in, a company may adopt different strategies along the product life cycle. For example, a company is more likely to incur heavy marketing and R&D costs in the introduction stage. As the product becomes more mature, companies may then turn to improving product quality, entering new segments, or increasing distribution channels. Companies also strategically approach divesting from product lines including the sale of divisions or discontinuation of goods. ## What Is Product Life Cycle Management? Product life cycle management is the act of overseeing a product's performance over the course of its life. Throughout the different stages of product life cycle, a company enacts strategies and changes based on how the market is receiving a good. ## Why Is Product Life Cycle Important? Product life cycle is important because it informs management of how its product is performing and what strategic approaches it may take. By being informed of which stage its product(s) are in, a company can change how it spends resources, which products to push, how to allocate staff time, and what innovations they want to research next. ## Which Factors Impact a Product's Life Cycle? Countless factors can affect how a product performs and where it lies within the product life cycle. In general, the product life cycle is heavily impacted by market adoption, ease of competitive entry, rate of industry innovation, and changes to consumer preferences. If it is easier for competitors to enter markets, consumers change their mind frequently about the goods they consume or the market becomes quickly saturated. Then, products are more likely to have shorter lives throughout a product life cycle. ## The Bottom Line Broadly speaking, almost every product sold undergoes the product life cycle. This cycle of market introduction, growth, maturity, and decline may vary from product to product—or industry to industry. However, this cycle informs a company of how to best utilize its resources, what the future outlook of their product is, and how to strategically plan for bringing new products to market.

What Is the Product Life Cycle? The term product life cycle refers to the length of time from when a product is introduced to consumers into the market until it's removed from the shelves. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging. The process of strategizing ways to continuously support and maintain a product is called product life cycle management. Key Takeaways A product life cycle is the amount of time a product goes from being introduced into the market until it's taken off the shelves.There are four stages in a product's life cycle—introduction, growth, maturity, and decline.A company often incurs higher marketing costs when introducing a product to the market but experiences higher sales as product adoption grows. Sales stabilize and peak when the product's adoption matures, though competition and obsolescence may cause its decline. The concept of product life cycle helps inform business decision-making, from pricing and promotion to expansion or cost-cutting. Investopedia / Xiaojie Liu How the Product Life Cycle Works Products, like people, have life cycles. The life cycle of a product is broken into four stages—introduction, growth, maturity, and decline. A product begins with an idea, and within the confines of modern business, it isn't likely to go further until it undergoes research and development (R&D) and is found to be feasible and potentially profitable. At that point, the product is produced, marketed, and rolled out. Some product life cycle models include product development as a stage, though at this point, the product has not yet been brought to customers. As mentioned above, there are four generally accepted stages in the life cycle of a product. Here are details about each one. Introduction Stage The introduction phase is the first time customers are introduced to the new product. A company must generally includes a substantial investment in advertising and a marketing campaign focused on making consumers aware of the product and its benefits, especially if it is broadly unknown what the item will do. During the introduction stage, there is often little-to-no competition for a product, as competitors may just be getting a first look at the new offering. However, companies still often experience negative financial results at this stage as sales tend to be lower, promotional pricing may be low to drive customer engagement, and the sales strategy is still being evaluated. Growth Stage If the product is successful, it then moves to the growth stage. This is characterized by growing demand, an increase in production, and expansion in its availability. The amount of time spent in the introduction phase before a company's product experiences strong growth will vary from between industries and products. During the growth phase, the product becomes more popular and recognizable. A company may still choose to invest heavily in advertising if the product faces heavy competition. However, marketing campaigns will likely be geared towards differentiating its product from others as opposed to introducing the goods to the market. A company may also refine its product by improving functionality based on customer feedback. Financially, the growth period of the product life cycle results in increased sales and higher revenue. As competition begins to offer rival products, competition increases, potentially forcing the company to decrease prices and experience lower margins. Maturity Stage The maturity stage of the product life cycle is the most profitable stage, the time when the costs of producing and marketing decline. With the market saturated with the product, competition now higher than at other stages, and profit margins starting to shrink, some analysts refer to the maturity stage as when sales volume is "maxed out". Depending on the good, a company may begin deciding how to innovate its product or introduce new ways to capture a larger market presence. This includes getting more feedback from customers, and researching their demographics and their needs. During the maturity stage, competition is at the highest level. Rival companies have had enough time to introduce competing and improved products, and competition for customers is usually highest. Sales levels stabilize, and a company strives to have its product exist in this maturity stage for as long as possible. A new product needs to be explained, while a mature product needs to be differentiated. Decline Stage As the product takes on increased competition as other companies emulate its success, the product may lose market share and begin its decline. Product sales begin to drop due to market saturation and alternative products, and the company may choose to not pursue additional marketing efforts as customers may already have determined whether they are loyal to the company's products or not. Should a product be entirely retired, the company will stop generating support for it and will entirely phase out marketing endeavors. Alternatively, the company may decide to revamp the product or introduce a next-generation, completely overhauled model. If the upgrade is substantial enough, the company may choose to re-enter the product life cycle by introducing the new version to the market. The stage of a product's life cycle impacts the way in which it is marketed to consumers. A new product needs to be explained, while a mature product needs to be differentiated from its competitors. Advantages of Using the Product Life Cycle The product life cycle better allows marketers and business developers to better understand how each product or brand sits with a company's portfolio. This enables the company to internally shift resources to specific products based on those products' positioning within the product life cycle. For example, a company may decide to reallocate market staff time to products entering the introduction or growth stages. Alternatively, it may need to invest more cost of labor in engineers or customer service technicians as the product matures. The product life cycle naturally tends to have a positive impact on economic growth, as it promotes innovation and discourages supporting outdated products. As products move through the life cycle stages, companies that use the product life cycle can realize the need to make their products more effective, safer, efficient, faster, cheaper, or better suited to client needs. Limitations of Using the Product Life Cycle Despite its utility for planning and analysis, the product life cycle doesn't pertain to every industry and doesn't work consistently across all products. Consider popular beverage lines whose primary products have been in the maturity stage for decades, while spin-offs or variations of these drinks from the same company have failed. The product life cycle also may be artificial in industries with legal or trademark restrictions. Consider the new patent term of 20 years from which the application for the patent was filed in the United States. Though a drug may be just entering their growth stage, it may be adversely impacted by competition when its patent ends regardless of which stage it is in. Another unfortunate side effect of the product life cycle is prospective planned obsolescence. When a product enters the maturity stage, a company may be tempted to begin planning its replacement. This may be the case even if the existing product still holds many benefits for customers and still has a long shelf life. For producers who tend to introduce new products every few years, this may lead to product waste and inefficient use of product development resources. Notification messages such as Microsoft's alert that Windows 8.1 will sunset on January 2023 is an example of decline. Due to obsolescence of the operating system, Microsoft is choosing to no longer support the product and instead focus resources on newer technologies. Product Life Cycle vs. BCG Matrix A similar analytical tool to determine the market positioning of a product is the Boston Consulting Group (BCG) Matrix. This four-square table defines products based on their market growth and market share: "Stars" are products with high market growth and high market share. "Cash cows" are products with low market growth and high market share. "Question marks," also known as "problem children," are products with high market growth and low market share. "Dogs" are products with low market growth and low market share. Although there is no direct relationship between the matrix and the product life cycle concept, both analyze a product's market growth and saturation. However, the BCG Matrix does not traditionally communicate the direction in which a product will move. For example, a product that has entered the maturity stage of the product life cycle will likely experience decline next; the BCG Matrix does not communicate this product flow in its visual depiction. Introduction and Maturity: Special Considerations Companies that have a good handle on all four stages can increase profitability and maximize their returns. Those that aren't able to may experience an increase in their marketing and production costs, ultimately leading to the limited shelf life for their product(s). Back in 1965, Theodore Levitt, a marketing professor, wrote in the Harvard Business Review that the innovator is the one with the most to lose because so many truly new products fail at the first phase of their life cycle—the introductory stage. The failure comes only after the investment of substantial money and time into research, development, and production. This fact prevents many companies from even trying anything really new. Instead, he said, they wait for someone else to succeed and then clone the success. To cite an established and still-thriving industry, television program distribution has related products in all stages of the product life cycle. OLED TVs are in the mature phase, programming-on-demand is in the growth stage, DVDs are in decline, and the videocassette is extinct. Many of the most successful products on earth are suspended in the mature stage for as long as possible, undergoing minor updates and redesigns to keep them differentiated. Examples include Apple computers and iPhones, Ford's best-selling trucks, and Starbucks' coffee—all of which undergo minor changes accompanied by marketing efforts—are designed to keep them feeling unique and special in the eyes of consumers. Examples of Product Life Cycles Many brands that were American icons have dwindled and died. Better management of product life cycles might have saved some of them—or perhaps their time had just come. Oldsmobile Oldsmobile began producing cars in 1897. After merging with General Motors in 1908, the company used the first V-8 engine in 1916. By 1935, the one millionth Oldsmobile had been built. In 1984, Oldsmobile sales peaked, selling more cars in that year than any other year. By 2000, General Motors announced it would phase out the automobile and, on April 29th, 2004, the last Oldsmobile was built. Woolworth Co. In 1905, Frank Winfield Woolworth incorporated F.W. Woolworth Co., a general merchandise retail store. By 1929, Woolworth had about 2,250 outlet stores across the United States and Britain, Decades later, due to increased competition from other discount retailors, Woolworth closed the last of its variety stores in the United States in 1997 to increasingly focus on sporting goods. Coca-Cola On April 23, 1985, Coca-Cola announced a new formula for its popular beverage, referred to as "new Coke." Coca-Cola's market-share lead had been decreasing over the past 15 years, and the company decided to launch a new recipe in hopes of reinvigorating product interest. After its launch, Coca-Cola's phone line began receiving 1,500 calls per day, many of which were to complain about the change. Protest groups recruited 100,000 individuals to support their cause of bringing "old" Coke back. A stunning 79 days after its launch, "new Coke's" full product life cycle was complete. Though the product didn't experience much growth or maturity, its introduction to the market was met with heavy protest. Less than three months after it announced its new recipe, Coca-Cola announced it would revert its product back to the original recipe. What Are the Stages of the Product Life Cycle? The product life cycle is defined as four distinct stages: product introduction, growth, maturity, and decline. The amount of time spent in each stage will vary from product to product, and different companies have different strategic approaches to transitioning from one phase to the next. What Are Product Life Cycle Strategies? Depending on the stage a product is in, a company may adopt different strategies along the product life cycle. For example, a company is more likely to incur heavy marketing and R&D costs in the introduction stage. As the product becomes more mature, companies may then turn to improving product quality, entering new segments, or increasing distribution channels. Companies also strategically approach divesting from product lines including the sale of divisions or discontinuation of goods. What Is Product Life Cycle Management? Product life cycle management is the act of overseeing a product's performance over the course of its life. Throughout the different stages of product life cycle, a company enacts strategies and changes based on how the market is receiving a good. Why Is Product Life Cycle Important? Product life cycle is important because it informs management of how its product is performing and what strategic approaches it may take. By being informed of which stage its product(s) are in, a company can change how it spends resources, which products to push, how to allocate staff time, and what innovations they want to research next. Which Factors Impact a Product's Life Cycle? Countless factors can affect how a product performs and where it lies within the product life cycle. In general, the product life cycle is heavily impacted by market adoption, ease of competitive entry, rate of industry innovation, and changes to consumer preferences. If it is easier for competitors to enter markets, consumers change their mind frequently about the goods they consume or the market becomes quickly saturated. Then, products are more likely to have shorter lives throughout a product life cycle. The Bottom Line Broadly speaking, almost every product sold undergoes the product life cycle. This cycle of market introduction, growth, maturity, and decline may vary from product to product—or industry to industry. However, this cycle informs a company of how to best utilize its resources, what the future outlook of their product is, and how to strategically plan for bringing new products to market.

https://www.investopedia.com/use-social-media-to-grow-business-8391642

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> You can leverage social media marketing to grow your business in many ways, from building your brand to engaging with customers. But no matter your business goal, you’ll want to be sure you’re using the right <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-media.asp">social media</a> tool for your needs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Choosing the best social media <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">marketing</a> tool and learning how to use it effectively can give you a consistent online presence that can help you grow your business with an affordable strategy. Learn how to leverage social media to help you meet revenue targets, attract new customers, and more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Effectively using social media can help you establish an online brand presence that embodies your brand’s mission, values, and offerings.</li><li>Social media metrics can help you gain valuable insights into your customer base to help further inform your marketing and business development strategies.</li><li>Before committing to a social media platform (or several), research how much the business tools cost (many are free), and which platforms your target audience use most.</li><li>Consistency is key when it comes to leveraging social media for your business, so consider how you will leverage a content calendar to engage with your customers, generate leads, and promote your products or services.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-to-use-social-media-to-grow-your-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> How to Use Social Media to Grow Your Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-media-marketing-smm.asp">Social media marketing</a>, also called digital marketing or e-marketing, leverages various online social media platforms to connect business owners and brands with their existing or target audiences. Social media also generates purpose-built <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/data-analytics.asp">data analytics</a> that provide excellent, detailed metrics to help you understand whether certain products, services, or approaches are really in demand with customers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Online, you can easily share information with customers, learn about competitors, build brand awareness, accept online sales, and drive long-term business growth. Some social media platforms even pay for catchy content that keeps users on their platforms and off competitor sites. So, developing a strong online presence could pay off in more ways than one. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Social media <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/metrics.asp">metrics</a> can be used to gain valuable data, such as customer data (email addresses, phone numbers, etc.), audience engagement (likes, comments, shares, clicks), referrals, and conversions. This feedback can help businesses improve products and social marketing strategies. Also, you can compare your brand’s online performance and adjust in real time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Social media is a low-cost beta-testing opportunity and marketing tool that can turn into its own revenue source.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-subheading__text"> Business Branding </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Social media platforms are capable of reaching a very wide audience, so they are great vehicles to showcase your products, services, and brand personality. Brand identity incorporates the visual elements that translate the mission, vision, and values of your business. This can include the symbols, colors, and unique designs that a business will use consistently over time. The most visible element of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brand-identity.asp">brand identity</a> is the company logo, which should be distinctive from competitors and easily recognizable by customers.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Your slogan or mission statement is the written or spoken elements that share what the company stands for and its values. While many <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small business</a> owners may think brand identity is only about packaging, it is so much more. Identity helps customers feel connected with the people behind the company—its founders, employees, designers, and/or key spokespeople—and the company’s main mission. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-social-media-platforms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Social Media Platforms </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> There were 4.95 billion social media users in the world, or roughly 61.4% of the global population, as of October 2023, according to global statistics from DataReportal.<span class="ql-inline-citation" data-cite="2"></span> This total is spread out across multiple popular platforms that target different audiences and can be used for different marketing strategies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Here are some of the most prominent platforms in the United States (although there are many global options as well): </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp"><strong>Facebook</strong></a>: Facebook is the most popular global platform, with a cross-generational demographic of nearly 3 billion monthly active users.<span class="ql-inline-citation" data-cite="3"></span> A wide range of businesses can benefit by creating business pages that automatically cross-posts content on Instagram, which can act as an online store, too. Facebook groups also build a sense of community, allowing for moderated or unmoderated conversations between like-minded people.</li> <li><strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/120114/how-does-twitter-twtr-make-money.asp">X</a> </strong>(formerly known as Twitter): X is useful for real-time updates, customer engagement, and businesses looking to share concise information. This character-limited text platform has recently undergone a rebrand under its new ownership. Some users have closed their accounts, while others have upgraded to X Premium, a fee-based subscription that allows for greater visibility.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="4"></span></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-tiktok-4588933"><strong>TikTok</strong></a>: While TikTok started off as a place to do silly voiceover videos, it is fast superseding Instagram as the place for visual content. Despite concerns over data security, many content creators continue to find it easy to create and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/monetize.asp">monetize</a> viral TikTok content that builds brand awareness and audience popularity. Many businesses that create TikToks cross-post them on Instagram as well.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/102615/story-instagram-rise-1-photo0sharing-app.asp"><strong>Instagram</strong></a>: Instagram is a photo-sharing platform owned by Meta, which also owns Facebook. Instagram is designed for visual content, like photos or videos of travel, food, or lifestyle brands.</li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/120214/how-does-linkedin-lnkd-make-money.asp"><strong>LinkedIn</strong></a>: LinkedIn is a more professional and business-oriented platform, originally created to connect employees with recruiters and hiring companies. Companies often find success advertising jobs on the platform or creating newsletters that gain media attention.</li> <li><a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/022415/how-pinterest-makes-money.asp"><strong>Pinterest</strong></a>: Pinterest is a photo-focused search engine site. It has a strong, predominantly female demographic who uses the platform to create visual shopping lists for arts, crafts, events, and design projects.<span class="ql-inline-citation" data-cite="5"></span></li> <li><a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/022415/how-make-money-youtube.asp"><strong>YouTube</strong></a>: YouTube includes longer-form video content that is too lengthy for TikTok and Instagram’s normal 30-second snippets. Here, business owners can offer password-protected or publicly available content, ideal for tours, tutorials, staff introductions, industry explainers, and webinars, as well as unique content that can attract viewers and customers.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Before committing to a platform, understand how they work, how much they cost (many are free), and which platform your target audience uses most.</p></div></div></div> <span class="heading-toc" id="toc-consistent-posting"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Consistent Posting </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Consistent posting is key to making the most of your online presence. Develop a content calendar to regularly schedule messages for your audience. The algorithms behind each platform change all the time, but the more content you produce, the more the platforms boost your content to ever-larger audiences. This often means posting daily for at least 30 days at a time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> When in doubt, look at competitors’ social media pages to learn from their successes and failures, to adapt your content toward industry trends and audience interest. Solo entrepreneurs may find this cadence of content production and competitor listening overwhelming. Hiring project-based freelancers can help. Community managers, copywriters, graphic designers, filmmakers, and editors can be hired at varying prices to do this work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_35-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_36-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Social media aggregators like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-social-media-management-software-5087716#toc-best-for-analytics-hootsuite">Hootsuite</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-social-media-management-software-5087716#toc-best-overall-sprout-social">Sprout Social</a> manage all your accounts on one dashboard. They can save you the time of posting multiple times a day and provide statistics to help you measure your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/returnoninvestment.asp">return on investment (ROI)</a>.</p></div></div></div> <span class="heading-toc" id="toc-customer-engagement"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Customer Engagement </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Engaging with your customers goes beyond posting content. You can interact with your audience directly through comments, likes, shares, and messages. Marketing strategies such as hosting live videos, Q&amp;A sessions, and giveaways can help you foster a personal connection with your audience, which can ultimately lead to sales. Be responsive to online interest by responding promptly to comments and messages. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Many business owners add a chatbot to their Facebook accounts to simulate a customer service exchange and field frequently asked questions. This is just one way to keep users on the platform, out of your email inbox, and off your customer service line. Remember, social media is often about two-way communication, and you should have a strategy in your social media plan to respond to comments and queries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-lead-generation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Lead Generation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Social media is an ideal way to search for potential customers who may be interested in your product. You can attract them with unique or informative content and eventually convert them into clients. Social media allows you to test concepts with audiences even before you invest any money in developing new products or services. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Try putting up images of a prototype to gauge interest or accept presales. Create surveys to ask existing customers what you should develop next and how much they would be willing to pay for the new offering. Social media is one of the best ways for businesses of all sizes to reach new customers and design products and services that people are willing to buy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <span class="heading-toc" id="toc-paid-advertising"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> Paid Advertising </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> While organic reach is valuable, many small businesses can benefit by paying a small fee to advertise to new audiences. Each platform has a different set of paid advertising options, but most entail a campaign that puts your video or visual content in front of your target demographic. This can drive traffic to your business’s website or store, leading to increased sales. It can also eliminate the need for an expensive PR company or marketing consultant. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> For just a few dollars per day, your business could advertise its services to hundreds if not thousands of potential clients. Often, you can specify desired age group, gender, and location, and the platform will put your content in front of the right audience. Budgets for paid ads can vary in price (typically $1 to $50 a day, depending on how many people you want to reach) and minimum time periods to run campaigns (typically around 30 days).<span class="ql-inline-citation" data-cite="6"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_52-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_53-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>Paid ads on social media are not a “set it and forget it” kind of marketing tool. Instead, you can change keywords, demographics, images, and even wording throughout the campaign. Unlike with radio and TV, you have control over changing your ads.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_54-0"><span class="heading-toc" id="toc-how-can-social-media-help-a-business-to-grow"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Social Media Help a Business to Grow?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Social media platforms can play a significant role in helping a business grow in several ways. They can help you increase brand visibility, improve audience engagement, and generate leads. Social media platforms can also provide a way to leverage targeted advertising and garner customer insights. Finally, it can help with content distribution, sales, and conversions.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_56-0"><span class="heading-toc" id="toc-what-is-the-best-social-media-platform-for-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Best Social Media Platform for Businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Each business will have different target audiences and goals, and different ideal social media platforms. However, some of the most popular platforms for businesses include Facebook, Instagram, LinkedIn, Pinterest, TikTok, X, and YouTube.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-how-often-should-a-business-post-on-social-media"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Often Should a Business Post on Social Media?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Each business has to define its specific goals and audience to determine how frequently to post on social media. Also, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/algorithm.asp">algorithms</a> that govern each social media site differ slightly in how they reward frequent posters or paid accounts. Consistency and engagement with the target audience matter more than just the number of posts. According to Hootsuite research, some ideal target ranges are:<span class="ql-inline-citation" data-cite="7"></span></p><ul><li><strong>Pinterest</strong>: 1 post per week.</li><li><strong>X (formerly Twitter)</strong>: 2–3 posts per day; pay attention to hashtags.</li><li><strong>Instagram</strong>: 3–5 posts per week, including stories, lives, reels, and posts.</li><li><strong>Meta (Facebook)</strong>: 1–2 posts per day, including posts, lives, etc.</li><li><strong>TikTok</strong>: 3–5 posts per week.</li><li><strong>LinkedIn</strong>: 1–2 posts per day.</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-can-you-promote-your-business-on-social-media-for-free"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Promote Your Business on Social Media for Free?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can promote your business on social media for free. Many social media platforms allow businesses to create free profiles and post content without any cost. Organic reach can help you connect with your existing audience, but it might not reach as many prospective customers as you’d like. Over time, you might want to consider paying for a modest amount of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/target-market.asp">targeted advertising</a> to reach a broader audience.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Using the right social media platforms in the best way can help your business grow significantly. As you review all your options for leveraging social media, keep your main business goals and budget in mind. Marketing via social media can help you reach a wide audience to generate leads, build your brand, engage audiences, and target advertising, among many other benefits. </p></div>

You can leverage social media marketing to grow your business in many ways, from building your brand to engaging with customers. But no matter your business goal, you’ll want to be sure you’re using the right [social media](https://www.investopedia.com/terms/s/social-media.asp) tool for your needs. Choosing the best social media [marketing](https://www.investopedia.com/terms/m/marketing.asp) tool and learning how to use it effectively can give you a consistent online presence that can help you grow your business with an affordable strategy. Learn how to leverage social media to help you meet revenue targets, attract new customers, and more. ### Key Takeaways * Effectively using social media can help you establish an online brand presence that embodies your brand’s mission, values, and offerings. * Social media metrics can help you gain valuable insights into your customer base to help further inform your marketing and business development strategies. * Before committing to a social media platform (or several), research how much the business tools cost (many are free), and which platforms your target audience use most. * Consistency is key when it comes to leveraging social media for your business, so consider how you will leverage a content calendar to engage with your customers, generate leads, and promote your products or services. ## How to Use Social Media to Grow Your Business [Social media marketing](https://www.investopedia.com/terms/s/social-media-marketing-smm.asp), also called digital marketing or e-marketing, leverages various online social media platforms to connect business owners and brands with their existing or target audiences. Social media also generates purpose-built [data analytics](https://www.investopedia.com/terms/d/data-analytics.asp) that provide excellent, detailed metrics to help you understand whether certain products, services, or approaches are really in demand with customers. Online, you can easily share information with customers, learn about competitors, build brand awareness, accept online sales, and drive long-term business growth. Some social media platforms even pay for catchy content that keeps users on their platforms and off competitor sites. So, developing a strong online presence could pay off in more ways than one. Social media [metrics](https://www.investopedia.com/terms/m/metrics.asp) can be used to gain valuable data, such as customer data (email addresses, phone numbers, etc.), audience engagement (likes, comments, shares, clicks), referrals, and conversions. This feedback can help businesses improve products and social marketing strategies. Also, you can compare your brand’s online performance and adjust in real time. ### Note Social media is a low-cost beta-testing opportunity and marketing tool that can turn into its own revenue source. ### Business Branding Social media platforms are capable of reaching a very wide audience, so they are great vehicles to showcase your products, services, and brand personality. Brand identity incorporates the visual elements that translate the mission, vision, and values of your business. This can include the symbols, colors, and unique designs that a business will use consistently over time. The most visible element of [brand identity](https://www.investopedia.com/terms/b/brand-identity.asp) is the company logo, which should be distinctive from competitors and easily recognizable by customers. Your slogan or mission statement is the written or spoken elements that share what the company stands for and its values. While many [small business](https://www.investopedia.com/small-business-4427743) owners may think brand identity is only about packaging, it is so much more. Identity helps customers feel connected with the people behind the company—its founders, employees, designers, and/or key spokespeople—and the company’s main mission. ## Social Media Platforms There were 4.95 billion social media users in the world, or roughly 61.4% of the global population, as of October 2023, according to global statistics from DataReportal. This total is spread out across multiple popular platforms that target different audiences and can be used for different marketing strategies. Here are some of the most prominent platforms in the United States (although there are many global options as well): * [**Facebook**](https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp): Facebook is the most popular global platform, with a cross-generational demographic of nearly 3 billion monthly active users. A wide range of businesses can benefit by creating business pages that automatically cross-posts content on Instagram, which can act as an online store, too. Facebook groups also build a sense of community, allowing for moderated or unmoderated conversations between like-minded people. * **[X](https://www.investopedia.com/ask/answers/120114/how-does-twitter-twtr-make-money.asp)** (formerly known as Twitter): X is useful for real-time updates, customer engagement, and businesses looking to share concise information. This character-limited text platform has recently undergone a rebrand under its new ownership. Some users have closed their accounts, while others have upgraded to X Premium, a fee-based subscription that allows for greater visibility. * [**TikTok**](https://www.investopedia.com/what-is-tiktok-4588933): While TikTok started off as a place to do silly voiceover videos, it is fast superseding Instagram as the place for visual content. Despite concerns over data security, many content creators continue to find it easy to create and [monetize](https://www.investopedia.com/terms/m/monetize.asp) viral TikTok content that builds brand awareness and audience popularity. Many businesses that create TikToks cross-post them on Instagram as well. * [**Instagram**](https://www.investopedia.com/articles/investing/102615/story-instagram-rise-1-photo0sharing-app.asp): Instagram is a photo-sharing platform owned by Meta, which also owns Facebook. Instagram is designed for visual content, like photos or videos of travel, food, or lifestyle brands. * [**LinkedIn**](https://www.investopedia.com/ask/answers/120214/how-does-linkedin-lnkd-make-money.asp): LinkedIn is a more professional and business-oriented platform, originally created to connect employees with recruiters and hiring companies. Companies often find success advertising jobs on the platform or creating newsletters that gain media attention. * [**Pinterest**](https://www.investopedia.com/articles/personal-finance/022415/how-pinterest-makes-money.asp): Pinterest is a photo-focused search engine site. It has a strong, predominantly female demographic who uses the platform to create visual shopping lists for arts, crafts, events, and design projects. * [**YouTube**](https://www.investopedia.com/articles/personal-finance/022415/how-make-money-youtube.asp): YouTube includes longer-form video content that is too lengthy for TikTok and Instagram’s normal 30-second snippets. Here, business owners can offer password-protected or publicly available content, ideal for tours, tutorials, staff introductions, industry explainers, and webinars, as well as unique content that can attract viewers and customers. ### Before committing to a platform, understand how they work, how much they cost (many are free), and which platform your target audience uses most. ## Consistent Posting Consistent posting is key to making the most of your online presence. Develop a content calendar to regularly schedule messages for your audience. The algorithms behind each platform change all the time, but the more content you produce, the more the platforms boost your content to ever-larger audiences. This often means posting daily for at least 30 days at a time. When in doubt, look at competitors’ social media pages to learn from their successes and failures, to adapt your content toward industry trends and audience interest. Solo entrepreneurs may find this cadence of content production and competitor listening overwhelming. Hiring project-based freelancers can help. Community managers, copywriters, graphic designers, filmmakers, and editors can be hired at varying prices to do this work. ### Note Social media aggregators like [Hootsuite](https://www.investopedia.com/best-social-media-management-software-5087716#toc-best-for-analytics-hootsuite) and [Sprout Social](https://www.investopedia.com/best-social-media-management-software-5087716#toc-best-overall-sprout-social) manage all your accounts on one dashboard. They can save you the time of posting multiple times a day and provide statistics to help you measure your [return on investment (ROI)](https://www.investopedia.com/terms/r/returnoninvestment.asp). ## Customer Engagement Engaging with your customers goes beyond posting content. You can interact with your audience directly through comments, likes, shares, and messages. Marketing strategies such as hosting live videos, Q&A sessions, and giveaways can help you foster a personal connection with your audience, which can ultimately lead to sales. Be responsive to online interest by responding promptly to comments and messages. Many business owners add a chatbot to their Facebook accounts to simulate a customer service exchange and field frequently asked questions. This is just one way to keep users on the platform, out of your email inbox, and off your customer service line. Remember, social media is often about two-way communication, and you should have a strategy in your social media plan to respond to comments and queries. ## Lead Generation Social media is an ideal way to search for potential customers who may be interested in your product. You can attract them with unique or informative content and eventually convert them into clients. Social media allows you to test concepts with audiences even before you invest any money in developing new products or services. Try putting up images of a prototype to gauge interest or accept presales. Create surveys to ask existing customers what you should develop next and how much they would be willing to pay for the new offering. Social media is one of the best ways for businesses of all sizes to reach new customers and design products and services that people are willing to buy. ## Paid Advertising While organic reach is valuable, many small businesses can benefit by paying a small fee to advertise to new audiences. Each platform has a different set of paid advertising options, but most entail a campaign that puts your video or visual content in front of your target demographic. This can drive traffic to your business’s website or store, leading to increased sales. It can also eliminate the need for an expensive PR company or marketing consultant. For just a few dollars per day, your business could advertise its services to hundreds if not thousands of potential clients. Often, you can specify desired age group, gender, and location, and the platform will put your content in front of the right audience. Budgets for paid ads can vary in price (typically $1 to $50 a day, depending on how many people you want to reach) and minimum time periods to run campaigns (typically around 30 days).  ### Paid ads on social media are not a “set it and forget it” kind of marketing tool. Instead, you can change keywords, demographics, images, and even wording throughout the campaign. Unlike with radio and TV, you have control over changing your ads. ## How Can Social Media Help a Business to Grow? Social media platforms can play a significant role in helping a business grow in several ways. They can help you increase brand visibility, improve audience engagement, and generate leads. Social media platforms can also provide a way to leverage targeted advertising and garner customer insights. Finally, it can help with content distribution, sales, and conversions. ## What Is the Best Social Media Platform for Businesses? Each business will have different target audiences and goals, and different ideal social media platforms. However, some of the most popular platforms for businesses include Facebook, Instagram, LinkedIn, Pinterest, TikTok, X, and YouTube. ## How Often Should a Business Post on Social Media? Each business has to define its specific goals and audience to determine how frequently to post on social media. Also, the [algorithms](https://www.investopedia.com/terms/a/algorithm.asp) that govern each social media site differ slightly in how they reward frequent posters or paid accounts. Consistency and engagement with the target audience matter more than just the number of posts. According to Hootsuite research, some ideal target ranges are: * **Pinterest**: 1 post per week. * **X (formerly Twitter)**: 2–3 posts per day; pay attention to hashtags. * **Instagram**: 3–5 posts per week, including stories, lives, reels, and posts. * **Meta (Facebook)**: 1–2 posts per day, including posts, lives, etc. * **TikTok**: 3–5 posts per week. * **LinkedIn**: 1–2 posts per day. ## Can You Promote Your Business on Social Media for Free? You can promote your business on social media for free. Many social media platforms allow businesses to create free profiles and post content without any cost. Organic reach can help you connect with your existing audience, but it might not reach as many prospective customers as you’d like. Over time, you might want to consider paying for a modest amount of [targeted advertising](https://www.investopedia.com/terms/t/target-market.asp) to reach a broader audience. ## The Bottom Line Using the right social media platforms in the best way can help your business grow significantly. As you review all your options for leveraging social media, keep your main business goals and budget in mind. Marketing via social media can help you reach a wide audience to generate leads, build your brand, engage audiences, and target advertising, among many other benefits.

You can leverage social media marketing to grow your business in many ways, from building your brand to engaging with customers. But no matter your business goal, you’ll want to be sure you’re using the right social media tool for your needs. Choosing the best social media marketing tool and learning how to use it effectively can give you a consistent online presence that can help you grow your business with an affordable strategy. Learn how to leverage social media to help you meet revenue targets, attract new customers, and more. Key Takeaways Effectively using social media can help you establish an online brand presence that embodies your brand’s mission, values, and offerings.Social media metrics can help you gain valuable insights into your customer base to help further inform your marketing and business development strategies.Before committing to a social media platform (or several), research how much the business tools cost (many are free), and which platforms your target audience use most.Consistency is key when it comes to leveraging social media for your business, so consider how you will leverage a content calendar to engage with your customers, generate leads, and promote your products or services. How to Use Social Media to Grow Your Business Social media marketing, also called digital marketing or e-marketing, leverages various online social media platforms to connect business owners and brands with their existing or target audiences. Social media also generates purpose-built data analytics that provide excellent, detailed metrics to help you understand whether certain products, services, or approaches are really in demand with customers. Online, you can easily share information with customers, learn about competitors, build brand awareness, accept online sales, and drive long-term business growth. Some social media platforms even pay for catchy content that keeps users on their platforms and off competitor sites. So, developing a strong online presence could pay off in more ways than one. Social media metrics can be used to gain valuable data, such as customer data (email addresses, phone numbers, etc.), audience engagement (likes, comments, shares, clicks), referrals, and conversions. This feedback can help businesses improve products and social marketing strategies. Also, you can compare your brand’s online performance and adjust in real time. Note Social media is a low-cost beta-testing opportunity and marketing tool that can turn into its own revenue source. Business Branding Social media platforms are capable of reaching a very wide audience, so they are great vehicles to showcase your products, services, and brand personality. Brand identity incorporates the visual elements that translate the mission, vision, and values of your business. This can include the symbols, colors, and unique designs that a business will use consistently over time. The most visible element of brand identity is the company logo, which should be distinctive from competitors and easily recognizable by customers. Your slogan or mission statement is the written or spoken elements that share what the company stands for and its values. While many small business owners may think brand identity is only about packaging, it is so much more. Identity helps customers feel connected with the people behind the company—its founders, employees, designers, and/or key spokespeople—and the company’s main mission. Social Media Platforms There were 4.95 billion social media users in the world, or roughly 61.4% of the global population, as of October 2023, according to global statistics from DataReportal. This total is spread out across multiple popular platforms that target different audiences and can be used for different marketing strategies. Here are some of the most prominent platforms in the United States (although there are many global options as well): Facebook: Facebook is the most popular global platform, with a cross-generational demographic of nearly 3 billion monthly active users. A wide range of businesses can benefit by creating business pages that automatically cross-posts content on Instagram, which can act as an online store, too. Facebook groups also build a sense of community, allowing for moderated or unmoderated conversations between like-minded people. X (formerly known as Twitter): X is useful for real-time updates, customer engagement, and businesses looking to share concise information. This character-limited text platform has recently undergone a rebrand under its new ownership. Some users have closed their accounts, while others have upgraded to X Premium, a fee-based subscription that allows for greater visibility. TikTok: While TikTok started off as a place to do silly voiceover videos, it is fast superseding Instagram as the place for visual content. Despite concerns over data security, many content creators continue to find it easy to create and monetize viral TikTok content that builds brand awareness and audience popularity. Many businesses that create TikToks cross-post them on Instagram as well. Instagram: Instagram is a photo-sharing platform owned by Meta, which also owns Facebook. Instagram is designed for visual content, like photos or videos of travel, food, or lifestyle brands. LinkedIn: LinkedIn is a more professional and business-oriented platform, originally created to connect employees with recruiters and hiring companies. Companies often find success advertising jobs on the platform or creating newsletters that gain media attention. Pinterest: Pinterest is a photo-focused search engine site. It has a strong, predominantly female demographic who uses the platform to create visual shopping lists for arts, crafts, events, and design projects. YouTube: YouTube includes longer-form video content that is too lengthy for TikTok and Instagram’s normal 30-second snippets. Here, business owners can offer password-protected or publicly available content, ideal for tours, tutorials, staff introductions, industry explainers, and webinars, as well as unique content that can attract viewers and customers. Before committing to a platform, understand how they work, how much they cost (many are free), and which platform your target audience uses most. Consistent Posting Consistent posting is key to making the most of your online presence. Develop a content calendar to regularly schedule messages for your audience. The algorithms behind each platform change all the time, but the more content you produce, the more the platforms boost your content to ever-larger audiences. This often means posting daily for at least 30 days at a time. When in doubt, look at competitors’ social media pages to learn from their successes and failures, to adapt your content toward industry trends and audience interest. Solo entrepreneurs may find this cadence of content production and competitor listening overwhelming. Hiring project-based freelancers can help. Community managers, copywriters, graphic designers, filmmakers, and editors can be hired at varying prices to do this work. Note Social media aggregators like Hootsuite and Sprout Social manage all your accounts on one dashboard. They can save you the time of posting multiple times a day and provide statistics to help you measure your return on investment (ROI). Customer Engagement Engaging with your customers goes beyond posting content. You can interact with your audience directly through comments, likes, shares, and messages. Marketing strategies such as hosting live videos, Q&A sessions, and giveaways can help you foster a personal connection with your audience, which can ultimately lead to sales. Be responsive to online interest by responding promptly to comments and messages. Many business owners add a chatbot to their Facebook accounts to simulate a customer service exchange and field frequently asked questions. This is just one way to keep users on the platform, out of your email inbox, and off your customer service line. Remember, social media is often about two-way communication, and you should have a strategy in your social media plan to respond to comments and queries. Lead Generation Social media is an ideal way to search for potential customers who may be interested in your product. You can attract them with unique or informative content and eventually convert them into clients. Social media allows you to test concepts with audiences even before you invest any money in developing new products or services. Try putting up images of a prototype to gauge interest or accept presales. Create surveys to ask existing customers what you should develop next and how much they would be willing to pay for the new offering. Social media is one of the best ways for businesses of all sizes to reach new customers and design products and services that people are willing to buy. Paid Advertising While organic reach is valuable, many small businesses can benefit by paying a small fee to advertise to new audiences. Each platform has a different set of paid advertising options, but most entail a campaign that puts your video or visual content in front of your target demographic. This can drive traffic to your business’s website or store, leading to increased sales. It can also eliminate the need for an expensive PR company or marketing consultant. For just a few dollars per day, your business could advertise its services to hundreds if not thousands of potential clients. Often, you can specify desired age group, gender, and location, and the platform will put your content in front of the right audience. Budgets for paid ads can vary in price (typically $1 to $50 a day, depending on how many people you want to reach) and minimum time periods to run campaigns (typically around 30 days).  Paid ads on social media are not a “set it and forget it” kind of marketing tool. Instead, you can change keywords, demographics, images, and even wording throughout the campaign. Unlike with radio and TV, you have control over changing your ads. How Can Social Media Help a Business to Grow? Social media platforms can play a significant role in helping a business grow in several ways. They can help you increase brand visibility, improve audience engagement, and generate leads. Social media platforms can also provide a way to leverage targeted advertising and garner customer insights. Finally, it can help with content distribution, sales, and conversions. What Is the Best Social Media Platform for Businesses? Each business will have different target audiences and goals, and different ideal social media platforms. However, some of the most popular platforms for businesses include Facebook, Instagram, LinkedIn, Pinterest, TikTok, X, and YouTube. How Often Should a Business Post on Social Media? Each business has to define its specific goals and audience to determine how frequently to post on social media. Also, the algorithms that govern each social media site differ slightly in how they reward frequent posters or paid accounts. Consistency and engagement with the target audience matter more than just the number of posts. According to Hootsuite research, some ideal target ranges are:Pinterest: 1 post per week.X (formerly Twitter): 2–3 posts per day; pay attention to hashtags.Instagram: 3–5 posts per week, including stories, lives, reels, and posts.Meta (Facebook): 1–2 posts per day, including posts, lives, etc.TikTok: 3–5 posts per week.LinkedIn: 1–2 posts per day. Can You Promote Your Business on Social Media for Free? You can promote your business on social media for free. Many social media platforms allow businesses to create free profiles and post content without any cost. Organic reach can help you connect with your existing audience, but it might not reach as many prospective customers as you’d like. Over time, you might want to consider paying for a modest amount of targeted advertising to reach a broader audience. The Bottom Line Using the right social media platforms in the best way can help your business grow significantly. As you review all your options for leveraging social media, keep your main business goals and budget in mind. Marketing via social media can help you reach a wide audience to generate leads, build your brand, engage audiences, and target advertising, among many other benefits.

https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> If you're wondering how to obtain <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">financing</a> to expand your small business, a loan from the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> may be just the solution that you need. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Low-interest, long-term SBA loans are a viable option for business owners suffering substantial disaster-related physical or economic damage or who want to grow their business and can’t obtain other nongovernment financing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p><br/></p> <ul> <li>PPP loans are provided by private lenders, while EIDL loans and SVO grants are generated with funds provided by the government.</li> <li>SBA business expansion loans are guaranteed loans with funds coming from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-sba-lenders-5091699">approved private lenders</a>.</li> <li>Additional SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, Loan Deferrals, and several others.</li> </ul></div></div></div> <span class="heading-toc" id="toc-consolidated-appropriations-act-2021--american-rescue-plan-act-2021"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Consolidated Appropriations Act, 2021 &amp; American Rescue Plan Act, 2021 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Neither the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226">Consolidated Appropriations Act (CAA) of 2021</a> nor the American Rescue Plan Act, 2021 are government loan programs per se. They are laws, passed by Congress, that provide additional funding and rule changes for several government programs, including the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195">Paycheck Protection Program (PPP)</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134">Economic Injury Disaster Loan (EIDL)</a> program, and EIDL advances. Also included is funding for a new Shuttered Venue Operator (SVO) Grant program.<span class="ql-inline-citation" data-cite="55"></span><span class="ql-inline-citation" data-cite="43"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Descriptions of the programs below reflect changes made by the CAA and the American Rescue Plan. Additional guidance from the Treasury Department and the SBA may require further updates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-paycheck-protection-program-ppp"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Paycheck Protection Program (PPP) </span> </h2> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The Paycheck Protection Program (PPP) ended on May 31, 2021. The information below provides background for existing borrowers who may be eligible for PPP loan forgiveness.<span class="ql-inline-citation" data-cite="56"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The Paycheck Protection Program (PPP), created by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">Coronavirus Aid, Relief, and Economic Security (CARES) Act</a> on March 27, 2020, provided forgivable SBA emergency 7(a) loans of up to $10 million to small businesses with 500 or fewer employees, including sole proprietorships, independent contractors, and self-employed people affected by COVID-19.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> This program was amended by the PPP Flexibility Act of 2020, with new guidelines that allowed full or partial forgiveness of at least 60% (formerly 75%) if the amount forgiven was used for payroll and 40%<strong> </strong>(formerly 25%) of the amount forgiven was used for mortgage interest, rent, and utilities.<span class="ql-inline-citation" data-cite="57"></span><span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Instead of a six-month payment deferral, your loan was deferred until the SBA remitted the forgiven amount to your lender. If you didn't seek forgiveness, then your payments were deferred for 10 months from the end of the covered period.<span class="ql-inline-citation" data-cite="57"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> As with the original PPP program, no collateral was required and the loan did not carry any fees. However, instead of a two-year term, you now had five years to pay off your loan at the same 1% fixed rate as before.<span class="ql-inline-citation" data-cite="27"></span><span class="ql-inline-citation" data-cite="58"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The PPP Flexibility Act of 2020 further stipulated that if you make a good-faith offer to rehire a furloughed employee (same hours, same wages) and documented it, then you could exclude that employee from your count for purposes of forgiveness if they refused your offer.<span class="ql-inline-citation" data-cite="59"></span><span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The PPP loan program, which stopped accepting loan applications on August 8, 2020, due to lack of funds, received new funding via the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021.<span class="ql-inline-citation" data-cite="72"></span><span class="ql-inline-citation" data-cite="60"></span></p></div></div></div> <span class="heading-toc" id="toc-paycheck-protection-program-ppp-loan-refresh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Paycheck Protection Program (PPP) Loan Refresh </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The Consolidated Appropriations Act and the American Rescue Plan provided additional funding and guidance for the PPP loan program. Presidential executive orders also helped target funds where they were needed most. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Changes to the PPP made by the Consolidated Appropriations Act, 2021 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The Consolidated Appropriations Act, 2021 provided $284 billion in new PPP loan funding through March 31, 2021, including special set-asides for companies in depressed areas and those with 10 or fewer employees.<span class="ql-inline-citation" data-cite="53"></span><span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The legislation provided first-time forgivable PPP loans of up to $10 million for qualifying companies with 500 employees or fewer and second-draw loans of up to $2 million for previous borrowers with 300 or fewer employees.<span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> If you returned all or part of your PPP loan, you could reapply for the maximum amount applicable—provided you had not already received forgiveness. Further, if you would be eligible for a higher loan amount due to interim final rule changes, then you could work with your lender to modify the amount of your loan—even after forgiveness.<span class="ql-inline-citation" data-cite="61"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The list of forgivable expenses was expanded to include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>Personal protective equipment (PPE)</li><li>Complying with federal or state health and safety guidelines</li><li>Software, cloud computing, and other human resources and accounting needs</li><li>Property damage due to public disturbances that took place in 2020 and were not covered by insurance</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Also new, expenses that you paid with PPP loan proceeds were tax-deductible even if the loan was forgiven. This applied to both first- and second-draw loans.<span class="ql-inline-citation" data-cite="62"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> You could select a covered period between eight and 24 weeks from when you received your loan, instead of needing to pick either eight or 24 weeks. Your covered period could extend through March 31, 2021.<span class="ql-inline-citation" data-cite="63"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> New, simplified applications for loans under $150,000 and for forgiveness of those loans were made available.<span class="ql-inline-citation" data-cite="64"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> You no longer had to deduct your $10,000 Economic Injury Disaster Loan (EIDL) advance from the forgivable amount of your PPP loan, and the new legislation directed the SBA to treat previous PPP loans and EIDL advances the same.<span class="ql-inline-citation" data-cite="66"></span><span class="ql-inline-citation" data-cite="65"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> Changes to the PPP loan program that target very small businesses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> On February 22, 2021, the Biden administration announced several changes to the PPP program designed to make PPP funds available to the smallest businesses, including some excluded from previous <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-banks-are-helping-those-impacted-by-covid-19-5105072">relief efforts</a>.<span class="ql-inline-citation" data-cite="67"></span><span class="ql-inline-citation" data-cite="41"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> <li>Beginning February 24, 2021, businesses with fewer than 20 employees had an exclusive two-week window to apply for PPP funding. During this period, larger businesses were not allowed to apply.</li> <li>The formula used to calculate PPP loans was revised to allow sole proprietors, independent contractors, and self-employed individuals to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">receive more financial support</a>.</li> <li>Eligibility rules were changed to let small business owners with non-fraud-related felonies receive PPP loans as long as the applicant was not incarcerated at the time of the application.</li> <li>Also newly eligible were those who were delinquent on federal student loans.</li> <li>Non-citizen small business owners who are lawful U.S. residents, including green card holders and those here on a visa, also were eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply for PPP relief.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-subheading__text"> Changes to PPP made by the American Rescue Plan Act of 2021 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> When the American Rescue Plan Act was signed into law on March 11, 2021, it provided $7.25 billion for PPP forgivable loans.<span class="ql-inline-citation" data-cite="68"></span><span class="ql-inline-citation" data-cite="43"></span> Additional legislation known as the PPP Extension Act of 2021, signed by President Biden on March 30, 2021, let business owners apply for a PPP loan through May 31, 2021, extended the covered period for PPP through June 30, 2021, and allowed lenders to process PPP loans through that date.<span class="ql-inline-citation" data-cite="44"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> The American Rescue Plan Act further enhanced the PPP program by:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <li>Making more not-for-profits eligible for the PPP by creating a new category called “additional covered nonprofit entity”</li> <li>Widening PPP eligibility to include 501(c)(3) organizations and veterans’ organizations that employ not more than 500 employees per physical location </li> <li>Including 501(c)(6) organizations, domestic marketing organizations, and additional covered not-for-profit entities that employ not more than 300 employees per physical location </li> <li>Allocating $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments</li> <li>Providing funds to businesses located in low-income communities that have no more than 300 employees and have suffered an economic loss of more than 30%, as determined by the amount that the entity’s gross receipts declined during an eight-week period, between March 2, 2020, and December 31, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020 </li> <li>Ruling that funds from Targeted EIDL Advances shall not be included in the gross income of the person who receives the grant and that no tax deductions will be denied, no <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-attribute.asp">tax attribute</a> reduced, and no basis increase denied due to the exclusion of the grant funds from gross income</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li>Instituting the Restaurant Revitalization Fund: $28.6 billion for restaurants, bars, and other eligible providers of food and drink.<span class="ql-inline-citation" data-cite="68"></span> It allows for grants equal to the pandemic-related revenue loss of the eligible entity, up to $10 million per entity, or $5 million per physical location.<span class="ql-inline-citation" data-cite="46"></span> The grants are calculated by subtracting 2020 revenue from 2019 revenue. Entities are limited to 20 locations.<span class="ql-inline-citation" data-cite="69"></span></li> <li>$1.25 billion for shuttered venue operators </li> <li>$175 million to create a “community navigator” pilot program to increase awareness of and participation in COVID-19 relief programs for business owners currently lacking access, with priority for businesses owned by socially and economically disadvantaged individuals, women, and veterans</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_61-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_62-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/who-is-isabel-guzman-5112773">Isabel Guzman</a> is the administrator of the Small Business Administration. Prior to holding this office, she had served as the director of California's Office of the Small Business Advocate.<span class="ql-inline-citation" data-cite="70"></span> </p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_63-0"> <span class="mntl-sc-block-subheading__text"> Where to apply for an SBA Paycheck Protection Program (PPP) loan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Applications for this loan were made through any existing SBA 7(a) lender or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> The SBA and the Treasury Department announced that the PPP would reopen the week of January 11, 2021, for new borrowers and existing PPP loan recipients.<span class="ql-inline-citation" data-cite="71"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Initially, only community financial institutions, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cdfi.asp">community development financial institutions (CDFIs)</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/minority-deposit-institution-mdi-definition-5072268">minority depository institutions (MDIs)</a>, certified development companies, and microlender intermediaries were able to make first-draw PPP loans beginning January 11, 2021. Second-draw PPP loans through the same lenders started January 13, 2021.<span class="ql-inline-citation" data-cite="71"></span> First- and second-draw loans were available from small lenders with less than $1 billion in assets as of January 15, 2021, and all participating PPP lenders were approved to make loans beginning January 19, 2021.<span class="ql-inline-citation" data-cite="39"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> Do not use any other road to apply for a PPP loan: Scammers will offer shortcuts to PPP loans, just as they did with the original program. The Federal Trade Commission filed a case against one such company on April 17, 2020. The FTC cautioned to only apply by first going to the SBA website and that the SBA will never ask for Social Security numbers—or bank account or credit card numbers—upfront.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <span class="heading-toc" id="toc-economic-injury-disaster-loan-eidl-advance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_72-0"> <span class="mntl-sc-block-heading__text"> Economic Injury Disaster Loan (EIDL) Advance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Small business owners in all 50 states, Washington, D.C., and U.S. territories were able to apply for an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134">Economic Injury Disaster Loan (EIDL)</a> Advance of up to $10,000 as part of the application process for an EIDL loan. The loan advance did not have to be repaid and you didn’t actually have to be approved for an EIDL loan to receive the advance; however, the amount of the loan advance was deducted from total loan eligibility.<span class="ql-inline-citation" data-cite="35"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_75-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_76-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>The EIDL Advance program ended on July 11, 2020, due to a lack of funds.<span class="ql-inline-citation" data-cite="72"></span> A new EIDL Targeted Advance program was created with the passage of the Consolidated Appropriations Act (CAA), 2021.<span class="ql-inline-citation" data-cite="33"></span></p></div></div></div> <span class="heading-toc" id="toc-economic-injury-disaster-loan-eidl-targeted-advance-refresh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> Economic Injury Disaster Loan (EIDL) Targeted Advance Refresh </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> The Targeted EIDL Advance program, which is more restrictive than its predecessor, is authorized under the CAA and makes up to $10,000 available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of program funding.<span class="ql-inline-citation" data-cite="73"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> If you previously received<strong> </strong>a partial EIDL Advance ($1,000 to $9,000), then the SBA will reach out to you first by official (@sba.gov) email to determine your eligibility and provide instructions.<span class="ql-inline-citation" data-cite="73"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> If you are in this group, then you may qualify if you: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> <li>Are located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code; and</li><li>Can demonstrate that you suffered a more than 30% reduction in revenue during an eight-week period beginning on March 2, 2020, or later. You will be asked to provide proof of the more than 30% revenue reduction.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> If you previously applied<em> </em>for an EIDL Advance but did not receive one due to a lack of funds, you are next in line to be contacted by the SBA.<span class="ql-inline-citation" data-cite="73"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> To qualify for this group, you must meet the qualifications above plus:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_90-0"> <li>Have no more than 300 employees.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> If your business is otherwise eligible for the EIDL program—including if you are a sole proprietor, independent contractor, or private, nonprofit organization—and you meet the qualifications above, then you are eligible for consideration for the targeted advance. Agricultural enterprises are not eligible.<span class="ql-inline-citation" data-cite="74"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_94-0"> You may be asked to provide an Internal Revenue Service (IRS) <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/form-4506.asp">Form 4506-T</a>, giving the SBA permission to request your tax return information.<span class="ql-inline-citation" data-cite="75"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_96-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_97-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_6-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_6-0"><p>Do not submit a duplicate COVID-19 EIDL application. Only prior applicants will be considered for the Targeted EIDL Advance.</p></div></div></div> <span class="heading-toc" id="toc-economic-injury-disaster-loan-eidl"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_98-0"> <span class="mntl-sc-block-heading__text"> Economic Injury Disaster Loan (EIDL) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> SBA Coronavirus Disaster assistance loans were designed to help businesses recover from the economic effects of COVID-19. Disaster assistance loans of up to $500,000 with maximum terms of 30 years were available. Small business owners in all 50 states, Washington, D.C., and U.S. territories were eligible to apply. However, as of January 1, 2022, the SBA announced the program "is not accepting new applications, increase requests, or reconsiderations."<span class="ql-inline-citation" data-cite="36"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_100-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_101-0"> Loans could be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the impact of COVID-19. The interest rate for small businesses is 3.75%. Nonprofits pay just 2.75%.<span class="ql-inline-citation" data-cite="83"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_102-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_103-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_104-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_7-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_7-0"><p>On March 24, 2021, the SBA announced that starting April 6, 2021, it would raise the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury.<span class="ql-inline-citation" data-cite="42"></span></p></div></div></div> <span class="heading-toc" id="toc-economic-injury-disaster-loan-eidl-refresh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_105-0"> <span class="mntl-sc-block-heading__text"> Economic Injury Disaster Loan (EIDL) Refresh </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_106-0"> The main change brought about by the CAA, aside from $20 billion in additional funding for the Economic Injury Disaster Loan (EIDL) program, was an extension of time to file for a loan from December 31, 2020, to December 31, 2021.<span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_108-0"> On March 24, 2021, the SBA raised the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury, effective April 6, 2021. Further, some businesses that previously received a loan under the lower limits may be deemed eligible to increase their loan amount. The SBA said it would notify those businesses of their eligibility.<span class="ql-inline-citation" data-cite="42"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_109-0"></div> <span class="heading-toc" id="toc-shuttered-venue-operator-grant-svog-program"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_110-0"> <span class="mntl-sc-block-heading__text"> Shuttered Venue Operator Grant (SVOG) Program </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-a-shuttered-venue-operators-grant-5121150">Shuttered Venue Operators Grant (SVOG)</a> program, authorized by the CAA on December 27, 2020, includes $15 billion in grants to shuttered venues.<span class="ql-inline-citation" data-cite="33"></span> Funds are administered by the SBA’s Office of Disaster Assistance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_113-0"> Eligible applicants can qualify for SVOG grants equal to 45% of their gross earned revenue, with a maximum of $10 million. There is $2 billion reserved for eligible applicants with up to 50 full-time employees.<span class="ql-inline-citation" data-cite="76"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_114-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_115-0"> Eligible entities include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_117-0"> <li>Live venue operators or promoters</li><li>Theatrical producers</li><li>Live performing arts organization operators</li><li>Relevant museum operators, zoos, and aquariums that meet specific criteria</li><li>Motion picture theater operators</li><li>Talent representatives</li><li>Any business entity owned by an eligible entity that also meets eligibility requirements</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_119-0">  SVO grants are only available to venues that: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_120-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_121-0"> <li>Have been in operation as of February 29, 2020</li><li>Have not received a PPP loan on or after December 27, 2020</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_122-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_123-0"> SVO grant funds may be used for: payroll, rent, utility, mortgage payments, debt, worker protection, payments to independent contractors, maintenance, administrative costs, state and local taxes, operating leases (in effect as of February 15, 2020), insurance, advertising, and other costs of production.<span class="ql-inline-citation" data-cite="77"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_124-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_125-0"> Grantees may not use funds to purchase real estate, make loan payments on loans originated after February 15, 2020, make investments, or make political contributions or payments.<span class="ql-inline-citation" data-cite="77"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_126-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_127-0"> <span class="mntl-sc-block-subheading__text"> Where To Apply for Coronavirus Disaster Assistance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_128-0"> Economic Injury Disaster Assistance Loans and Targeted Advances are funded by the Small Business Administration (SBA). Applications for an EIDL loan went through the SBA website.<span class="ql-inline-citation" data-cite="36"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_129-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_130-0"> Recall that there is no application process for the new EIDL $10,000 Targeted Advance. The SBA will contact you if you are eligible.<span class="ql-inline-citation" data-cite="73"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_131-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_132-0"> As of August 2023, the SBA is no longer accepting SVO Grant applications. Interested entities can stay up to date by visiting www.sba.gov/svogrant on a regular basis.<span class="ql-inline-citation" data-cite="45"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_133-0"></div> <span class="heading-toc" id="toc-sba-express-bridge-loan-ebl"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_134-0"> <span class="mntl-sc-block-heading__text"> SBA Express Bridge Loan (EBL) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_135-0"> If you already have a business relationship with an SBA Express Lender, a new Express Bridge Loan Pilot Program offers a quick turnaround on up to $25,000 to help bridge the gap until your SBA Economic Injury Disaster Loan (EIDL) is approved. Bridge funds can be paid in full or in part with proceeds from your EIDL once it is approved.<span class="ql-inline-citation" data-cite="78"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_136-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_137-0"> <span class="mntl-sc-block-subheading__text"> Where To Apply for an SBA Express Bridge Loan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_138-0"> Consult the Express Bridge Loan Pilot Program Guide or contact your local SBA district office for details.<span class="ql-inline-citation" data-cite="79"></span><span class="ql-inline-citation" data-cite="49"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_139-0"></div> <span class="heading-toc" id="toc-sba-7a-loan-debt-relief"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_140-0"> <span class="mntl-sc-block-heading__text"> SBA 7(a) Loan Debt Relief </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_141-0"> The SBA Debt Relief program will pay principal, interest, and fees for six months on new 7(a), 504, and microloans made from March 27, 2020, to September 27, 2020. The program also will pay principal, interest, and fees for six months on existing 7(a), 504, and microloans beginning with the first payment due after March 27, 2020.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_142-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_143-0"> <span class="mntl-sc-block-subheading__text"> Where to Apply for 7(a) Loan Debt Relief </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_144-0"> This relief is automatic and does not require an application. Check with your lender for more information or if you have questions.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_145-0"></div> <span class="heading-toc" id="toc-sba-deferral-on-existing-home-and-business-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_146-0"> <span class="mntl-sc-block-heading__text"> SBA Deferral on Existing Home and Business Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_147-0"> If you currently have an SBA Serviced Disaster (Home and Business) loan that was in “regular servicing” on March 1, 2020, then the SBA provided automatic deferral on your loan through March 31, 2021.<span class="ql-inline-citation" data-cite="13"></span> Note the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_148-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_149-0"> <li>Interest will continue to accrue on your loan during the deferral period.</li><li>1201 monthly notices will still be mailed but will show no payment due.</li><li>Pre-Authorized Debit (PAD) payments will not automatically be canceled. You must contact your servicer to do that.</li><li>You may continue making payments if you wish. No contact is necessary.</li><li>After the deferral period, you must resume payments and set up PAD if you canceled it earlier.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_150-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_151-0"> <span class="mntl-sc-block-subheading__text"> Where to Apply for Existing Disaster Loan Deferral </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_152-0"> Deferral is automatic. You do not need to apply. After the deferral period, you do not need to contact the SBA before resuming payments.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_153-0"></div> <span class="heading-toc" id="toc-sba-business-expansion-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_154-0"> <span class="mntl-sc-block-heading__text"> SBA Business Expansion Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_155-0"> The disaster-related loans referenced above are made with funds appropriated or guaranteed by Congress. SBA business expansion loans are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercial-loan.asp">commercial loans</a>, structured according to SBA requirements, with an SBA guarantee. Small business owners and borrowers who have access to other financing with reasonable terms are not eligible for this type of SBA-guaranteed loan. Guaranteed loan programs from the SBA include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_156-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_157-0"> <span class="mntl-sc-block-subheading__text"> 7(a) Loan Program </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_158-0"> This is the SBA’s most common loan program and provides financial help for businesses with special requirements, such as franchises, farms and agricultural businesses, and fishing vessels. There is no minimum loan amount, but the maximum is $5 million.<span class="ql-inline-citation" data-cite="80"></span> Note that emergency SBA 7(a) loans available under the PPP have different requirements from those used for business expansion. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_159-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_160-0"> There are eight types of 7(a) loans—each with its own maximum loan amount, SBA guarantee, negotiated interest rate, and other factors—all of which are spelled out on the 7(a) loan program web page.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_161-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_162-0"> <span class="mntl-sc-block-subheading__text"> Microloan Program </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_163-0"> This program provides small, short-term loans of up to $50,000 to small businesses and certain types of not-for-profit childcare centers. Loans can be used to buy new equipment, supplies, furniture, or to provide working capital. Loans are provided by microlenders, with each having its own lending and credit requirements.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_164-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_165-0"> <span class="mntl-sc-block-subheading__text"> CDC/504 Program </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_166-0"> This loan program provides financing for businesses to purchase real estate, major fixed assets, and equipment, or to make improvements like landscaping. This program can also provide funding for renovation.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_167-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_168-0"> <span class="mntl-sc-block-subheading__text"> Where to Apply for an Expansion Loan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_169-0"> As previously noted, the SBA doesn’t lend money directly to help you grow your business, as it does when providing disaster relief. Instead, it sets stipulations for loans made by its partners (lenders, community development organizations, and microlending institutions). You can apply for an expansion loan at any SBA-approved lender or use the SBA’s Lender Match. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_170-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_171-0"><span class="heading-toc" id="toc-can-i-still-apply-to-the-paycheck-protection-program"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Still Apply to the Paycheck Protection Program?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No, businesses can no longer apply for the Paycheck Protection Program (PPP), which ended on May 31, 2021.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_172-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_173-0"><span class="heading-toc" id="toc-what-is-the-fastest-sba-loan-to-get"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Fastest SBA Loan to Get?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA Express is a type of 7(a) loan that is processed quickly. The SBA will respond to applications for express loans within 36 hours, and loan amounts can be for up to $500,000. However, decisions about eligibility and collateral are made by the lender, not the SBA.<span class="ql-inline-citation" data-cite="81"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_174-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_175-0"><span class="heading-toc" id="toc-what-is-the-most-popular-sba-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Most Popular SBA Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>7(a) loans are the most popular types of SBA loans. These loans can provide help for small businesses with special requirements, real estate transactions, working capital needs, refinancing business debt, establishing or expanding a new business, and more.<span class="ql-inline-citation" data-cite="82"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_176-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_177-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_178-0"> There were multiple pieces of legislation enacted in 2020 and 2021 to provide funding and relief to small businesses. These included Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs, as well as forgivable EIDL Targeted Advances and Shuttered Venue Operator (SVO) Grants. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_179-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_180-0"> Many of these programs have since expired. The Small Business Administration stopped accepting applications for COVID-19 EIDL loans on January 1, 2022, and the Paycheck Protection program ended on May 31, 2021. Other SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, and Loan Deferrals. </p></div>

If you're wondering how to obtain [financing](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp) to expand your small business, a loan from the [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) may be just the solution that you need. Low-interest, long-term SBA loans are a viable option for business owners suffering substantial disaster-related physical or economic damage or who want to grow their business and can’t obtain other nongovernment financing. ### Key Takeaways * PPP loans are provided by private lenders, while EIDL loans and SVO grants are generated with funds provided by the government. * SBA business expansion loans are guaranteed loans with funds coming from [approved private lenders](https://www.investopedia.com/best-sba-lenders-5091699). * Additional SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, Loan Deferrals, and several others. ## Consolidated Appropriations Act, 2021 & American Rescue Plan Act, 2021 Neither the [Consolidated Appropriations Act (CAA) of 2021](https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226) nor the American Rescue Plan Act, 2021 are government loan programs per se. They are laws, passed by Congress, that provide additional funding and rule changes for several government programs, including the [Paycheck Protection Program (PPP)](https://www.investopedia.com/your-guide-to-the-paycheck-protection-program-ppp-and-how-to-apply-4802195), [Economic Injury Disaster Loan (EIDL)](https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134) program, and EIDL advances. Also included is funding for a new Shuttered Venue Operator (SVO) Grant program. Descriptions of the programs below reflect changes made by the CAA and the American Rescue Plan. Additional guidance from the Treasury Department and the SBA may require further updates. ## Paycheck Protection Program (PPP) ### The Paycheck Protection Program (PPP) ended on May 31, 2021. The information below provides background for existing borrowers who may be eligible for PPP loan forgiveness. The Paycheck Protection Program (PPP), created by the [Coronavirus Aid, Relief, and Economic Security (CARES) Act](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707) on March 27, 2020, provided forgivable SBA emergency 7(a) loans of up to $10 million to small businesses with 500 or fewer employees, including sole proprietorships, independent contractors, and self-employed people affected by COVID-19. This program was amended by the PPP Flexibility Act of 2020, with new guidelines that allowed full or partial forgiveness of at least 60% (formerly 75%) if the amount forgiven was used for payroll and 40%(formerly 25%) of the amount forgiven was used for mortgage interest, rent, and utilities. Instead of a six-month payment deferral, your loan was deferred until the SBA remitted the forgiven amount to your lender. If you didn't seek forgiveness, then your payments were deferred for 10 months from the end of the covered period. As with the original PPP program, no collateral was required and the loan did not carry any fees. However, instead of a two-year term, you now had five years to pay off your loan at the same 1% fixed rate as before. The PPP Flexibility Act of 2020 further stipulated that if you make a good-faith offer to rehire a furloughed employee (same hours, same wages) and documented it, then you could exclude that employee from your count for purposes of forgiveness if they refused your offer. ### The PPP loan program, which stopped accepting loan applications on August 8, 2020, due to lack of funds, received new funding via the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. ## Paycheck Protection Program (PPP) Loan Refresh The Consolidated Appropriations Act and the American Rescue Plan provided additional funding and guidance for the PPP loan program. Presidential executive orders also helped target funds where they were needed most. ### Changes to the PPP made by the Consolidated Appropriations Act, 2021 The Consolidated Appropriations Act, 2021 provided $284 billion in new PPP loan funding through March 31, 2021, including special set-asides for companies in depressed areas and those with 10 or fewer employees. The legislation provided first-time forgivable PPP loans of up to $10 million for qualifying companies with 500 employees or fewer and second-draw loans of up to $2 million for previous borrowers with 300 or fewer employees. If you returned all or part of your PPP loan, you could reapply for the maximum amount applicable—provided you had not already received forgiveness. Further, if you would be eligible for a higher loan amount due to interim final rule changes, then you could work with your lender to modify the amount of your loan—even after forgiveness. The list of forgivable expenses was expanded to include: * Personal protective equipment (PPE) * Complying with federal or state health and safety guidelines * Software, cloud computing, and other human resources and accounting needs * Property damage due to public disturbances that took place in 2020 and were not covered by insurance Also new, expenses that you paid with PPP loan proceeds were tax-deductible even if the loan was forgiven. This applied to both first- and second-draw loans. You could select a covered period between eight and 24 weeks from when you received your loan, instead of needing to pick either eight or 24 weeks. Your covered period could extend through March 31, 2021. New, simplified applications for loans under $150,000 and for forgiveness of those loans were made available. You no longer had to deduct your $10,000 Economic Injury Disaster Loan (EIDL) advance from the forgivable amount of your PPP loan, and the new legislation directed the SBA to treat previous PPP loans and EIDL advances the same. ### Changes to the PPP loan program that target very small businesses On February 22, 2021, the Biden administration announced several changes to the PPP program designed to make PPP funds available to the smallest businesses, including some excluded from previous [relief efforts](https://www.investopedia.com/how-banks-are-helping-those-impacted-by-covid-19-5105072). * Beginning February 24, 2021, businesses with fewer than 20 employees had an exclusive two-week window to apply for PPP funding. During this period, larger businesses were not allowed to apply. * The formula used to calculate PPP loans was revised to allow sole proprietors, independent contractors, and self-employed individuals to [receive more financial support](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707). * Eligibility rules were changed to let small business owners with non-fraud-related felonies receive PPP loans as long as the applicant was not incarcerated at the time of the application. * Also newly eligible were those who were delinquent on federal student loans. * Non-citizen small business owners who are lawful U.S. residents, including green card holders and those here on a visa, also were eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply for PPP relief. ### Changes to PPP made by the American Rescue Plan Act of 2021 When the American Rescue Plan Act was signed into law on March 11, 2021, it provided $7.25 billion for PPP forgivable loans. Additional legislation known as the PPP Extension Act of 2021, signed by President Biden on March 30, 2021, let business owners apply for a PPP loan through May 31, 2021, extended the covered period for PPP through June 30, 2021, and allowed lenders to process PPP loans through that date. The American Rescue Plan Act further enhanced the PPP program by:  * Making more not-for-profits eligible for the PPP by creating a new category called “additional covered nonprofit entity” * Widening PPP eligibility to include 501(c)(3) organizations and veterans’ organizations that employ not more than 500 employees per physical location * Including 501(c)(6) organizations, domestic marketing organizations, and additional covered not-for-profit entities that employ not more than 300 employees per physical location * Allocating $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments * Providing funds to businesses located in low-income communities that have no more than 300 employees and have suffered an economic loss of more than 30%, as determined by the amount that the entity’s gross receipts declined during an eight-week period, between March 2, 2020, and December 31, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020 * Ruling that funds from Targeted EIDL Advances shall not be included in the gross income of the person who receives the grant and that no tax deductions will be denied, no [tax attribute](https://www.investopedia.com/terms/t/tax-attribute.asp) reduced, and no basis increase denied due to the exclusion of the grant funds from gross income * Instituting the Restaurant Revitalization Fund: $28.6 billion for restaurants, bars, and other eligible providers of food and drink. It allows for grants equal to the pandemic-related revenue loss of the eligible entity, up to $10 million per entity, or $5 million per physical location. The grants are calculated by subtracting 2020 revenue from 2019 revenue. Entities are limited to 20 locations. * $1.25 billion for shuttered venue operators * $175 million to create a “community navigator” pilot program to increase awareness of and participation in COVID-19 relief programs for business owners currently lacking access, with priority for businesses owned by socially and economically disadvantaged individuals, women, and veterans ### [Isabel Guzman](https://www.investopedia.com/who-is-isabel-guzman-5112773) is the administrator of the Small Business Administration. Prior to holding this office, she had served as the director of California's Office of the Small Business Advocate.  ### Where to apply for an SBA Paycheck Protection Program (PPP) loan Applications for this loan were made through any existing SBA 7(a) lender or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. The SBA and the Treasury Department announced that the PPP would reopen the week of January 11, 2021, for new borrowers and existing PPP loan recipients. Initially, only community financial institutions, including [community development financial institutions (CDFIs)](https://www.investopedia.com/terms/c/cdfi.asp), [minority depository institutions (MDIs)](https://www.investopedia.com/minority-deposit-institution-mdi-definition-5072268), certified development companies, and microlender intermediaries were able to make first-draw PPP loans beginning January 11, 2021. Second-draw PPP loans through the same lenders started January 13, 2021. First- and second-draw loans were available from small lenders with less than $1 billion in assets as of January 15, 2021, and all participating PPP lenders were approved to make loans beginning January 19, 2021. Do not use any other road to apply for a PPP loan: Scammers will offer shortcuts to PPP loans, just as they did with the original program. The Federal Trade Commission filed a case against one such company on April 17, 2020. The FTC cautioned to only apply by first going to the SBA website and that the SBA will never ask for Social Security numbers—or bank account or credit card numbers—upfront. ## Economic Injury Disaster Loan (EIDL) Advance Small business owners in all 50 states, Washington, D.C., and U.S. territories were able to apply for an [Economic Injury Disaster Loan (EIDL)](https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134) Advance of up to $10,000 as part of the application process for an EIDL loan. The loan advance did not have to be repaid and you didn’t actually have to be approved for an EIDL loan to receive the advance; however, the amount of the loan advance was deducted from total loan eligibility. ### The EIDL Advance program ended on July 11, 2020, due to a lack of funds. A new EIDL Targeted Advance program was created with the passage of the Consolidated Appropriations Act (CAA), 2021. ## Economic Injury Disaster Loan (EIDL) Targeted Advance Refresh The Targeted EIDL Advance program, which is more restrictive than its predecessor, is authorized under the CAA and makes up to $10,000 available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of program funding. If you previously receiveda partial EIDL Advance ($1,000 to $9,000), then the SBA will reach out to you first by official (@sba.gov) email to determine your eligibility and provide instructions. If you are in this group, then you may qualify if you: * Are located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code; and * Can demonstrate that you suffered a more than 30% reduction in revenue during an eight-week period beginning on March 2, 2020, or later. You will be asked to provide proof of the more than 30% revenue reduction. If you previously appliedfor an EIDL Advance but did not receive one due to a lack of funds, you are next in line to be contacted by the SBA. To qualify for this group, you must meet the qualifications above plus:  * Have no more than 300 employees. If your business is otherwise eligible for the EIDL program—including if you are a sole proprietor, independent contractor, or private, nonprofit organization—and you meet the qualifications above, then you are eligible for consideration for the targeted advance. Agricultural enterprises are not eligible. You may be asked to provide an Internal Revenue Service (IRS) [Form 4506-T](https://www.investopedia.com/terms/f/form-4506.asp), giving the SBA permission to request your tax return information. ### Do not submit a duplicate COVID-19 EIDL application. Only prior applicants will be considered for the Targeted EIDL Advance. ## Economic Injury Disaster Loan (EIDL) SBA Coronavirus Disaster assistance loans were designed to help businesses recover from the economic effects of COVID-19. Disaster assistance loans of up to $500,000 with maximum terms of 30 years were available. Small business owners in all 50 states, Washington, D.C., and U.S. territories were eligible to apply. However, as of January 1, 2022, the SBA announced the program "is not accepting new applications, increase requests, or reconsiderations." Loans could be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the impact of COVID-19. The interest rate for small businesses is 3.75%. Nonprofits pay just 2.75%. ### On March 24, 2021, the SBA announced that starting April 6, 2021, it would raise the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury. ## Economic Injury Disaster Loan (EIDL) Refresh The main change brought about by the CAA, aside from $20 billion in additional funding for the Economic Injury Disaster Loan (EIDL) program, was an extension of time to file for a loan from December 31, 2020, to December 31, 2021. On March 24, 2021, the SBA raised the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury, effective April 6, 2021. Further, some businesses that previously received a loan under the lower limits may be deemed eligible to increase their loan amount. The SBA said it would notify those businesses of their eligibility. ## Shuttered Venue Operator Grant (SVOG) Program The [Shuttered Venue Operators Grant (SVOG)](https://www.investopedia.com/how-to-apply-for-a-shuttered-venue-operators-grant-5121150) program, authorized by the CAA on December 27, 2020, includes $15 billion in grants to shuttered venues. Funds are administered by the SBA’s Office of Disaster Assistance. Eligible applicants can qualify for SVOG grants equal to 45% of their gross earned revenue, with a maximum of $10 million. There is $2 billion reserved for eligible applicants with up to 50 full-time employees. Eligible entities include: * Live venue operators or promoters * Theatrical producers * Live performing arts organization operators * Relevant museum operators, zoos, and aquariums that meet specific criteria * Motion picture theater operators * Talent representatives * Any business entity owned by an eligible entity that also meets eligibility requirements  SVO grants are only available to venues that: * Have been in operation as of February 29, 2020 * Have not received a PPP loan on or after December 27, 2020 SVO grant funds may be used for: payroll, rent, utility, mortgage payments, debt, worker protection, payments to independent contractors, maintenance, administrative costs, state and local taxes, operating leases (in effect as of February 15, 2020), insurance, advertising, and other costs of production. Grantees may not use funds to purchase real estate, make loan payments on loans originated after February 15, 2020, make investments, or make political contributions or payments. ### Where To Apply for Coronavirus Disaster Assistance Economic Injury Disaster Assistance Loans and Targeted Advances are funded by the Small Business Administration (SBA). Applications for an EIDL loan went through the SBA website. Recall that there is no application process for the new EIDL $10,000 Targeted Advance. The SBA will contact you if you are eligible. As of August 2023, the SBA is no longer accepting SVO Grant applications. Interested entities can stay up to date by visiting www.sba.gov/svogrant on a regular basis. ## SBA Express Bridge Loan (EBL) If you already have a business relationship with an SBA Express Lender, a new Express Bridge Loan Pilot Program offers a quick turnaround on up to $25,000 to help bridge the gap until your SBA Economic Injury Disaster Loan (EIDL) is approved. Bridge funds can be paid in full or in part with proceeds from your EIDL once it is approved. ### Where To Apply for an SBA Express Bridge Loan Consult the Express Bridge Loan Pilot Program Guide or contact your local SBA district office for details. ## SBA 7(a) Loan Debt Relief The SBA Debt Relief program will pay principal, interest, and fees for six months on new 7(a), 504, and microloans made from March 27, 2020, to September 27, 2020. The program also will pay principal, interest, and fees for six months on existing 7(a), 504, and microloans beginning with the first payment due after March 27, 2020. ### Where to Apply for 7(a) Loan Debt Relief This relief is automatic and does not require an application. Check with your lender for more information or if you have questions. ## SBA Deferral on Existing Home and Business Loans If you currently have an SBA Serviced Disaster (Home and Business) loan that was in “regular servicing” on March 1, 2020, then the SBA provided automatic deferral on your loan through March 31, 2021. Note the following: * Interest will continue to accrue on your loan during the deferral period. * 1201 monthly notices will still be mailed but will show no payment due. * Pre-Authorized Debit (PAD) payments will not automatically be canceled. You must contact your servicer to do that. * You may continue making payments if you wish. No contact is necessary. * After the deferral period, you must resume payments and set up PAD if you canceled it earlier. ### Where to Apply for Existing Disaster Loan Deferral Deferral is automatic. You do not need to apply. After the deferral period, you do not need to contact the SBA before resuming payments. ## SBA Business Expansion Loans The disaster-related loans referenced above are made with funds appropriated or guaranteed by Congress. SBA business expansion loans are [commercial loans](https://www.investopedia.com/terms/c/commercial-loan.asp), structured according to SBA requirements, with an SBA guarantee. Small business owners and borrowers who have access to other financing with reasonable terms are not eligible for this type of SBA-guaranteed loan. Guaranteed loan programs from the SBA include the following: ### 7(a) Loan Program This is the SBA’s most common loan program and provides financial help for businesses with special requirements, such as franchises, farms and agricultural businesses, and fishing vessels. There is no minimum loan amount, but the maximum is $5 million. Note that emergency SBA 7(a) loans available under the PPP have different requirements from those used for business expansion. There are eight types of 7(a) loans—each with its own maximum loan amount, SBA guarantee, negotiated interest rate, and other factors—all of which are spelled out on the 7(a) loan program web page. ### Microloan Program This program provides small, short-term loans of up to $50,000 to small businesses and certain types of not-for-profit childcare centers. Loans can be used to buy new equipment, supplies, furniture, or to provide working capital. Loans are provided by microlenders, with each having its own lending and credit requirements. ### CDC/504 Program This loan program provides financing for businesses to purchase real estate, major fixed assets, and equipment, or to make improvements like landscaping. This program can also provide funding for renovation. ### Where to Apply for an Expansion Loan As previously noted, the SBA doesn’t lend money directly to help you grow your business, as it does when providing disaster relief. Instead, it sets stipulations for loans made by its partners (lenders, community development organizations, and microlending institutions). You can apply for an expansion loan at any SBA-approved lender or use the SBA’s Lender Match. ## Can I Still Apply to the Paycheck Protection Program? No, businesses can no longer apply for the Paycheck Protection Program (PPP), which ended on May 31, 2021. ## What Is the Fastest SBA Loan to Get? The SBA Express is a type of 7(a) loan that is processed quickly. The SBA will respond to applications for express loans within 36 hours, and loan amounts can be for up to $500,000. However, decisions about eligibility and collateral are made by the lender, not the SBA. ## What Is the Most Popular SBA Loan? 7(a) loans are the most popular types of SBA loans. These loans can provide help for small businesses with special requirements, real estate transactions, working capital needs, refinancing business debt, establishing or expanding a new business, and more. ## The Bottom Line There were multiple pieces of legislation enacted in 2020 and 2021 to provide funding and relief to small businesses. These included Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs, as well as forgivable EIDL Targeted Advances and Shuttered Venue Operator (SVO) Grants. Many of these programs have since expired. The Small Business Administration stopped accepting applications for COVID-19 EIDL loans on January 1, 2022, and the Paycheck Protection program ended on May 31, 2021. Other SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, and Loan Deferrals.

If you're wondering how to obtain financing to expand your small business, a loan from the Small Business Administration (SBA) may be just the solution that you need. Low-interest, long-term SBA loans are a viable option for business owners suffering substantial disaster-related physical or economic damage or who want to grow their business and can’t obtain other nongovernment financing. Key Takeaways PPP loans are provided by private lenders, while EIDL loans and SVO grants are generated with funds provided by the government. SBA business expansion loans are guaranteed loans with funds coming from approved private lenders. Additional SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, Loan Deferrals, and several others. Consolidated Appropriations Act, 2021 & American Rescue Plan Act, 2021 Neither the Consolidated Appropriations Act (CAA) of 2021 nor the American Rescue Plan Act, 2021 are government loan programs per se. They are laws, passed by Congress, that provide additional funding and rule changes for several government programs, including the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL) program, and EIDL advances. Also included is funding for a new Shuttered Venue Operator (SVO) Grant program. Descriptions of the programs below reflect changes made by the CAA and the American Rescue Plan. Additional guidance from the Treasury Department and the SBA may require further updates. Paycheck Protection Program (PPP) The Paycheck Protection Program (PPP) ended on May 31, 2021. The information below provides background for existing borrowers who may be eligible for PPP loan forgiveness. The Paycheck Protection Program (PPP), created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, provided forgivable SBA emergency 7(a) loans of up to $10 million to small businesses with 500 or fewer employees, including sole proprietorships, independent contractors, and self-employed people affected by COVID-19. This program was amended by the PPP Flexibility Act of 2020, with new guidelines that allowed full or partial forgiveness of at least 60% (formerly 75%) if the amount forgiven was used for payroll and 40% (formerly 25%) of the amount forgiven was used for mortgage interest, rent, and utilities. Instead of a six-month payment deferral, your loan was deferred until the SBA remitted the forgiven amount to your lender. If you didn't seek forgiveness, then your payments were deferred for 10 months from the end of the covered period. As with the original PPP program, no collateral was required and the loan did not carry any fees. However, instead of a two-year term, you now had five years to pay off your loan at the same 1% fixed rate as before. The PPP Flexibility Act of 2020 further stipulated that if you make a good-faith offer to rehire a furloughed employee (same hours, same wages) and documented it, then you could exclude that employee from your count for purposes of forgiveness if they refused your offer. The PPP loan program, which stopped accepting loan applications on August 8, 2020, due to lack of funds, received new funding via the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021. Paycheck Protection Program (PPP) Loan Refresh The Consolidated Appropriations Act and the American Rescue Plan provided additional funding and guidance for the PPP loan program. Presidential executive orders also helped target funds where they were needed most. Changes to the PPP made by the Consolidated Appropriations Act, 2021 The Consolidated Appropriations Act, 2021 provided $284 billion in new PPP loan funding through March 31, 2021, including special set-asides for companies in depressed areas and those with 10 or fewer employees. The legislation provided first-time forgivable PPP loans of up to $10 million for qualifying companies with 500 employees or fewer and second-draw loans of up to $2 million for previous borrowers with 300 or fewer employees. If you returned all or part of your PPP loan, you could reapply for the maximum amount applicable—provided you had not already received forgiveness. Further, if you would be eligible for a higher loan amount due to interim final rule changes, then you could work with your lender to modify the amount of your loan—even after forgiveness. The list of forgivable expenses was expanded to include: Personal protective equipment (PPE)Complying with federal or state health and safety guidelinesSoftware, cloud computing, and other human resources and accounting needsProperty damage due to public disturbances that took place in 2020 and were not covered by insurance Also new, expenses that you paid with PPP loan proceeds were tax-deductible even if the loan was forgiven. This applied to both first- and second-draw loans. You could select a covered period between eight and 24 weeks from when you received your loan, instead of needing to pick either eight or 24 weeks. Your covered period could extend through March 31, 2021. New, simplified applications for loans under $150,000 and for forgiveness of those loans were made available. You no longer had to deduct your $10,000 Economic Injury Disaster Loan (EIDL) advance from the forgivable amount of your PPP loan, and the new legislation directed the SBA to treat previous PPP loans and EIDL advances the same. Changes to the PPP loan program that target very small businesses On February 22, 2021, the Biden administration announced several changes to the PPP program designed to make PPP funds available to the smallest businesses, including some excluded from previous relief efforts. Beginning February 24, 2021, businesses with fewer than 20 employees had an exclusive two-week window to apply for PPP funding. During this period, larger businesses were not allowed to apply. The formula used to calculate PPP loans was revised to allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support. Eligibility rules were changed to let small business owners with non-fraud-related felonies receive PPP loans as long as the applicant was not incarcerated at the time of the application. Also newly eligible were those who were delinquent on federal student loans. Non-citizen small business owners who are lawful U.S. residents, including green card holders and those here on a visa, also were eligible and allowed to use their Individual Taxpayer Identification Numbers (ITINs) to apply for PPP relief. Changes to PPP made by the American Rescue Plan Act of 2021 When the American Rescue Plan Act was signed into law on March 11, 2021, it provided $7.25 billion for PPP forgivable loans. Additional legislation known as the PPP Extension Act of 2021, signed by President Biden on March 30, 2021, let business owners apply for a PPP loan through May 31, 2021, extended the covered period for PPP through June 30, 2021, and allowed lenders to process PPP loans through that date. The American Rescue Plan Act further enhanced the PPP program by:  Making more not-for-profits eligible for the PPP by creating a new category called “additional covered nonprofit entity” Widening PPP eligibility to include 501(c)(3) organizations and veterans’ organizations that employ not more than 500 employees per physical location  Including 501(c)(6) organizations, domestic marketing organizations, and additional covered not-for-profit entities that employ not more than 300 employees per physical location  Allocating $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments Providing funds to businesses located in low-income communities that have no more than 300 employees and have suffered an economic loss of more than 30%, as determined by the amount that the entity’s gross receipts declined during an eight-week period, between March 2, 2020, and December 31, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020  Ruling that funds from Targeted EIDL Advances shall not be included in the gross income of the person who receives the grant and that no tax deductions will be denied, no tax attribute reduced, and no basis increase denied due to the exclusion of the grant funds from gross income Instituting the Restaurant Revitalization Fund: $28.6 billion for restaurants, bars, and other eligible providers of food and drink. It allows for grants equal to the pandemic-related revenue loss of the eligible entity, up to $10 million per entity, or $5 million per physical location. The grants are calculated by subtracting 2020 revenue from 2019 revenue. Entities are limited to 20 locations. $1.25 billion for shuttered venue operators  $175 million to create a “community navigator” pilot program to increase awareness of and participation in COVID-19 relief programs for business owners currently lacking access, with priority for businesses owned by socially and economically disadvantaged individuals, women, and veterans Isabel Guzman is the administrator of the Small Business Administration. Prior to holding this office, she had served as the director of California's Office of the Small Business Advocate.  Where to apply for an SBA Paycheck Protection Program (PPP) loan Applications for this loan were made through any existing SBA 7(a) lender or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. The SBA and the Treasury Department announced that the PPP would reopen the week of January 11, 2021, for new borrowers and existing PPP loan recipients. Initially, only community financial institutions, including community development financial institutions (CDFIs), minority depository institutions (MDIs), certified development companies, and microlender intermediaries were able to make first-draw PPP loans beginning January 11, 2021. Second-draw PPP loans through the same lenders started January 13, 2021. First- and second-draw loans were available from small lenders with less than $1 billion in assets as of January 15, 2021, and all participating PPP lenders were approved to make loans beginning January 19, 2021. Do not use any other road to apply for a PPP loan: Scammers will offer shortcuts to PPP loans, just as they did with the original program. The Federal Trade Commission filed a case against one such company on April 17, 2020. The FTC cautioned to only apply by first going to the SBA website and that the SBA will never ask for Social Security numbers—or bank account or credit card numbers—upfront. Economic Injury Disaster Loan (EIDL) Advance Small business owners in all 50 states, Washington, D.C., and U.S. territories were able to apply for an Economic Injury Disaster Loan (EIDL) Advance of up to $10,000 as part of the application process for an EIDL loan. The loan advance did not have to be repaid and you didn’t actually have to be approved for an EIDL loan to receive the advance; however, the amount of the loan advance was deducted from total loan eligibility. The EIDL Advance program ended on July 11, 2020, due to a lack of funds. A new EIDL Targeted Advance program was created with the passage of the Consolidated Appropriations Act (CAA), 2021. Economic Injury Disaster Loan (EIDL) Targeted Advance Refresh The Targeted EIDL Advance program, which is more restrictive than its predecessor, is authorized under the CAA and makes up to $10,000 available to applicants located in low-income communities who previously received an EIDL Advance for less than $10,000, or those who applied but received no funds due to lack of program funding. If you previously received a partial EIDL Advance ($1,000 to $9,000), then the SBA will reach out to you first by official (@sba.gov) email to determine your eligibility and provide instructions. If you are in this group, then you may qualify if you: Are located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code; andCan demonstrate that you suffered a more than 30% reduction in revenue during an eight-week period beginning on March 2, 2020, or later. You will be asked to provide proof of the more than 30% revenue reduction. If you previously applied for an EIDL Advance but did not receive one due to a lack of funds, you are next in line to be contacted by the SBA. To qualify for this group, you must meet the qualifications above plus:  Have no more than 300 employees. If your business is otherwise eligible for the EIDL program—including if you are a sole proprietor, independent contractor, or private, nonprofit organization—and you meet the qualifications above, then you are eligible for consideration for the targeted advance. Agricultural enterprises are not eligible. You may be asked to provide an Internal Revenue Service (IRS) Form 4506-T, giving the SBA permission to request your tax return information. Do not submit a duplicate COVID-19 EIDL application. Only prior applicants will be considered for the Targeted EIDL Advance. Economic Injury Disaster Loan (EIDL) SBA Coronavirus Disaster assistance loans were designed to help businesses recover from the economic effects of COVID-19. Disaster assistance loans of up to $500,000 with maximum terms of 30 years were available. Small business owners in all 50 states, Washington, D.C., and U.S. territories were eligible to apply. However, as of January 1, 2022, the SBA announced the program "is not accepting new applications, increase requests, or reconsiderations." Loans could be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the impact of COVID-19. The interest rate for small businesses is 3.75%. Nonprofits pay just 2.75%. On March 24, 2021, the SBA announced that starting April 6, 2021, it would raise the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury. Economic Injury Disaster Loan (EIDL) Refresh The main change brought about by the CAA, aside from $20 billion in additional funding for the Economic Injury Disaster Loan (EIDL) program, was an extension of time to file for a loan from December 31, 2020, to December 31, 2021. On March 24, 2021, the SBA raised the EIDL limit from $150,000 covering six months of economic injury to $500,000 for 24 months of economic injury, effective April 6, 2021. Further, some businesses that previously received a loan under the lower limits may be deemed eligible to increase their loan amount. The SBA said it would notify those businesses of their eligibility. Shuttered Venue Operator Grant (SVOG) Program The Shuttered Venue Operators Grant (SVOG) program, authorized by the CAA on December 27, 2020, includes $15 billion in grants to shuttered venues. Funds are administered by the SBA’s Office of Disaster Assistance. Eligible applicants can qualify for SVOG grants equal to 45% of their gross earned revenue, with a maximum of $10 million. There is $2 billion reserved for eligible applicants with up to 50 full-time employees. Eligible entities include: Live venue operators or promotersTheatrical producersLive performing arts organization operatorsRelevant museum operators, zoos, and aquariums that meet specific criteriaMotion picture theater operatorsTalent representativesAny business entity owned by an eligible entity that also meets eligibility requirements  SVO grants are only available to venues that: Have been in operation as of February 29, 2020Have not received a PPP loan on or after December 27, 2020 SVO grant funds may be used for: payroll, rent, utility, mortgage payments, debt, worker protection, payments to independent contractors, maintenance, administrative costs, state and local taxes, operating leases (in effect as of February 15, 2020), insurance, advertising, and other costs of production. Grantees may not use funds to purchase real estate, make loan payments on loans originated after February 15, 2020, make investments, or make political contributions or payments. Where To Apply for Coronavirus Disaster Assistance Economic Injury Disaster Assistance Loans and Targeted Advances are funded by the Small Business Administration (SBA). Applications for an EIDL loan went through the SBA website. Recall that there is no application process for the new EIDL $10,000 Targeted Advance. The SBA will contact you if you are eligible. As of August 2023, the SBA is no longer accepting SVO Grant applications. Interested entities can stay up to date by visiting www.sba.gov/svogrant on a regular basis. SBA Express Bridge Loan (EBL) If you already have a business relationship with an SBA Express Lender, a new Express Bridge Loan Pilot Program offers a quick turnaround on up to $25,000 to help bridge the gap until your SBA Economic Injury Disaster Loan (EIDL) is approved. Bridge funds can be paid in full or in part with proceeds from your EIDL once it is approved. Where To Apply for an SBA Express Bridge Loan Consult the Express Bridge Loan Pilot Program Guide or contact your local SBA district office for details. SBA 7(a) Loan Debt Relief The SBA Debt Relief program will pay principal, interest, and fees for six months on new 7(a), 504, and microloans made from March 27, 2020, to September 27, 2020. The program also will pay principal, interest, and fees for six months on existing 7(a), 504, and microloans beginning with the first payment due after March 27, 2020. Where to Apply for 7(a) Loan Debt Relief This relief is automatic and does not require an application. Check with your lender for more information or if you have questions. SBA Deferral on Existing Home and Business Loans If you currently have an SBA Serviced Disaster (Home and Business) loan that was in “regular servicing” on March 1, 2020, then the SBA provided automatic deferral on your loan through March 31, 2021. Note the following: Interest will continue to accrue on your loan during the deferral period.1201 monthly notices will still be mailed but will show no payment due.Pre-Authorized Debit (PAD) payments will not automatically be canceled. You must contact your servicer to do that.You may continue making payments if you wish. No contact is necessary.After the deferral period, you must resume payments and set up PAD if you canceled it earlier. Where to Apply for Existing Disaster Loan Deferral Deferral is automatic. You do not need to apply. After the deferral period, you do not need to contact the SBA before resuming payments. SBA Business Expansion Loans The disaster-related loans referenced above are made with funds appropriated or guaranteed by Congress. SBA business expansion loans are commercial loans, structured according to SBA requirements, with an SBA guarantee. Small business owners and borrowers who have access to other financing with reasonable terms are not eligible for this type of SBA-guaranteed loan. Guaranteed loan programs from the SBA include the following: 7(a) Loan Program This is the SBA’s most common loan program and provides financial help for businesses with special requirements, such as franchises, farms and agricultural businesses, and fishing vessels. There is no minimum loan amount, but the maximum is $5 million. Note that emergency SBA 7(a) loans available under the PPP have different requirements from those used for business expansion. There are eight types of 7(a) loans—each with its own maximum loan amount, SBA guarantee, negotiated interest rate, and other factors—all of which are spelled out on the 7(a) loan program web page. Microloan Program This program provides small, short-term loans of up to $50,000 to small businesses and certain types of not-for-profit childcare centers. Loans can be used to buy new equipment, supplies, furniture, or to provide working capital. Loans are provided by microlenders, with each having its own lending and credit requirements. CDC/504 Program This loan program provides financing for businesses to purchase real estate, major fixed assets, and equipment, or to make improvements like landscaping. This program can also provide funding for renovation. Where to Apply for an Expansion Loan As previously noted, the SBA doesn’t lend money directly to help you grow your business, as it does when providing disaster relief. Instead, it sets stipulations for loans made by its partners (lenders, community development organizations, and microlending institutions). You can apply for an expansion loan at any SBA-approved lender or use the SBA’s Lender Match. Can I Still Apply to the Paycheck Protection Program? No, businesses can no longer apply for the Paycheck Protection Program (PPP), which ended on May 31, 2021. What Is the Fastest SBA Loan to Get? The SBA Express is a type of 7(a) loan that is processed quickly. The SBA will respond to applications for express loans within 36 hours, and loan amounts can be for up to $500,000. However, decisions about eligibility and collateral are made by the lender, not the SBA. What Is the Most Popular SBA Loan? 7(a) loans are the most popular types of SBA loans. These loans can provide help for small businesses with special requirements, real estate transactions, working capital needs, refinancing business debt, establishing or expanding a new business, and more. The Bottom Line There were multiple pieces of legislation enacted in 2020 and 2021 to provide funding and relief to small businesses. These included Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs, as well as forgivable EIDL Targeted Advances and Shuttered Venue Operator (SVO) Grants. Many of these programs have since expired. The Small Business Administration stopped accepting applications for COVID-19 EIDL loans on January 1, 2022, and the Paycheck Protection program ended on May 31, 2021. Other SBA programs include Express Bridge Loans, 7(a) Debt Relief Loans, and Loan Deferrals.

https://www.investopedia.com/how-do-business-grants-work-7642849

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> In the United States, thousands of grants are available to small businesses, which are a vital part of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economy.asp">economy</a>. After all, nearly half of all jobs are in companies with fewer than 500 employees. And these companies make up over 43% of U.S. gross domestic product (GDP).<span class="ql-inline-citation" data-cite="5"></span> That gives them an outsized role in innovation, job creation, and economic output. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> From technology-focused grants to those created for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250">minority-owned businesses</a>, grants are available based on a wide spectrum of business types, stages of growth, and funding needs. Often, they are driven from government organizations, nonprofits, and academic institutions.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Over 5 million businesses were created in the U.S. in 2021, a 53% rise from 2019.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="8"></span></li><li>A broad spectrum of grants are available for small businesses, although securing funding can be competitive.</li><li>Organizations that provide grants for small businesses include the U.S. Small Business Association (SBA), Grants.gov, the Minority Business Development Agency (MBDA), and the State Trade Expansion Program, along with several other nonprofit and academic funding resources.</li><li>In many cases, business grants are not required to be repaid, providing an attractive source of funds to grow or expand a business.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is a Business Grant? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> At the heart of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">small business grants</a> is promoting <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/092514/entrepreneur-vs-small-business-owner-defined.asp#toc-entrepreneurship">entrepreneurship</a>. These grants are offered by the U.S. government and other organizations to a variety of small business owners, including individuals, businesses, or corporations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> To help companies grow their business, government funding programs from local to federal levels are available. Funding for small businesses can take the form of loans, grants, and investment capital.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Corporate and nonprofit grants range from sources such as the Halstead Grant to the National Association for the Self-Employed. Along with this, the Amber Foundation provides <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-women-small-business-grant-7963621">grants for women-run businesses</a>. Operation HOPE is an organization focused on supporting Black-owned businesses, providing a range of funding assistance and programs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Often, business grants do not require repayment, but securing funding can be competitive and requires applicants to meet certain criteria and adhere to strict requirements. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-how-does-a-business-grant-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> How Does a Business Grant Work?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> To apply for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-a-business-grant-7644272">business grant</a>, it’s important to know the steps and criteria for the type of funding for which you are applying. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> For government grants, first ensure that your business meets all of the requirements. For instance, it may not be suitable for funding if you are looking to cover payroll costs or other operating costs, or paying off debt.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Also, be aware of the time involved in applying for different grants. Often, they can require a lot of paperwork that details your business’s reasons for applying for the grant, market demographics, or the nature of your product or service. Additional documentation may ask for details on your finances, marketing, purposes of using the funds, and other details. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The good news is there are countless resources for funding opportunities, including the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <li>The U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.grants.gov">Grants.gov</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/funding-programs/grants/state-trade-expansion-program-step">State Trade Expansion Program (STEP)</a></li> <li>The <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.mbda.gov">Minority Business Development Agency (MBDA)</a></li> <li>The <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://ambergrantsforwomen.com/about-us/">Amber Foundation</a></li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="externalLink" href="https://operationhope.org" rel="nofollow">Operation HOPE</a></li> <li><a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="externalLink" href="https://www.sbir.gov">Small Business Innovation Research (SBIR)</a> programs</li> <li><a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="externalLink" href="https://www.sbir.gov/about">Small Business Technology Transfer (STTR)</a> grants</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> While business grants are typically not required to be repaid, they are often <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/are-business-grants-taxable-7814330">taxable</a>. Details on the tax payments on different grants usually can be found on the business grant agreement. Or, the funding organization can provide tax information if it is not explicitly stated in the agreement. In addition, the Internal Revenue Service (IRS) and state Department of Revenue websites provide information on tax responsibilities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> As a rule of thumb, it is good to set aside a portion of the grant for taxes. Keeping clear financial records can help you prepare. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businessexpenses.asp">Tax deductions</a> may also be available on business grants, which may be worthwhile if they are applicable to your business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-types-of-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Types of Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Generally speaking, there are five main types of grants based on their funding source.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> Federal Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> The primary source for federal grants can be found at Grants.gov. As of August 2023, over 900 grants were available to small businesses. These include grants issued directly or indirectly to small businesses.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Consider one example, where a grant is available for small businesses working on research on office space to residential conversions. Total funding for the grant is $860,000 through the Department of Housing and Urban Development (HUD).<span class="ql-inline-citation" data-cite="11"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Other grants across Grants.gov may fall under agriculture, business, and commerce. For instance, a separate grant with a total program funding of $13.8 million is focused on diversifying the semiconductor supply chain for national security purposes, “to support the development and adoption of secure semiconductors, [and] semiconductor supply chains.” It’s worth noting that the vast majority of these grants are designed to support research.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> At the same time, the Small Business Administration (SBA), run by the federal government, offers two main programs designed for companies building innovative solutions in their field.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The Small Business Innovation Research Grant (SBIR) program is for businesses that are working with nonprofit organizations or universities that drive innovation. Each year, it awards $3.2 billion in funding for grants that range from $50,000 to $750,000 apiece, depending on the phase of the research project. In some cases, grants awarded may be in the millions.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> An example of an SBIR grant can be seen with a solar company, Ubiquitous Energy, that worked with the National Science Foundation to bring its renewable energy technology to expand operations for the commercialization of solar technologies. In 2014, it was awarded an SBIR grant of $750,000 to help develop the technology.<span class="ql-inline-citation" data-cite="7"></span> Since then, the company has raised an additional $25 million in private funding alongside support from the SBIR grant.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The second primary grant program from the SBA is the Small Business Technology Transfer (STTR) program. Like the SBIR, it awards grants to businesses working with nonprofits, including academic institutions, that are designed to bring advanced technologies to market. Each year, $453 million is allocated for these programs.<span class="ql-inline-citation" data-cite="4"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> The main difference between an SBIR grant and an STTR grant is that for an SBIR grant, the small business has the option to work with a nonprofit partner, while for an STTR grant, it is a requirement.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-subheading__text"> State Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> U.S. states offer a variety of grants to small businesses. Your local <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/chamber-of-commerce.asp">chamber of commerce</a> can be an excellent resource to learn more about these types of grants, which may be industry-focused with the goals of promoting job creation or aligning with economic development.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> For instance, Massachusetts Growth Capital Lending Projects provide loans from $5,000 to $2 million for businesses to finance commercial real estate purchases for business purposes.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Municipal Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> These types of grants can be found at the city or county level. They often don’t require a research component. Small business development centers, such as the San Diego &amp; Imperial Small Business Development Center, provide grants to companies to support job creation and innovation. They also may provide funding for companies looking to expand into international markets.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-subheading__text"> Corporate Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Many companies offer small business grants, such as the FedEx Small Business Grant Contest, which awards $30,000 in funding to companies with fewer than 99 employees; the Venmo Small Business Grant, which provides $10,000 in funding to companies with under $50,000 in annual sales and fewer than 10 employees; and the National Association for the Self-Employed, which awards $4,000 in grants to its members for business development activities.<span class="ql-inline-citation" data-cite="19"></span><span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> Nonprofit Organization Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Nonprofit organizations and foundations offer grants as well. There are many examples, including the Foundation for a Just Society, which focuses on LGBTQI- and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-grants-for-women-8417262">women-run businesses</a>, and the BIPOC Small Business grant, run by AnnuityFreedom.net, which provides grants for business owners who are Black, Indigenous, or people of color.<span class="ql-inline-citation" data-cite="21"></span><span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-how-do-you-qualify-for-a-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Qualify for a Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312">qualify for a business grant</a>, carefully read the details of the grant requirements. Often, the application will state requirements covering the number of employees, annual revenue, where the business is registered, and grant objectives. Many federal grants require a small business to partner with a nonprofit organization, which is also important to consider, depending on the type of grant for which you are applying.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-what-are-the-chances-of-receiving-a-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Chances of Receiving a Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The odds of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596">successfully receiving a business grant</a> vary based on the source of the funding. Federal grants are among the most competitive, but funding awards can go into the millions depending on the nature of the project or program. Grants coming from the state or municipal government may be less competitive, along with corporate grants or those stemming from nonprofit organizations.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-where-do-you-find-business-grants"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Do You Find Business Grants?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Countless resources for business grants are available to entrepreneurs. Among the many sources that offer funding for entrepreneurs are the Small Business Administration (SBA), Grants.gov, the Small Business Innovation Research (SBIR) program, Small Business Technology Transfer (STTR) grants, the Minority Business Development Agency (MBDA), the Amber Foundation, local chambers of commerce, the FedEx Small Business Grant contest, and the Venmo Small Business Grant, to name a few.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> There are hundreds of grants available for small businesses to support entrepreneurship, job creation, and a broad spectrum of objectives. This is because small businesses play a critical role in the economy, driving economic growth and spurring innovation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> These grants are offered by government, nonprofit, and corporate sources, among others. Often, applications can be rigorous and time-intensive, but the payoff can range from thousands to millions. Furthermore, grants often do not have to be repaid. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> For business owners looking to access funding, it is worth paying close attention to grant requirements and building connections, whether with your local chamber of commerce or with contacts at state agencies. These can provide key information on grant funding to help your business grow.<br/> </p></div>

In the United States, thousands of grants are available to small businesses, which are a vital part of the [economy](https://www.investopedia.com/terms/e/economy.asp). After all, nearly half of all jobs are in companies with fewer than 500 employees. And these companies make up over 43% of U.S. gross domestic product (GDP). That gives them an outsized role in innovation, job creation, and economic output. From technology-focused grants to those created for [minority-owned businesses](https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250), grants are available based on a wide spectrum of business types, stages of growth, and funding needs. Often, they are driven from government organizations, nonprofits, and academic institutions. ### Key Takeaways * Over 5 million businesses were created in the U.S. in 2021, a 53% rise from 2019. * A broad spectrum of grants are available for small businesses, although securing funding can be competitive. * Organizations that provide grants for small businesses include the U.S. Small Business Association (SBA), Grants.gov, the Minority Business Development Agency (MBDA), and the State Trade Expansion Program, along with several other nonprofit and academic funding resources. * In many cases, business grants are not required to be repaid, providing an attractive source of funds to grow or expand a business. ## What Is a Business Grant? At the heart of [small business grants](https://www.investopedia.com/terms/g/grant.asp) is promoting [entrepreneurship](https://www.investopedia.com/articles/investing/092514/entrepreneur-vs-small-business-owner-defined.asp#toc-entrepreneurship). These grants are offered by the U.S. government and other organizations to a variety of small business owners, including individuals, businesses, or corporations. To help companies grow their business, government funding programs from local to federal levels are available. Funding for small businesses can take the form of loans, grants, and investment capital.  Corporate and nonprofit grants range from sources such as the Halstead Grant to the National Association for the Self-Employed. Along with this, the Amber Foundation provides [grants for women-run businesses](https://www.investopedia.com/how-to-get-women-small-business-grant-7963621). Operation HOPE is an organization focused on supporting Black-owned businesses, providing a range of funding assistance and programs. Often, business grants do not require repayment, but securing funding can be competitive and requires applicants to meet certain criteria and adhere to strict requirements. ## How Does a Business Grant Work? To apply for a [business grant](https://www.investopedia.com/what-is-a-business-grant-7644272), it’s important to know the steps and criteria for the type of funding for which you are applying. For government grants, first ensure that your business meets all of the requirements. For instance, it may not be suitable for funding if you are looking to cover payroll costs or other operating costs, or paying off debt.  Also, be aware of the time involved in applying for different grants. Often, they can require a lot of paperwork that details your business’s reasons for applying for the grant, market demographics, or the nature of your product or service. Additional documentation may ask for details on your finances, marketing, purposes of using the funds, and other details. The good news is there are countless resources for funding opportunities, including the following: * The U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) * [Grants.gov](https://www.grants.gov) * [State Trade Expansion Program (STEP)](https://www.sba.gov/funding-programs/grants/state-trade-expansion-program-step) * The [Minority Business Development Agency (MBDA)](https://www.mbda.gov) * The [Amber Foundation](https://ambergrantsforwomen.com/about-us/) * [Operation HOPE](https://operationhope.org) * [Small Business Innovation Research (SBIR)](https://www.sbir.gov) programs * [Small Business Technology Transfer (STTR)](https://www.sbir.gov/about) grants While business grants are typically not required to be repaid, they are often [taxable](https://www.investopedia.com/are-business-grants-taxable-7814330). Details on the tax payments on different grants usually can be found on the business grant agreement. Or, the funding organization can provide tax information if it is not explicitly stated in the agreement. In addition, the Internal Revenue Service (IRS) and state Department of Revenue websites provide information on tax responsibilities. As a rule of thumb, it is good to set aside a portion of the grant for taxes. Keeping clear financial records can help you prepare. [Tax deductions](https://www.investopedia.com/terms/b/businessexpenses.asp) may also be available on business grants, which may be worthwhile if they are applicable to your business. ## Types of Business Grants Generally speaking, there are five main types of grants based on their funding source.  ### Federal Grants The primary source for federal grants can be found at Grants.gov. As of August 2023, over 900 grants were available to small businesses. These include grants issued directly or indirectly to small businesses. Consider one example, where a grant is available for small businesses working on research on office space to residential conversions. Total funding for the grant is $860,000 through the Department of Housing and Urban Development (HUD). Other grants across Grants.gov may fall under agriculture, business, and commerce. For instance, a separate grant with a total program funding of $13.8 million is focused on diversifying the semiconductor supply chain for national security purposes, “to support the development and adoption of secure semiconductors, [and] semiconductor supply chains.” It’s worth noting that the vast majority of these grants are designed to support research. At the same time, the Small Business Administration (SBA), run by the federal government, offers two main programs designed for companies building innovative solutions in their field.  The Small Business Innovation Research Grant (SBIR) program is for businesses that are working with nonprofit organizations or universities that drive innovation. Each year, it awards $3.2 billion in funding for grants that range from $50,000 to $750,000 apiece, depending on the phase of the research project. In some cases, grants awarded may be in the millions. An example of an SBIR grant can be seen with a solar company, Ubiquitous Energy, that worked with the National Science Foundation to bring its renewable energy technology to expand operations for the commercialization of solar technologies. In 2014, it was awarded an SBIR grant of $750,000 to help develop the technology. Since then, the company has raised an additional $25 million in private funding alongside support from the SBIR grant. The second primary grant program from the SBA is the Small Business Technology Transfer (STTR) program. Like the SBIR, it awards grants to businesses working with nonprofits, including academic institutions, that are designed to bring advanced technologies to market. Each year, $453 million is allocated for these programs.  The main difference between an SBIR grant and an STTR grant is that for an SBIR grant, the small business has the option to work with a nonprofit partner, while for an STTR grant, it is a requirement. ### State Grants U.S. states offer a variety of grants to small businesses. Your local [chamber of commerce](https://www.investopedia.com/terms/c/chamber-of-commerce.asp) can be an excellent resource to learn more about these types of grants, which may be industry-focused with the goals of promoting job creation or aligning with economic development.  For instance, Massachusetts Growth Capital Lending Projects provide loans from $5,000 to $2 million for businesses to finance commercial real estate purchases for business purposes. ### Municipal Grants These types of grants can be found at the city or county level. They often don’t require a research component. Small business development centers, such as the San Diego & Imperial Small Business Development Center, provide grants to companies to support job creation and innovation. They also may provide funding for companies looking to expand into international markets. ### Corporate Grants Many companies offer small business grants, such as the FedEx Small Business Grant Contest, which awards $30,000 in funding to companies with fewer than 99 employees; the Venmo Small Business Grant, which provides $10,000 in funding to companies with under $50,000 in annual sales and fewer than 10 employees; and the National Association for the Self-Employed, which awards $4,000 in grants to its members for business development activities. ### Nonprofit Organization Grants Nonprofit organizations and foundations offer grants as well. There are many examples, including the Foundation for a Just Society, which focuses on LGBTQI- and [women-run businesses](https://www.investopedia.com/small-business-grants-for-women-8417262), and the BIPOC Small Business grant, run by AnnuityFreedom.net, which provides grants for business owners who are Black, Indigenous, or people of color. ## How Do You Qualify for a Business Grant? To [qualify for a business grant](https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312), carefully read the details of the grant requirements. Often, the application will state requirements covering the number of employees, annual revenue, where the business is registered, and grant objectives. Many federal grants require a small business to partner with a nonprofit organization, which is also important to consider, depending on the type of grant for which you are applying. ## What Are the Chances of Receiving a Business Grant? The odds of [successfully receiving a business grant](https://www.investopedia.com/business-grants-for-people-convicted-of-felony-8624596) vary based on the source of the funding. Federal grants are among the most competitive, but funding awards can go into the millions depending on the nature of the project or program. Grants coming from the state or municipal government may be less competitive, along with corporate grants or those stemming from nonprofit organizations. ## Where Do You Find Business Grants? Countless resources for business grants are available to entrepreneurs. Among the many sources that offer funding for entrepreneurs are the Small Business Administration (SBA), Grants.gov, the Small Business Innovation Research (SBIR) program, Small Business Technology Transfer (STTR) grants, the Minority Business Development Agency (MBDA), the Amber Foundation, local chambers of commerce, the FedEx Small Business Grant contest, and the Venmo Small Business Grant, to name a few. ## The Bottom Line There are hundreds of grants available for small businesses to support entrepreneurship, job creation, and a broad spectrum of objectives. This is because small businesses play a critical role in the economy, driving economic growth and spurring innovation. These grants are offered by government, nonprofit, and corporate sources, among others. Often, applications can be rigorous and time-intensive, but the payoff can range from thousands to millions. Furthermore, grants often do not have to be repaid. For business owners looking to access funding, it is worth paying close attention to grant requirements and building connections, whether with your local chamber of commerce or with contacts at state agencies. These can provide key information on grant funding to help your business grow.

In the United States, thousands of grants are available to small businesses, which are a vital part of the economy. After all, nearly half of all jobs are in companies with fewer than 500 employees. And these companies make up over 43% of U.S. gross domestic product (GDP). That gives them an outsized role in innovation, job creation, and economic output. From technology-focused grants to those created for minority-owned businesses, grants are available based on a wide spectrum of business types, stages of growth, and funding needs. Often, they are driven from government organizations, nonprofits, and academic institutions. Key Takeaways Over 5 million businesses were created in the U.S. in 2021, a 53% rise from 2019.A broad spectrum of grants are available for small businesses, although securing funding can be competitive.Organizations that provide grants for small businesses include the U.S. Small Business Association (SBA), Grants.gov, the Minority Business Development Agency (MBDA), and the State Trade Expansion Program, along with several other nonprofit and academic funding resources.In many cases, business grants are not required to be repaid, providing an attractive source of funds to grow or expand a business. What Is a Business Grant? At the heart of small business grants is promoting entrepreneurship. These grants are offered by the U.S. government and other organizations to a variety of small business owners, including individuals, businesses, or corporations. To help companies grow their business, government funding programs from local to federal levels are available. Funding for small businesses can take the form of loans, grants, and investment capital.  Corporate and nonprofit grants range from sources such as the Halstead Grant to the National Association for the Self-Employed. Along with this, the Amber Foundation provides grants for women-run businesses. Operation HOPE is an organization focused on supporting Black-owned businesses, providing a range of funding assistance and programs. Often, business grants do not require repayment, but securing funding can be competitive and requires applicants to meet certain criteria and adhere to strict requirements. How Does a Business Grant Work?  To apply for a business grant, it’s important to know the steps and criteria for the type of funding for which you are applying. For government grants, first ensure that your business meets all of the requirements. For instance, it may not be suitable for funding if you are looking to cover payroll costs or other operating costs, or paying off debt.  Also, be aware of the time involved in applying for different grants. Often, they can require a lot of paperwork that details your business’s reasons for applying for the grant, market demographics, or the nature of your product or service. Additional documentation may ask for details on your finances, marketing, purposes of using the funds, and other details. The good news is there are countless resources for funding opportunities, including the following: The U.S. Small Business Administration (SBA) Grants.gov State Trade Expansion Program (STEP) The Minority Business Development Agency (MBDA) The Amber Foundation Operation HOPE Small Business Innovation Research (SBIR) programs Small Business Technology Transfer (STTR) grants While business grants are typically not required to be repaid, they are often taxable. Details on the tax payments on different grants usually can be found on the business grant agreement. Or, the funding organization can provide tax information if it is not explicitly stated in the agreement. In addition, the Internal Revenue Service (IRS) and state Department of Revenue websites provide information on tax responsibilities. As a rule of thumb, it is good to set aside a portion of the grant for taxes. Keeping clear financial records can help you prepare. Tax deductions may also be available on business grants, which may be worthwhile if they are applicable to your business. Types of Business Grants Generally speaking, there are five main types of grants based on their funding source.  Federal Grants The primary source for federal grants can be found at Grants.gov. As of August 2023, over 900 grants were available to small businesses. These include grants issued directly or indirectly to small businesses. Consider one example, where a grant is available for small businesses working on research on office space to residential conversions. Total funding for the grant is $860,000 through the Department of Housing and Urban Development (HUD). Other grants across Grants.gov may fall under agriculture, business, and commerce. For instance, a separate grant with a total program funding of $13.8 million is focused on diversifying the semiconductor supply chain for national security purposes, “to support the development and adoption of secure semiconductors, [and] semiconductor supply chains.” It’s worth noting that the vast majority of these grants are designed to support research. At the same time, the Small Business Administration (SBA), run by the federal government, offers two main programs designed for companies building innovative solutions in their field.  The Small Business Innovation Research Grant (SBIR) program is for businesses that are working with nonprofit organizations or universities that drive innovation. Each year, it awards $3.2 billion in funding for grants that range from $50,000 to $750,000 apiece, depending on the phase of the research project. In some cases, grants awarded may be in the millions. An example of an SBIR grant can be seen with a solar company, Ubiquitous Energy, that worked with the National Science Foundation to bring its renewable energy technology to expand operations for the commercialization of solar technologies. In 2014, it was awarded an SBIR grant of $750,000 to help develop the technology. Since then, the company has raised an additional $25 million in private funding alongside support from the SBIR grant. The second primary grant program from the SBA is the Small Business Technology Transfer (STTR) program. Like the SBIR, it awards grants to businesses working with nonprofits, including academic institutions, that are designed to bring advanced technologies to market. Each year, $453 million is allocated for these programs.  The main difference between an SBIR grant and an STTR grant is that for an SBIR grant, the small business has the option to work with a nonprofit partner, while for an STTR grant, it is a requirement. State Grants U.S. states offer a variety of grants to small businesses. Your local chamber of commerce can be an excellent resource to learn more about these types of grants, which may be industry-focused with the goals of promoting job creation or aligning with economic development.  For instance, Massachusetts Growth Capital Lending Projects provide loans from $5,000 to $2 million for businesses to finance commercial real estate purchases for business purposes. Municipal Grants These types of grants can be found at the city or county level. They often don’t require a research component. Small business development centers, such as the San Diego & Imperial Small Business Development Center, provide grants to companies to support job creation and innovation. They also may provide funding for companies looking to expand into international markets. Corporate Grants Many companies offer small business grants, such as the FedEx Small Business Grant Contest, which awards $30,000 in funding to companies with fewer than 99 employees; the Venmo Small Business Grant, which provides $10,000 in funding to companies with under $50,000 in annual sales and fewer than 10 employees; and the National Association for the Self-Employed, which awards $4,000 in grants to its members for business development activities. Nonprofit Organization Grants Nonprofit organizations and foundations offer grants as well. There are many examples, including the Foundation for a Just Society, which focuses on LGBTQI- and women-run businesses, and the BIPOC Small Business grant, run by AnnuityFreedom.net, which provides grants for business owners who are Black, Indigenous, or people of color. How Do You Qualify for a Business Grant? To qualify for a business grant, carefully read the details of the grant requirements. Often, the application will state requirements covering the number of employees, annual revenue, where the business is registered, and grant objectives. Many federal grants require a small business to partner with a nonprofit organization, which is also important to consider, depending on the type of grant for which you are applying. What Are the Chances of Receiving a Business Grant? The odds of successfully receiving a business grant vary based on the source of the funding. Federal grants are among the most competitive, but funding awards can go into the millions depending on the nature of the project or program. Grants coming from the state or municipal government may be less competitive, along with corporate grants or those stemming from nonprofit organizations. Where Do You Find Business Grants? Countless resources for business grants are available to entrepreneurs. Among the many sources that offer funding for entrepreneurs are the Small Business Administration (SBA), Grants.gov, the Small Business Innovation Research (SBIR) program, Small Business Technology Transfer (STTR) grants, the Minority Business Development Agency (MBDA), the Amber Foundation, local chambers of commerce, the FedEx Small Business Grant contest, and the Venmo Small Business Grant, to name a few. The Bottom Line There are hundreds of grants available for small businesses to support entrepreneurship, job creation, and a broad spectrum of objectives. This is because small businesses play a critical role in the economy, driving economic growth and spurring innovation. These grants are offered by government, nonprofit, and corporate sources, among others. Often, applications can be rigorous and time-intensive, but the payoff can range from thousands to millions. Furthermore, grants often do not have to be repaid. For business owners looking to access funding, it is worth paying close attention to grant requirements and building connections, whether with your local chamber of commerce or with contacts at state agencies. These can provide key information on grant funding to help your business grow.

https://www.investopedia.com/terms/d/deliverables.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-are-deliverables"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Are Deliverables? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term "deliverables" is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/project-management.asp">project management</a> term that's traditionally used to describe the quantifiable goods or services that must be provided upon the completion of a project. Deliverables can be tangible or intangible in nature. For example, in a project focusing on upgrading a firm's technology, a deliverable may refer to the acquisition of a dozen new computers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> On the other hand, for a software project, a deliverable might allude to the implementation of a computer program aimed at improving a company's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountsreceivable.asp">accounts receivable</a> computational efficiency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The word "deliverables" is a project management term describing the quantifiable goods or services that must be provided upon the completion of a project.</li><li>Deliverables can be tangible in nature, such as the acquisition of a dozen new computers, or they can be intangible, like the implementation of a computer program aimed at improving a company's accounts receivable computational efficiency.</li><li>A deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed.</li><li>In many cases, deliverables are accompanied by instruction manuals.</li><li>In film production, deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Deliverables: A project management term describing the quantifiable goods or services that must be provided upon the completion of a project." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/vPGPeYEmFHLk0e4Mf5plh5M0UL4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/vPGPeYEmFHLk0e4Mf5plh5M0UL4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png" data-srcset="https://www.investopedia.com/thmb/49DP3PMNyYfpjCocefvsFEhHGm4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Deliverables: A project management term describing the quantifiable goods or services that must be provided upon the completion of a project." class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/vPGPeYEmFHLk0e4Mf5plh5M0UL4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png" srcset="https://www.investopedia.com/thmb/49DP3PMNyYfpjCocefvsFEhHGm4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / NoNo Flores</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-deliverables"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding Deliverables </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> In addition to computer equipment and software programs, a deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed. In many cases, deliverables are accompanied by instruction manuals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-subheading__text"> Documentation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Deliverables are usually contractually obligated requirements, detailed in agreements drawn up between two related parties within a company, or between a client and an outside consultant or developer. The documentation precisely articulates the description of a deliverable, as well as the delivery timeline and payment terms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Milestones </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Many large projects include milestones, which are interim goals and targets that must be achieved by stipulated points in time. A milestone may refer to a portion of the deliverable due, or it may merely refer to a detailed progress report, describing the current status of a project. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-subheading__text"> Film Deliverables </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> In <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/093015/how-exactly-do-movies-make-money.asp">film production</a>, deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors. Audio and visual materials generally include stereo and Dolby 5.1 sound mixes, music and sound effects on separate files, as well as the full movie in a specified format. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Sometimes, distributors that are purchasing independent films for theatrical release will not include a list of deliverables with the first draft of a term sheet; it's thus important for filmmakers to proactively ask for the expected deliverables so that they can be assembled in a timely manner.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Paperwork deliverables include signed and executed licensing agreements for all music, errors, and omissions reports, performance releases for all on-screen talent, a list of the credit block that will appear in all artwork and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">advertising</a>, as well as location, artwork, and logo legal releases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Film deliverables also pertain to elements that are ancillary to the movies themselves. These items include the trailer, TV spots, publicity stills photographed on set, and other legal work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <span class="heading-toc" id="toc-types-of-deliverables"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Types of Deliverables </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Tangible vs. Intangible Deliverables </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Deliverables can be tangible or intangible. An example of a tangible deliverable would be the construction of a new office to place new workers that don't fit in the old office or a new manufacturing plant that needs to be built to meet increased production levels. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> An example of an intangible deliverable would be a training program for employees to teach them how to use new software that will be used at the company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Internal Deliverables vs. External Deliverables </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Internal deliverables are those deliverables that are in-house and required to complete a project, deliver a good, or provide a service. Internal deliverables are not seen by the customer and are not considered final. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> They are merely deliverables that are part of the steps in a project that will lead to the completion of that project. For example, the construction of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/ppe.asp">factory</a> to produce more goods to meet increased customer <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/demand.asp">demand</a> would be an internal deliverable. Internal deliverables in project management are commonly known as project deliverables. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> External deliverables, on the other hand, are final and provided to the customer. In the example above, the external deliverable would be the final good that comes out of the new factory that the customer will purchase and use. In project management, external deliverables are commonly known as product deliverables. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <span class="heading-toc" id="toc-requirements-for-deliverables"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Requirements for Deliverables </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> At the start of any project, there must be a defined end goal of what is to be achieved. There must then be a clearly defined path to achieve that goal. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/113015/project-manager-career-path-qualifications.asp">project manager</a> can lay out a timeline with deliverables to be met at certain intervals, which are the milestones. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Each project will have different requirements for the deliverables that need to be completed by the milestone dates. The types of projects can be process-based, a phased approach, product-based, or a critical change. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Regardless of the type of project, all will have set stages, which typically include the initiation phase, the planning phase, the execution phase, the monitoring phase, and the closing phase. At each of these phases, there will be a requirement for different deliverables. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_47-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_48-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>At the start of a project, it is important to clearly define project deliverables, which can be in the form of a SWOT analysis, a gap analysis, a project scope statement, a design presentation, or a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gantt-chart.asp">Gantt chart</a>.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> For example, in the planning phase, a deliverable might be a report outlining the entire project, whereas in the monitoring phase the deliverables will be to report on the quality of the new product that was created. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> When a project is initiated there will be a contract drafted that will list expectations, timelines, and the types of deliverables to be provided. These contracts can be drafted internally with different departments within an organization for project deliverables and with external clients for product deliverables. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Certain documentation may also take the form of a statement of work (SOW), which is a document created at the onset of a project that outlines all aspects of the project that multiple parties can agree upon to set expectations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_55-0"><span class="heading-toc" id="toc-what-are-examples-of-deliverables"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Examples of Deliverables?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Examples of deliverables include an initial project strategy report, the budget report, a progress report, a beta product, a test result report, and any other quantifiable aspects of a project that mark a completion.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_57-0"><span class="heading-toc" id="toc-what-is-the-difference-between-an-objective-and-a-deliverable"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between an Objective and a Deliverable?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An objective includes all items outside of a project, such as the outcome and the benefits of a project. The deliverables are the tangible results of the project that allow for the objectives to be achieved.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_59-0"><span class="heading-toc" id="toc-how-do-you-describe-a-deliverable"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Describe a Deliverable?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A deliverable is a final deadline or project milestone that can be provided to external or internal customers. It is the end result or one of many end results in a project plan that can be quantifiable.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Deliverables are the quantifiable goods or services that need to be provided at the various steps of a project as well as at the end of a project. Deliverables help to keep projects on course and allow for an efficient allocation of time and money. They help managers stay on course and are critical to the success of a business. </p></div>

## What Are Deliverables? The term "deliverables" is a [project management](https://www.investopedia.com/terms/p/project-management.asp) term that's traditionally used to describe the quantifiable goods or services that must be provided upon the completion of a project. Deliverables can be tangible or intangible in nature. For example, in a project focusing on upgrading a firm's technology, a deliverable may refer to the acquisition of a dozen new computers. On the other hand, for a software project, a deliverable might allude to the implementation of a computer program aimed at improving a company's [accounts receivable](https://www.investopedia.com/terms/a/accountsreceivable.asp) computational efficiency. ### Key Takeaways * The word "deliverables" is a project management term describing the quantifiable goods or services that must be provided upon the completion of a project. * Deliverables can be tangible in nature, such as the acquisition of a dozen new computers, or they can be intangible, like the implementation of a computer program aimed at improving a company's accounts receivable computational efficiency. * A deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed. * In many cases, deliverables are accompanied by instruction manuals. * In film production, deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors. ![Deliverables: A project management term describing the quantifiable goods or services that must be provided upon the completion of a project.]() :max_bytes(150000):strip_icc()/deliverables.asp-final-b4864bb870254871a4603433941acb93.png) Investopedia / NoNo Flores ## Understanding Deliverables In addition to computer equipment and software programs, a deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed. In many cases, deliverables are accompanied by instruction manuals. ### Documentation Deliverables are usually contractually obligated requirements, detailed in agreements drawn up between two related parties within a company, or between a client and an outside consultant or developer. The documentation precisely articulates the description of a deliverable, as well as the delivery timeline and payment terms. ### Milestones Many large projects include milestones, which are interim goals and targets that must be achieved by stipulated points in time. A milestone may refer to a portion of the deliverable due, or it may merely refer to a detailed progress report, describing the current status of a project. ### Film Deliverables In [film production](https://www.investopedia.com/articles/investing/093015/how-exactly-do-movies-make-money.asp), deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors. Audio and visual materials generally include stereo and Dolby 5.1 sound mixes, music and sound effects on separate files, as well as the full movie in a specified format. ### Sometimes, distributors that are purchasing independent films for theatrical release will not include a list of deliverables with the first draft of a term sheet; it's thus important for filmmakers to proactively ask for the expected deliverables so that they can be assembled in a timely manner. Paperwork deliverables include signed and executed licensing agreements for all music, errors, and omissions reports, performance releases for all on-screen talent, a list of the credit block that will appear in all artwork and [advertising](https://www.investopedia.com/terms/m/marketing.asp), as well as location, artwork, and logo legal releases. Film deliverables also pertain to elements that are ancillary to the movies themselves. These items include the trailer, TV spots, publicity stills photographed on set, and other legal work. ## Types of Deliverables ### Tangible vs. Intangible Deliverables Deliverables can be tangible or intangible. An example of a tangible deliverable would be the construction of a new office to place new workers that don't fit in the old office or a new manufacturing plant that needs to be built to meet increased production levels. An example of an intangible deliverable would be a training program for employees to teach them how to use new software that will be used at the company. ### Internal Deliverables vs. External Deliverables Internal deliverables are those deliverables that are in-house and required to complete a project, deliver a good, or provide a service. Internal deliverables are not seen by the customer and are not considered final. They are merely deliverables that are part of the steps in a project that will lead to the completion of that project. For example, the construction of a [factory](https://www.investopedia.com/terms/p/ppe.asp) to produce more goods to meet increased customer [demand](https://www.investopedia.com/terms/d/demand.asp) would be an internal deliverable. Internal deliverables in project management are commonly known as project deliverables. External deliverables, on the other hand, are final and provided to the customer. In the example above, the external deliverable would be the final good that comes out of the new factory that the customer will purchase and use. In project management, external deliverables are commonly known as product deliverables. ## Requirements for Deliverables At the start of any project, there must be a defined end goal of what is to be achieved. There must then be a clearly defined path to achieve that goal. A [project manager](https://www.investopedia.com/articles/professionals/113015/project-manager-career-path-qualifications.asp) can lay out a timeline with deliverables to be met at certain intervals, which are the milestones. Each project will have different requirements for the deliverables that need to be completed by the milestone dates. The types of projects can be process-based, a phased approach, product-based, or a critical change. Regardless of the type of project, all will have set stages, which typically include the initiation phase, the planning phase, the execution phase, the monitoring phase, and the closing phase. At each of these phases, there will be a requirement for different deliverables. ### At the start of a project, it is important to clearly define project deliverables, which can be in the form of a SWOT analysis, a gap analysis, a project scope statement, a design presentation, or a [Gantt chart](https://www.investopedia.com/terms/g/gantt-chart.asp). For example, in the planning phase, a deliverable might be a report outlining the entire project, whereas in the monitoring phase the deliverables will be to report on the quality of the new product that was created. When a project is initiated there will be a contract drafted that will list expectations, timelines, and the types of deliverables to be provided. These contracts can be drafted internally with different departments within an organization for project deliverables and with external clients for product deliverables. Certain documentation may also take the form of a statement of work (SOW), which is a document created at the onset of a project that outlines all aspects of the project that multiple parties can agree upon to set expectations. ## What Are Examples of Deliverables? Examples of deliverables include an initial project strategy report, the budget report, a progress report, a beta product, a test result report, and any other quantifiable aspects of a project that mark a completion. ## What Is the Difference Between an Objective and a Deliverable? An objective includes all items outside of a project, such as the outcome and the benefits of a project. The deliverables are the tangible results of the project that allow for the objectives to be achieved. ## How Do You Describe a Deliverable? A deliverable is a final deadline or project milestone that can be provided to external or internal customers. It is the end result or one of many end results in a project plan that can be quantifiable. ## The Bottom Line Deliverables are the quantifiable goods or services that need to be provided at the various steps of a project as well as at the end of a project. Deliverables help to keep projects on course and allow for an efficient allocation of time and money. They help managers stay on course and are critical to the success of a business.

What Are Deliverables? The term "deliverables" is a project management term that's traditionally used to describe the quantifiable goods or services that must be provided upon the completion of a project. Deliverables can be tangible or intangible in nature. For example, in a project focusing on upgrading a firm's technology, a deliverable may refer to the acquisition of a dozen new computers. On the other hand, for a software project, a deliverable might allude to the implementation of a computer program aimed at improving a company's accounts receivable computational efficiency. Key Takeaways The word "deliverables" is a project management term describing the quantifiable goods or services that must be provided upon the completion of a project.Deliverables can be tangible in nature, such as the acquisition of a dozen new computers, or they can be intangible, like the implementation of a computer program aimed at improving a company's accounts receivable computational efficiency.A deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed.In many cases, deliverables are accompanied by instruction manuals.In film production, deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors. Investopedia / NoNo Flores Understanding Deliverables In addition to computer equipment and software programs, a deliverable may refer to in-person or online training programs, as well as design samples for products in the process of being developed. In many cases, deliverables are accompanied by instruction manuals. Documentation Deliverables are usually contractually obligated requirements, detailed in agreements drawn up between two related parties within a company, or between a client and an outside consultant or developer. The documentation precisely articulates the description of a deliverable, as well as the delivery timeline and payment terms. Milestones Many large projects include milestones, which are interim goals and targets that must be achieved by stipulated points in time. A milestone may refer to a portion of the deliverable due, or it may merely refer to a detailed progress report, describing the current status of a project. Film Deliverables In film production, deliverables refer to the range of audio, visual, and paperwork files that producers must furnish to distributors. Audio and visual materials generally include stereo and Dolby 5.1 sound mixes, music and sound effects on separate files, as well as the full movie in a specified format. Sometimes, distributors that are purchasing independent films for theatrical release will not include a list of deliverables with the first draft of a term sheet; it's thus important for filmmakers to proactively ask for the expected deliverables so that they can be assembled in a timely manner. Paperwork deliverables include signed and executed licensing agreements for all music, errors, and omissions reports, performance releases for all on-screen talent, a list of the credit block that will appear in all artwork and advertising, as well as location, artwork, and logo legal releases. Film deliverables also pertain to elements that are ancillary to the movies themselves. These items include the trailer, TV spots, publicity stills photographed on set, and other legal work. Types of Deliverables Tangible vs. Intangible Deliverables Deliverables can be tangible or intangible. An example of a tangible deliverable would be the construction of a new office to place new workers that don't fit in the old office or a new manufacturing plant that needs to be built to meet increased production levels. An example of an intangible deliverable would be a training program for employees to teach them how to use new software that will be used at the company. Internal Deliverables vs. External Deliverables Internal deliverables are those deliverables that are in-house and required to complete a project, deliver a good, or provide a service. Internal deliverables are not seen by the customer and are not considered final. They are merely deliverables that are part of the steps in a project that will lead to the completion of that project. For example, the construction of a factory to produce more goods to meet increased customer demand would be an internal deliverable. Internal deliverables in project management are commonly known as project deliverables. External deliverables, on the other hand, are final and provided to the customer. In the example above, the external deliverable would be the final good that comes out of the new factory that the customer will purchase and use. In project management, external deliverables are commonly known as product deliverables. Requirements for Deliverables At the start of any project, there must be a defined end goal of what is to be achieved. There must then be a clearly defined path to achieve that goal. A project manager can lay out a timeline with deliverables to be met at certain intervals, which are the milestones. Each project will have different requirements for the deliverables that need to be completed by the milestone dates. The types of projects can be process-based, a phased approach, product-based, or a critical change. Regardless of the type of project, all will have set stages, which typically include the initiation phase, the planning phase, the execution phase, the monitoring phase, and the closing phase. At each of these phases, there will be a requirement for different deliverables. At the start of a project, it is important to clearly define project deliverables, which can be in the form of a SWOT analysis, a gap analysis, a project scope statement, a design presentation, or a Gantt chart. For example, in the planning phase, a deliverable might be a report outlining the entire project, whereas in the monitoring phase the deliverables will be to report on the quality of the new product that was created. When a project is initiated there will be a contract drafted that will list expectations, timelines, and the types of deliverables to be provided. These contracts can be drafted internally with different departments within an organization for project deliverables and with external clients for product deliverables. Certain documentation may also take the form of a statement of work (SOW), which is a document created at the onset of a project that outlines all aspects of the project that multiple parties can agree upon to set expectations. What Are Examples of Deliverables? Examples of deliverables include an initial project strategy report, the budget report, a progress report, a beta product, a test result report, and any other quantifiable aspects of a project that mark a completion. What Is the Difference Between an Objective and a Deliverable? An objective includes all items outside of a project, such as the outcome and the benefits of a project. The deliverables are the tangible results of the project that allow for the objectives to be achieved. How Do You Describe a Deliverable? A deliverable is a final deadline or project milestone that can be provided to external or internal customers. It is the end result or one of many end results in a project plan that can be quantifiable. The Bottom Line Deliverables are the quantifiable goods or services that need to be provided at the various steps of a project as well as at the end of a project. Deliverables help to keep projects on course and allow for an efficient allocation of time and money. They help managers stay on course and are critical to the success of a business.

https://www.investopedia.com/how-to-write-a-business-plan-for-a-loan-7550194

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> If you are applying for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/business-loan-personal-loan-difference-7485839#toc-business-loan">business loan</a>, your lender may want to see your business plan. Your plan can prove that you understand your market and your <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businessmodel.asp">business model</a> and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Many lenders will require you to write a business plan to support your loan application.</li><li>Though every business plan is different, there are a number of sections that appear in every business plan.</li><li>A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.</li><li>Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.</li></ul></div></div></div> <span class="heading-toc" id="toc-why-do-i-need-a-business-plan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Why Do I Need a Business Plan? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> There are many reasons why all businesses should have a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-plan.asp">business plan</a>. A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> A business plan is also valuable when it comes to dealing with external organizations. Indeed, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank.asp">banks</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capital</a> firms often require a viable business plan before considering whether they’ll provide capital to new businesses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Even if a business is well-established, lenders may want to see a solid business plan before providing financing. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">Lenders</a> want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.</p></div></div></div> <span class="heading-toc" id="toc-sections-of-a-business-plan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Sections of a Business Plan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Let’s look at each section in more detail. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Executive Summary </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Company Overview </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Products and Services </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_36-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_37-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Market Analysis </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-subheading__text"> Marketing and Sales Plan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Operational Plan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-subheading__text"> Management Team </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_54-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_55-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/organizational-chart.asp">organizational chart</a> to explain how your team is structured.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Funding Request </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repay</a> your loan.<span class="ql-inline-citation" data-cite="5"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> Financial Statements </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <span class="heading-toc" id="toc-what-do-lenders-look-for-in-a-business-plan"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-heading__text"> What Do Lenders Look for in a Business Plan? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> Your lender will base their decision on what are known as the “five Cs.” These are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> <li><strong>Character</strong>: You can stress your good character in your executive summary, company overview, and your management team section.</li> <li><strong>Capacity</strong>: This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.</li> <li><strong>Capital</strong>: This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a> throughout your business plan.</li> <li><strong>Conditions</strong>: Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.</li> <li><strong>Collateral</strong>: Depending on your loan, you may be asked to provide <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/collateral.asp">collateral</a>, so you should provide information on the assets you own in your operational plan.<span class="ql-inline-citation" data-cite="7"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-write-a-business-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Write a Business Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_75-0"><span class="heading-toc" id="toc-what-should-you-avoid-when-writing-a-business-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Should You Avoid When Writing a Business Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_77-0"><span class="heading-toc" id="toc-should-i-hire-someone-to-write-a-business-plan-for-my-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should I Hire Someone to Write a Business Plan for My Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.<br> </br></p></div>

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups. If you are applying for a [business loan](https://www.investopedia.com/business-loan-personal-loan-difference-7485839#toc-business-loan), your lender may want to see your business plan. Your plan can prove that you understand your market and your [business model](https://www.investopedia.com/terms/b/businessmodel.asp) and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance. ### Key Takeaways * Many lenders will require you to write a business plan to support your loan application. * Though every business plan is different, there are a number of sections that appear in every business plan. * A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth. * Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral. ## Why Do I Need a Business Plan? There are many reasons why all businesses should have a [business plan](https://www.investopedia.com/terms/b/business-plan.asp). A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment. On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way. A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction. A business plan is also valuable when it comes to dealing with external organizations. Indeed, [banks](https://www.investopedia.com/terms/b/bank.asp) and [venture capital](https://www.investopedia.com/terms/v/venturecapital.asp) firms often require a viable business plan before considering whether they’ll provide capital to new businesses. ### Note Even if a business is well-established, lenders may want to see a solid business plan before providing financing. [Lenders](https://www.investopedia.com/terms/l/lender.asp) want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan. ## Sections of a Business Plan Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements. Let’s look at each section in more detail. ### Executive Summary The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business. You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans. ### Company Overview In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it. Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees. ### Products and Services In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable. ### You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business. ### Market Analysis A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section. ### Marketing and Sales Plan Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning. If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so. ### Operational Plan This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible. If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business. ### Management Team The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place. ### Note Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an [organizational chart](https://www.investopedia.com/terms/o/organizational-chart.asp) to explain how your team is structured. ### Funding Request If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it. The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to [repay](https://www.investopedia.com/terms/r/repayment.asp) your loan. ### Financial Statements Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance. The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years. ## What Do Lenders Look for in a Business Plan? Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth. Your lender will base their decision on what are known as the “five Cs.” These are: * **Character**: You can stress your good character in your executive summary, company overview, and your management team section. * **Capacity**: This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this. * **Capital**: This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your [capital](https://www.investopedia.com/terms/c/capital.asp) throughout your business plan. * **Conditions**: Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors. * **Collateral**: Depending on your loan, you may be asked to provide [collateral](https://www.investopedia.com/terms/c/collateral.asp), so you should provide information on the assets you own in your operational plan. ## How Long Does It Take to Write a Business Plan? The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business. ## What Should You Avoid When Writing a Business Plan? The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable. ## Should I Hire Someone to Write a Business Plan for My Business? You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant. ## The Bottom Line Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups. If you are applying for a business loan, your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance. Key Takeaways Many lenders will require you to write a business plan to support your loan application.Though every business plan is different, there are a number of sections that appear in every business plan.A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral. Why Do I Need a Business Plan? There are many reasons why all businesses should have a business plan. A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment. On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way. A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction. A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses. Note Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan. Sections of a Business Plan Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements. Let’s look at each section in more detail. Executive Summary The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business. You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans. Company Overview In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it. Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees. Products and Services In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable. You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business. Market Analysis A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section. Marketing and Sales Plan Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning. If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so. Operational Plan This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible. If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business. Management Team The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place. Note Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured. Funding Request If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it. The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan. Financial Statements Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance. The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years. What Do Lenders Look for in a Business Plan? Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth. Your lender will base their decision on what are known as the “five Cs.” These are: Character: You can stress your good character in your executive summary, company overview, and your management team section. Capacity: This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this. Capital: This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan. Conditions: Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors. Collateral: Depending on your loan, you may be asked to provide collateral, so you should provide information on the assets you own in your operational plan. How Long Does It Take to Write a Business Plan? The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business. What Should You Avoid When Writing a Business Plan? The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable. Should I Hire Someone to Write a Business Plan for My Business? You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant. The Bottom Line Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

https://www.investopedia.com/paycheck-protection-program-ppp-loan-forgiveness-7550209

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-navigate-the-new-stimulus-plan-and-get-a-ppp-loan-4843031">Paycheck Protection Program (PPP)</a> was a huge federal program that paid out $790.9 billion in small business loans during the COVID-19 pandemic. The <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944">PPP Act</a>, which instigated the program, allowed for much of that money to be forgiven, so the businesses that received it don’t have to pay it back. Since the program ended on May 31, 2021, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/where-ppp-money-went-5216725">nearly $661.5 billion has been forgiven</a>.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> If your business received a PPP loan, and you haven’t yet applied for forgiveness, you still can. Though there are limitations on exactly what expenses can be forgiven, most companies will be able to write off at least some of their PPP <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt.asp">debt</a>.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic.<span class="ql-inline-citation" data-cite="4"></span></li><li>If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan.<span class="ql-inline-citation" data-cite="2"></span></li><li>You should check if you are eligible for PPP forgiveness, and apply for it, as soon as possible.</li><li>All PPP loan recipients are able to apply for forgiveness via their lender.</li><li>If your loan was for less than $150,000, you may be able to apply for forgiveness from the SBA.<span class="ql-inline-citation" data-cite="5"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-ppp-loan-forgiveness-through-the-sba"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> PPP Loan Forgiveness Through the SBA  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> If your business received a PPP loan before the program ended on May 31, 2021, you can apply for PPP loan forgiveness until the date when your loan matures, which is two years for loans originated before June 5, 2020, and five years for loans issued on or after that date. However, you can apply earlier than that, or as soon as your covered period ends. It’s best to apply early, because you will have to start paying the loan back 10 months after your covered period ends.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The vast majority of these loans (92%) were for less than $150,000. If your loan is in that category, you can apply for loan forgiveness via your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">lender</a>, or directly from the U.S. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> if your lender was one of the 1,400 lenders that participated in the SBA’s Direct Forgiveness program.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> To apply for forgiveness through the SBA, you should visit the SBA’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://directforgiveness.sba.gov/requests/borrower/login/?next=/">PPP Direct Forgiveness Portal</a>. During the application process, you’ll have to fill out <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/document/sba-form-3508s-ppp-3508s-loan-forgiveness-application-instructions">SBA Form 3508S</a>. You don’t have to tell the SBA how you spent the funds, and if it’s your first loan, you don’t need to submit any further documentation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If it’s a second-draw loan, you’ll have to prove that you lost revenue before your loan can be forgiven.<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-how-to-apply-for-ppp-loan-forgiveness-from-your-lender"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> How to Apply for PPP Loan Forgiveness from Your Lender  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> You can also apply for loan forgiveness via your lender, and if your loan was for more than $150,000, this is the only way you can apply. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Each lender has a different process for this application, but they will typically contact you if you are eligible for loan forgiveness. Some lenders will even draft <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/document/sba-form-3508-ppp-loan-forgiveness-application-instructions">SBA Form 3508</a> for you and just require you to sign it. If you haven’t heard from your lender, and you think you are eligible for forgiveness, you should contact them as soon as possible.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> If your loan was for more than $150,000, you may have to provide extra documentation before your loan can be forgiven. Your lender will be able to provide guidance on their process for applying for loan forgiveness.<span class="ql-inline-citation" data-cite="3"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-eligible-expenses-for-ppp-loan-forgiveness"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Eligible Expenses for PPP Loan Forgiveness  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Though the majority of the funds disbursed through the program have already been forgiven, there are some eligibility requirements for forgiveness. First, to receive full forgiveness, your business must have maintained staffing and compensation levels throughout the covered period.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> In addition, the money from your PPP loan must have been spent on eligible expenses. These are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <li><strong>Payroll costs</strong>: To qualify for full forgiveness, you must have spent at least 60% of your PPP loan on payroll, which includes all wages, commissions, bonuses, and insurance payments and retirement payments made on behalf of your employees.<br/></li><li><strong>Operating costs</strong>: This includes mortgage payments, rent, software, and utility bills.<br/></li><li><strong>Supplier costs</strong>: The cost of goods that are necessary for the operation of your business are forgivable only if you ordered them before the beginning of your covered period. Perishable goods ordered during the period are also eligible.<br/></li><li><strong>Property damage</strong>: If your property was damaged during the covered period, you may be able to include repair costs in your forgiveness application, but only if you haven’t already been recompensed for this from your insurance. </li><li><strong>Worker protection</strong>: If you had to pay for personal protective equipment (PPE) for your workers, or install barriers to keep them safe during the pandemic, this cost is also eligible for forgiveness.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-documents-needed-for-ppp-loan-forgiveness"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Documents Needed for PPP Loan Forgiveness </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The documents you will need to submit in support of your loan forgiveness application will depend on how much your loan was for, and whether it was a first-draw or second-draw loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> If your first-draw loan was for less than $150,000, you won’t need to provide additional documents. Instead, you sign a form that certifies that you complied with the rules of the program. If you borrowed less than $150,000 on a second-draw loan, you need to prove that your revenue dropped by at least 25% for any quarter of 2020 compared to the same quarter in 2019.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> If your loan was for more than $150,000, you’ll need to submit evidence of how you spent it. Only the expenses in the list above are eligible, and to prove that you spent your loan on these expenses, you may have to submit: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <li>Third-party payroll reports<br/></li><li>State and local quarterly financial reports</li><li>State unemployment insurance filings</li><li>Bank statements</li><li>Tax documents: Form 1040 Schedule C or Schedule F, Form 1065 Schedule K-1, Form 941, Form 944, Form W-2, Form W-3</li><li>Payment receipts, canceled checks, or account statements showing employer health and retirement contributions</li><li>Account statements</li><li>Utility bills reflecting payments made</li><li>Purchase orders, contracts, and receipts for vendor payments</li><li>Canceled checks or receipts for covered expenses</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> This is an indicative list. Depending on your lender, you may not need to provide all of these documents, or you may have to provide more. Your lender will be able to advise you on exactly what they need. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-is-it-possible-to-have-my-ppp-loan-partially-forgiven"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is It Possible to Have My PPP Loan Partially Forgiven?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It is possible to have your PPP loan partially forgiven. If you didn’t spend more than 60% of your PPP loan on payroll costs, you may still be able to get your other eligible costs forgiven.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-what-happens-to-loan-proceeds-that-are-not-forgiven"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens to Loan Proceeds That Are Not Forgiven?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For PPP loan proceeds that are not forgiven, you will have to repay any amount of the PPP loan at 1% <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> over a five-year term. Loan payments will be deferred for six months, but they will start incurring interest immediately.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-what-happens-if-the-sba-declines-my-forgiveness-application"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens If the SBA Declines My Forgiveness Application?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If the SBA declines your forgiveness application, the SBA will send your lender a Final Loan Review Decision. Lenders must then pass this decision along to you within five business days. You’ll then have to start paying back your loan after six months.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic. If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> You should apply for PPP forgiveness as soon as possible. </p></div>

The [Paycheck Protection Program (PPP)](https://www.investopedia.com/how-to-navigate-the-new-stimulus-plan-and-get-a-ppp-loan-4843031) was a huge federal program that paid out $790.9 billion in small business loans during the COVID-19 pandemic. The [PPP Act](https://www.investopedia.com/paycheck-protection-program-flexibility-act-of-2020-an-overview-4846944), which instigated the program, allowed for much of that money to be forgiven, so the businesses that received it don’t have to pay it back. Since the program ended on May 31, 2021, [nearly $661.5 billion has been forgiven](https://www.investopedia.com/where-ppp-money-went-5216725). If your business received a PPP loan, and you haven’t yet applied for forgiveness, you still can. Though there are limitations on exactly what expenses can be forgiven, most companies will be able to write off at least some of their PPP [debt](https://www.investopedia.com/terms/d/debt.asp). ### Key Takeaways * The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic. * If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan. * You should check if you are eligible for PPP forgiveness, and apply for it, as soon as possible. * All PPP loan recipients are able to apply for forgiveness via their lender. * If your loan was for less than $150,000, you may be able to apply for forgiveness from the SBA. ## PPP Loan Forgiveness Through the SBA If your business received a PPP loan before the program ended on May 31, 2021, you can apply for PPP loan forgiveness until the date when your loan matures, which is two years for loans originated before June 5, 2020, and five years for loans issued on or after that date. However, you can apply earlier than that, or as soon as your covered period ends. It’s best to apply early, because you will have to start paying the loan back 10 months after your covered period ends. The vast majority of these loans (92%) were for less than $150,000. If your loan is in that category, you can apply for loan forgiveness via your [lender](https://www.investopedia.com/terms/l/lender.asp), or directly from the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) if your lender was one of the 1,400 lenders that participated in the SBA’s Direct Forgiveness program. To apply for forgiveness through the SBA, you should visit the SBA’s [PPP Direct Forgiveness Portal](https://directforgiveness.sba.gov/requests/borrower/login/?next=/). During the application process, you’ll have to fill out [SBA Form 3508S](https://www.sba.gov/document/sba-form-3508s-ppp-3508s-loan-forgiveness-application-instructions). You don’t have to tell the SBA how you spent the funds, and if it’s your first loan, you don’t need to submit any further documentation. ### If it’s a second-draw loan, you’ll have to prove that you lost revenue before your loan can be forgiven. ## How to Apply for PPP Loan Forgiveness from Your Lender You can also apply for loan forgiveness via your lender, and if your loan was for more than $150,000, this is the only way you can apply. Each lender has a different process for this application, but they will typically contact you if you are eligible for loan forgiveness. Some lenders will even draft [SBA Form 3508](https://www.sba.gov/document/sba-form-3508-ppp-loan-forgiveness-application-instructions) for you and just require you to sign it. If you haven’t heard from your lender, and you think you are eligible for forgiveness, you should contact them as soon as possible. If your loan was for more than $150,000, you may have to provide extra documentation before your loan can be forgiven. Your lender will be able to provide guidance on their process for applying for loan forgiveness. ## Eligible Expenses for PPP Loan Forgiveness Though the majority of the funds disbursed through the program have already been forgiven, there are some eligibility requirements for forgiveness. First, to receive full forgiveness, your business must have maintained staffing and compensation levels throughout the covered period. In addition, the money from your PPP loan must have been spent on eligible expenses. These are: * **Payroll costs**: To qualify for full forgiveness, you must have spent at least 60% of your PPP loan on payroll, which includes all wages, commissions, bonuses, and insurance payments and retirement payments made on behalf of your employees. * **Operating costs**: This includes mortgage payments, rent, software, and utility bills. * **Supplier costs**: The cost of goods that are necessary for the operation of your business are forgivable only if you ordered them before the beginning of your covered period. Perishable goods ordered during the period are also eligible. * **Property damage**: If your property was damaged during the covered period, you may be able to include repair costs in your forgiveness application, but only if you haven’t already been recompensed for this from your insurance. * **Worker protection**: If you had to pay for personal protective equipment (PPE) for your workers, or install barriers to keep them safe during the pandemic, this cost is also eligible for forgiveness. ## Documents Needed for PPP Loan Forgiveness The documents you will need to submit in support of your loan forgiveness application will depend on how much your loan was for, and whether it was a first-draw or second-draw loan. If your first-draw loan was for less than $150,000, you won’t need to provide additional documents. Instead, you sign a form that certifies that you complied with the rules of the program. If you borrowed less than $150,000 on a second-draw loan, you need to prove that your revenue dropped by at least 25% for any quarter of 2020 compared to the same quarter in 2019. If your loan was for more than $150,000, you’ll need to submit evidence of how you spent it. Only the expenses in the list above are eligible, and to prove that you spent your loan on these expenses, you may have to submit: * Third-party payroll reports * State and local quarterly financial reports * State unemployment insurance filings * Bank statements * Tax documents: Form 1040 Schedule C or Schedule F, Form 1065 Schedule K-1, Form 941, Form 944, Form W-2, Form W-3 * Payment receipts, canceled checks, or account statements showing employer health and retirement contributions * Account statements * Utility bills reflecting payments made * Purchase orders, contracts, and receipts for vendor payments * Canceled checks or receipts for covered expenses This is an indicative list. Depending on your lender, you may not need to provide all of these documents, or you may have to provide more. Your lender will be able to advise you on exactly what they need. ## Is It Possible to Have My PPP Loan Partially Forgiven? It is possible to have your PPP loan partially forgiven. If you didn’t spend more than 60% of your PPP loan on payroll costs, you may still be able to get your other eligible costs forgiven. ## What Happens to Loan Proceeds That Are Not Forgiven? For PPP loan proceeds that are not forgiven, you will have to repay any amount of the PPP loan at 1% [interest](https://www.investopedia.com/terms/i/interest.asp) over a five-year term. Loan payments will be deferred for six months, but they will start incurring interest immediately. ## What Happens If the SBA Declines My Forgiveness Application? If the SBA declines your forgiveness application, the SBA will send your lender a Final Loan Review Decision. Lenders must then pass this decision along to you within five business days. You’ll then have to start paying back your loan after six months. ## The Bottom Line The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic. If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan. You should apply for PPP forgiveness as soon as possible.

The Paycheck Protection Program (PPP) was a huge federal program that paid out $790.9 billion in small business loans during the COVID-19 pandemic. The PPP Act, which instigated the program, allowed for much of that money to be forgiven, so the businesses that received it don’t have to pay it back. Since the program ended on May 31, 2021, nearly $661.5 billion has been forgiven. If your business received a PPP loan, and you haven’t yet applied for forgiveness, you still can. Though there are limitations on exactly what expenses can be forgiven, most companies will be able to write off at least some of their PPP debt. Key Takeaways The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic.If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan.You should check if you are eligible for PPP forgiveness, and apply for it, as soon as possible.All PPP loan recipients are able to apply for forgiveness via their lender.If your loan was for less than $150,000, you may be able to apply for forgiveness from the SBA. PPP Loan Forgiveness Through the SBA  If your business received a PPP loan before the program ended on May 31, 2021, you can apply for PPP loan forgiveness until the date when your loan matures, which is two years for loans originated before June 5, 2020, and five years for loans issued on or after that date. However, you can apply earlier than that, or as soon as your covered period ends. It’s best to apply early, because you will have to start paying the loan back 10 months after your covered period ends. The vast majority of these loans (92%) were for less than $150,000. If your loan is in that category, you can apply for loan forgiveness via your lender, or directly from the U.S. Small Business Administration (SBA) if your lender was one of the 1,400 lenders that participated in the SBA’s Direct Forgiveness program. To apply for forgiveness through the SBA, you should visit the SBA’s PPP Direct Forgiveness Portal. During the application process, you’ll have to fill out SBA Form 3508S. You don’t have to tell the SBA how you spent the funds, and if it’s your first loan, you don’t need to submit any further documentation. If it’s a second-draw loan, you’ll have to prove that you lost revenue before your loan can be forgiven. How to Apply for PPP Loan Forgiveness from Your Lender  You can also apply for loan forgiveness via your lender, and if your loan was for more than $150,000, this is the only way you can apply. Each lender has a different process for this application, but they will typically contact you if you are eligible for loan forgiveness. Some lenders will even draft SBA Form 3508 for you and just require you to sign it. If you haven’t heard from your lender, and you think you are eligible for forgiveness, you should contact them as soon as possible. If your loan was for more than $150,000, you may have to provide extra documentation before your loan can be forgiven. Your lender will be able to provide guidance on their process for applying for loan forgiveness. Eligible Expenses for PPP Loan Forgiveness  Though the majority of the funds disbursed through the program have already been forgiven, there are some eligibility requirements for forgiveness. First, to receive full forgiveness, your business must have maintained staffing and compensation levels throughout the covered period. In addition, the money from your PPP loan must have been spent on eligible expenses. These are: Payroll costs: To qualify for full forgiveness, you must have spent at least 60% of your PPP loan on payroll, which includes all wages, commissions, bonuses, and insurance payments and retirement payments made on behalf of your employees.Operating costs: This includes mortgage payments, rent, software, and utility bills.Supplier costs: The cost of goods that are necessary for the operation of your business are forgivable only if you ordered them before the beginning of your covered period. Perishable goods ordered during the period are also eligible.Property damage: If your property was damaged during the covered period, you may be able to include repair costs in your forgiveness application, but only if you haven’t already been recompensed for this from your insurance. Worker protection: If you had to pay for personal protective equipment (PPE) for your workers, or install barriers to keep them safe during the pandemic, this cost is also eligible for forgiveness. Documents Needed for PPP Loan Forgiveness The documents you will need to submit in support of your loan forgiveness application will depend on how much your loan was for, and whether it was a first-draw or second-draw loan. If your first-draw loan was for less than $150,000, you won’t need to provide additional documents. Instead, you sign a form that certifies that you complied with the rules of the program. If you borrowed less than $150,000 on a second-draw loan, you need to prove that your revenue dropped by at least 25% for any quarter of 2020 compared to the same quarter in 2019. If your loan was for more than $150,000, you’ll need to submit evidence of how you spent it. Only the expenses in the list above are eligible, and to prove that you spent your loan on these expenses, you may have to submit: Third-party payroll reportsState and local quarterly financial reportsState unemployment insurance filingsBank statementsTax documents: Form 1040 Schedule C or Schedule F, Form 1065 Schedule K-1, Form 941, Form 944, Form W-2, Form W-3Payment receipts, canceled checks, or account statements showing employer health and retirement contributionsAccount statementsUtility bills reflecting payments madePurchase orders, contracts, and receipts for vendor paymentsCanceled checks or receipts for covered expenses This is an indicative list. Depending on your lender, you may not need to provide all of these documents, or you may have to provide more. Your lender will be able to advise you on exactly what they need. Is It Possible to Have My PPP Loan Partially Forgiven? It is possible to have your PPP loan partially forgiven. If you didn’t spend more than 60% of your PPP loan on payroll costs, you may still be able to get your other eligible costs forgiven. What Happens to Loan Proceeds That Are Not Forgiven? For PPP loan proceeds that are not forgiven, you will have to repay any amount of the PPP loan at 1% interest over a five-year term. Loan payments will be deferred for six months, but they will start incurring interest immediately. What Happens If the SBA Declines My Forgiveness Application? If the SBA declines your forgiveness application, the SBA will send your lender a Final Loan Review Decision. Lenders must then pass this decision along to you within five business days. You’ll then have to start paying back your loan after six months. The Bottom Line The Paycheck Protection Program (PPP) was a federal program designed to support small businesses through the COVID-19 pandemic. If you received a PPP loan, you may be able to apply for forgiveness. If this is granted, you won’t have to repay the loan. You should apply for PPP forgiveness as soon as possible.

https://www.investopedia.com/best-accounting-software-for-small-business-5069679

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> According to our research, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="sponsored nofollow">QuickBooks Online</a> is the best accounting software for small business due to its popularity with accountants, active user base, and broad collection of helpful tools and resources to help you master the software—and your business finances. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> The best software accounting packages are easy to use, offer robust tracking and planning tools and reports, integrate with other software, and are easy to share with outside bookkeepers and accountants. Despite these benefits, 51% of small businesses with 19 or fewer employees rely on spreadsheets or non-digital methods to manage and track their funds, according to one recent survey.<span class="ql-inline-citation" data-cite="20"></span> These software systems can help you manage business finances more efficiently, and set you up to transfer to more complex systems later as your business grows.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> We researched 19 different business accounting software products, and evaluated them based on their cost, scalability, ease of use, reputation, and accounting features. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Accounting Software for Small Businesses for May 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="nofollow noopener sponsored nocaes" target="_blank"> QuickBooks Online</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Micro-Business Owners:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=19&amp;aff_id=1028&amp;aff_sub2=5069679&amp;aff_sub3=ne41e62c3799146cbb0da7d44b3149f3322" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Xero</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Service-Based Businesses:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=960179&amp;u=2366409&amp;m=52946&amp;urllink=" rel="nofollow noopener sponsored nocaes" target="_blank"> FreshBooks</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Part-Time Freelancers:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE" rel="nofollow noopener sponsored nocaes" target="_blank"> QuickBooks Solopreneur</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Free Software:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.waveapps.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Wave</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp geo-targeted-fpb geo-targeted-featured-partner-block" id="geo-targeted-fpb_1-0"> <div class="geo-targeted-fpb-main"> <div class="loc title"> <div class="comp geo-targeted-fpb-header mntl-block" id="geo-targeted-fpb-header_1-0"> <h2 class="comp geo-targeted-fpb-header__title mntl-text-block" id="geo-targeted-fpb-header__title_1-0"> Our Pick for Micro-Business Owners</h2><!-- end: comp geo-targeted-fpb-header__title mntl-text-block --> </div><!-- end: comp geo-targeted-fpb-header mntl-block --> </div> <div class="geo-targeted-fpb-main__wrapper"> <div class="loc subtitle"> <h2 class="comp featured-partners__header-text mntl-text-block" id="featured-partners__header-text_2-0"> Xero: Accounting Software Born In The Cloud</h2><!-- end: comp featured-partners__header-text mntl-text-block --> </div> <div class="geo-targeted-fpb-body__wrapper"> <div class="geo-targeted-fpb-logo"> <div class="loc image"> <div class="entity-card__image mntl-universal-image universal-image__container"> <img alt="xero" class="lazyload universal-image__image" data-src="https://www.investopedia.com/thmb/4zBifHGGHXKNv2I-bWHYrnGwm88=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png" height="0" width="1500"/> <noscript> <img alt="xero" class="img--noscript universal-image__image" height="0" src="https://www.investopedia.com/thmb/4zBifHGGHXKNv2I-bWHYrnGwm88=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png" width="1500"/> </noscript></div> </div> </div> <div class="loc content-block"> <div class="comp geo-targeted-fpb-content mntl-block" id="geo-targeted-fpb-content_1-0"> <p class="comp geo-targeted-fpb-content__description mntl-text-block" id="geo-targeted-fpb-content__description_1-0"> Try Xero for free for 30 days. Get set-up with free onboarding support, connect with any of our 1,000+ app partners, and choose which of our 3 subscriptions is best for you</p><!-- end: comp geo-targeted-fpb-content__description mntl-text-block --> <ul class="comp geo-targeted-fpb-content__list mntl-block" id="geo-targeted-fpb-content__list_1-0"> <li class="comp geo-targeted-fpb-content__list-item mntl-block" id="geo-targeted-fpb-content__list-item_1-0"> <span class="comp geo-targeted-fpb-content__list-item--bold-text mntl-text-block" id="geo-targeted-fpb-content__list-item--bold-text_1-0"> Early</span><!-- end: comp geo-targeted-fpb-content__list-item--bold-text mntl-text-block --> <span class="comp geo-targeted-fpb-content__list-item--text mntl-text-block" id="geo-targeted-fpb-content__list-item--text_1-0"> at $15 per month</span><!-- end: comp geo-targeted-fpb-content__list-item--text mntl-text-block --> </li><!-- end: comp geo-targeted-fpb-content__list-item mntl-block --> <li class="comp 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class="comp geo-targeted-fpb-content__list-item--text mntl-text-block" id="geo-targeted-fpb-content__list-item--text_1-0-2"> at $78 per month</span><!-- end: comp geo-targeted-fpb-content__list-item--text mntl-text-block --> </li><!-- end: comp geo-targeted-fpb-content__list-item mntl-block --> </ul><!-- end: comp geo-targeted-fpb-content__list mntl-block --> </div><!-- end: comp geo-targeted-fpb-content mntl-block --> </div> <div class="geo-targeted-ctas"> <div class="geo-targeted-cta__wrapper"> <a class="geo-targeted-cta__hyperlink" data-click-action="OffPageClick - External" data-tracking-id="PRM Roundup | Summary List" href="https://try.xero.com/reviews/?utm_source=investopedia&amp;utm_medium=referral" rel="noopener nofollow sponsored nocaes" target="_blank">Sign Up Now</a> </div> <div class="geo-targeted-desc"> <a class="geo-targeted-cta__jumplink" data-click-action="OffPageClick - External" data-tracking-id="PRM Roundup | Summary List" href="https://try.xero.com/reviews/?utm_source=investopedia&amp;utm_medium=referral" rel="noopener nofollow sponsored nocaes" target="_blank"> </a> <span class="geo-targeted-cta__short-content">on Xero</span> </div> </div> </div> <div class="loc disclaimer"></div> </div> </div> </div><!-- end: comp geo-targeted-fpb geo-targeted-featured-partner-block --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Accounting Software for Small Businesses for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Accounting Software for Small Businesses for May 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Accounting Software for Small Businesses for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-QuickBooks Online" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-QuickBooks Online" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-quickbooks-online" rel="nocaes"> <span class="link__wrapper">QuickBooks Online</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Xero" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Xero" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-micro-business-owners-xero" rel="nocaes"> <span class="link__wrapper">Xero</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-FreshBooks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FreshBooks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-service-based-businesses-freshbooks" rel="nocaes"> <span class="link__wrapper">FreshBooks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-QuickBooks Solopreneur" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-QuickBooks Solopreneur" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-part-time-freelancers-quickbooks-solopreneur" rel="nocaes"> <span class="link__wrapper">QuickBooks Solopreneur</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Wave" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Wave" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-free-software-wave" rel="nocaes"> <span class="link__wrapper">Wave</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (2)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Software" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-accounting-software-for-small-businesses" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Software</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-the-best-accounting-software-for-small-business" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">How to Choose</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Alternatives" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternatives-to-small-business-accounting-software" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Alternatives</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions-ca8ed772-511d-49c0-b821-4270961ca772" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-picked-the-best-accounting-software-for-small-business" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-quickbooks-online"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> QuickBooks Online</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="QuickBooks Online" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/EdDESSjfLSMuoQ2bViJp-TEU8fg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-6e475440ecd94ce68c1a6ca124c04884.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="QuickBooks Online" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/EdDESSjfLSMuoQ2bViJp-TEU8fg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-6e475440ecd94ce68c1a6ca124c04884.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>QuickBooks Online</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="skimlinks" data-tracking-container="true" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" id="button_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> <li><strong>Price</strong>: $30 per month and up</li><li><strong>Cloud-based</strong>: Yes</li><li><strong>Mobile app</strong>: Yes (iOS &amp; Android)<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> We picked QuickBooks Online because of its wide use among small business accounting professionals and its numerous online training resources and forums to get support when you need it. Plus all accounting tools and features can be conveniently accessed through one main dashboard, making <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp">bookkeeping</a> more fluid and efficient. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-7"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Scalable</p></li> <li><p>Commonly used by accounting professionals</p></li> <li><p>Integration with third-party applications</p></li> <li><p>Cloud-based</p></li> <li><p>Has mobile app</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Upgrade required for more users</p></li> <li><p>Occasional syncing problems with banks and credit cards</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Intuit’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="sponsored nofollow">QuickBooks Online</a> is one of the most familiar names in accounting software, widely used by small businesses and their bookkeeping and tax professionals. The cloud-based software can be accessed through a web browser or a mobile app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> There are four options for monthly subscription plans: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> <li>Simple Start ($30 per month)</li><li>Essentials ($60 per month)</li><li>Plus ($90 per month)</li><li>Advanced ($200 per month)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> You can select to have a 30-day free trial, but if you elect to skip it, you'll receive 50% off the first three months.<span class="ql-inline-citation" data-cite="2"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> The monthly subscription for this software can be upgraded as a business grows. The feature-packed mobile app can be used to receive payments, send invoices, capture an image of a receipt, provide estimates, and more. For businesses looking for a payroll solution, QuickBooks Payroll fully integrates with QuickBooks Online. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Each plan offers more advanced features like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inventory-management.asp">inventory management</a>, time tracking, additional users, and cash flow. Most service-based small businesses will find that Simple Start meets all of their needs. Essentials adds additional features for bill and time management. For product-based small businesses, Plus will have more options for inventory and customizations. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> The Advanced subscription adds many features including expense management, exclusive premium apps, a dedicated account team, and on-demand training. All plans allow integration with third-party apps such as Stripe or PayPal. QuickBooks Online’s app store breaks down all of its apps by function and provides helpful examples of the benefits of each app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> Intuit, the company that produces QuickBooks, is a small business accounting and services behemoth, with more than 17,000 employees, and a roster of brands that includes QuickBooks, TurboTax, Mailchimp, and Credit Karma.<span class="ql-inline-citation" data-cite="18"></span> It is headquartered in Mountain View, California. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-micro-business-owners-xero"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Micro-Business Owners</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Xero</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-17" style="--imgWidth: 860px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Xero" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/C_tCOzhtWgXjgcxDFNY-GAbsHxM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Xero" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/C_tCOzhtWgXjgcxDFNY-GAbsHxM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Xero</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-square figure-low-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-18"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=19&amp;aff_id=1028&amp;aff_sub2=5069679&amp;aff_sub3=ne41e62c3799146cbb0da7d44b3149f3322" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> <li><strong>Price</strong>: $15 a month and up<span class="ql-inline-citation" data-cite="3"></span></li><li><strong>Cloud-based</strong>: Yes</li><li><strong>Mobile app</strong>: Yes (iOS &amp; Android)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> We chose Xero for really small "micro-business" that have just a few invoices and bills per month. For businesses of that size, Xero's "Early" subscription plan may be a good fit. At just $15 per month, it's limited to just 20 invoices (or quotes) and five bills per month. The plan also offers a receipt capture tool and a cashflow tool. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-24"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Cloud-based</p></li> <li><p>Has mobile app</p></li> <li><p>Payroll integration with Gusto</p></li> <li><p>Third-party app marketplace</p></li> <li><p>Simple inventory management</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Limited reporting</p></li> <li><p>Fees charged for ACH payments</p></li> <li><p>Limited customer service</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Xero offers three monthly subscription options and a full-service payroll add-on: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> <li>Early at $15 per month</li><li>Growing at $42 per month</li><li>Established at $78 per month</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> The company offers 50% off for the first three months.<span class="ql-inline-citation" data-cite="3"></span> The full-service payroll option is offered through Gusto and starts at an additional $40 per month, plus $6 per employee. You can try Gusto free for three months.<span class="ql-inline-citation" data-cite="5"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> The Early plan limits usage and only allows entry for 20 invoices or quotes and five bills per month. This limited plan may be suitable for a micro-business with high-ticket transactions but only a few per month, such as a consulting or small service provider. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Both the Growing and Established plans offer unlimited invoices and bills. The only difference between the two is that the Established plan has additional features like multi-currency, expense management, and project costing. All three plans offer Hubdoc, a bill and receipt capture solution. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.xero.com/us/signup/?utm_source=investopedia&amp;utm_medium=referral&amp;utm_campaign=channel+partners&amp;xtid=investopedia" rel="sponsored nofollow">Xero</a> was founded in 2006 in New Zealand and now has over 3.5 million subscribers worldwide. This accounting software is popular in New Zealand, Australia, and the United Kingdom. Xero has over 4,500 employees and is growing rapidly in the U.S., as well.<span class="ql-inline-citation" data-cite="16"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-service-based-businesses-freshbooks"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Service-Based Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> FreshBooks</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-32" style="--imgWidth: 29px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="FreshBooks" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/VCC-ZbPB-4skBcAjvYH9HCgwfR4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/freshbooks-f5c953441d184040a87d0d10fb0f7a84.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="FreshBooks" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/VCC-ZbPB-4skBcAjvYH9HCgwfR4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/freshbooks-f5c953441d184040a87d0d10fb0f7a84.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>FreshBooks</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-33"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="skimlinks" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=960179&amp;u=2366409&amp;m=52946&amp;urllink=" id="button_1-0-2" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> <li><strong>Price</strong>: $19 a month and up<span class="ql-inline-citation" data-cite="6"></span></li><li><strong>Cloud-based</strong>: Yes</li><li><strong>Mobile app</strong>: Yes (iOS &amp; Android)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> We like FreshBooks for service-based businesses because it excels at producing proposals, tracking time on projects, and receiving payments—all key processes for service-based businesses. FreshBooks's primary function is sending, receiving, printing, and paying invoices, but it can also handle a business’s basic bookkeeping needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-39"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Cloud-based</p></li> <li><p>User-friendly interface</p></li> <li><p>Third-party app integration</p></li> <li><p>Affordable</p></li> <li><p>Advanced invoicing features</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Reporting features not available in mobile app</p></li> <li><p>Additional users cost extra</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> There are four different Freshbooks plans to choose, and businesses can get a 10% discount if they choose to pay yearly rather than monthly. Additionally, FreshBooks often offers discounts for your first months of membership. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> <li>Lite ($19/monthly)</li><li>Plus ($33/monthly)</li><li>Premium ($60/monthly)</li><li>Select, which is a custom service with custom pricing</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> The main difference between the four plans is the number of different clients that can be billed per month. In the Lite plan, up to five clients can be billed per month. In the Plus plan, up to 50 clients can be billed per month. In the Premium plan, unlimited clients can be billed per month. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> The Select plan also does not have a limitation on the number of clients that can be billed per month but adds unique features. It costs an additional $10 per month for multiple team members to use the accounting software, and it includes the advanced payment feature for free ($20 extra each month with other plans), which allows users to charge a credit card in real-time or set up a recurring credit card charge for a client. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> Many third-party app integrations are available, such as Gusto, G Suite, and more. A unique feature of FreshBooks is that invoices can be highly stylized and customized for a professional look and feel. FreshBooks is a great tool for budgeting out projects, sending estimates or proposals, and collecting customer payments. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> Founded in 2003 in Toronto, <a data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=960179&amp;u=2366409&amp;m=52946&amp;urllink=" rel="sponsored nofollow">FreshBooks</a> started as just an invoicing tool. Over time, more features have been added, and as of 2023, FreshBooks has over 30 million users.<span class="ql-inline-citation" data-cite="7"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-part-time-freelancers-quickbooks-solopreneur"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Part-Time Freelancers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> QuickBooks Solopreneur</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-47" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Intuit QuickBooks logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/UEBqNwQAod611B_q0vY8JzmKZhw=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-fb8d0be1585243bea88b156c3123df7f.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Intuit QuickBooks logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/UEBqNwQAod611B_q0vY8JzmKZhw=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-fb8d0be1585243bea88b156c3123df7f.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>QuickBooks</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-48"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="skimlinks" data-tracking-container="true" href="https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE" id="button_1-0-3" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50"> <li><strong>Price</strong>: $20 a month and up</li><li><strong>Cloud-based</strong>: Yes</li><li><strong>Mobile app</strong>: Yes (iOS &amp; Android)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> This is our top choice for part-time freelancers and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/independent-contractor.asp">independent contractors</a> who primarily want to track their income and expenses for their tax returns. It's designed for business owners who file a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp">Schedule C</a> on their individual tax returns and need help separating business and personal transactions. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-53"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>QuickBooks Solopreneur replaces QuickBooks Self-Employed, which is no longer available to new subscribers. Existing Self-Employed subscribers can continue to use the older product. QuickBooks has also created a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/learn-support/en-us/help-article/compare-products/introduction-quickbooks-solopreneur/L8TodvTOE_US_en_US" rel="sponsored nofollow">FAQ page that explains</a> the differences between the two.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-55"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Cloud-based</p></li> <li><p>Mobile app available</p></li> <li><p>Tracks mileage</p></li> <li><p>Differentiates between business and personal expenses</p></li> <li><p>Syncs with TurboTax</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Somewhat difficult to upgrade to QuickBooks Online</p></li> <li><p>Relatively expensive for limited tools</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> QuickBooks Solopreneur is another Intuit product with a cloud-based online interface and a mobile app. This software was created to help freelancers stay organized each year for tax season. Features of QuickBooks Solopreneur include tracking mileage, sorting expenses, organizing receipts, and estimating and filing taxes through TurboTax. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> There is a 50% discount for the first three months. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> Solopreneur also gives you access to a tax expert to answer questions throughout the year and during tax season. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> The mobile app makes it easy to track mileage while driving and capture photos of receipts for business expenses. Most accounting software is not designed to separate business transactions from personal transactions, but a special feature of QuickBooks Solopreneur provides an option to mark each transaction as business or personal. This is helpful for freelancers who don’t have a separate bank account for their business activity. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-61"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>What's the difference between QuickBooks Online and QuickBooks Solopreneur? In short, Online is the more comprehensive and robust option, meant for businesses with lots of vendors, employees, and clients. Solopreneur lacks Online's reporting, inventory, and sales tracking tools. Both track expenses and can help you at tax time. If you're working a side hustle or run a micro business, Solopreneur can help you track receipts and expenses (and keep them separate from your non-business expenses), and it can help you meet your quarterly tax filing requirements.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-free-software-wave"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Free Software</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Wave</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-62" style="--imgWidth: 302px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Wave" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/l3ujApk7_hAjAYiQb8CZt3i4uOI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wave-3e941bf63b3c47fb8036015199df7ca9.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Wave" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/l3ujApk7_hAjAYiQb8CZt3i4uOI=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wave-3e941bf63b3c47fb8036015199df7ca9.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p>Wave</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-63"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.waveapps.com/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Key Specs</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65"> <li><strong>Price</strong>: Free invoicing and expense tracking, plus some paid features; $16 per month Pro plan with additional features</li><li><strong>Cloud-based</strong>: Yes</li><li><strong>Mobile app</strong>: Yes (iOS &amp; Android)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose it</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> Wave is a good choice for a service-based small business that sends simple invoices and doesn’t need to run payroll. Best of all, it's free (for the basics). At year-end, accountants can pull the necessary reports from Wave to prepare a business’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxreturn.asp">tax return</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-69"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free accounting and invoicing</p></li> <li><p>No transaction or billing limits</p></li> <li><p>Run multiple businesses in one account</p></li> <li><p>Unlimited number of users</p></li> <li><p>Mobile app available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Integrations only through Zapier</p></li> <li><p>Higher fees for credit card payments</p></li> <li><p>Full-service payroll is limited to only 14 states</p></li> <li><p>Receipt scanning costs $8/month</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> This free software includes the foundational accounting features that most small businesses need, such as income and expense tracking, financial reporting, sending invoices, and scanning receipts. These features can be accessed online or via the mobile app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> There's also a more robust "Pro" plan for $16 per month. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> Wave makes its money to support its free offering on its payment gateway. To process a credit card payment from a customer, Wave charges 2.9% plus 60¢ per transaction for Visa, Mastercard, and Discover and 3.4% plus 60¢ per transaction for American Express. These fees are slightly higher than other accounting software. (The Pro plan includes 10 credit card transactions with no transaction or "swipe" fees per month.) Additionally, Wave charges 1% per transaction with a $1 minimum fee to process an ACH payment rather than a credit card.<span class="ql-inline-citation" data-cite="12"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74"> Wave offers two payroll plans as an add-on service. The first plan is $20 per month plus $6 per employee or contractor. In this plan, Wave will process payroll and prepare payroll tax calculations, but the user is responsible for manually completing payroll tax forms and submitting tax payments. The second plan is $40 per month plus $6 per employee or contractor. In this plan, payroll is full-service, meaning that all tax filings and payments are managed by Wave. It is only available in 14 states.<span class="ql-inline-citation" data-cite="13"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> Wave was founded in 2010 and is based in Toronto. Nine years later, it was purchased by H&amp;R Block and has over 250 employees.<span class="ql-inline-citation" data-cite="10"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_3-0-76"> <iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp lazyload mntl-sc-block-iframe__uri mntl-block" data-src="https://datawrapper.dwcdn.net/GuX8B/3/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Capital One Announces Agreement to Acquire Discover Financial Services"></iframe><!-- end: comp lazyload mntl-sc-block-iframe__uri mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> QuickBooks Online topped our list for its scalability, training resources, and mobile app. But micro-businesses may find their needs more affordably met by Xero, and self-employed individuals will appreciate the ability to categorize personal and business expenses with QuickBooks Solopreneur. Service-based businesses that want the best invoicing tools and customization will be best-served by FreshBooks. And if you’re looking for a free solution to business’s invoicing and accounting needs, Wave is a good option. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-accounting-software-for-small-businesses"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Compare the Best Accounting Software for Small Businesses </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-3"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Company</b></th> <th>Price</th> <th>Key Features</th> <th>Integrations</th> <th>Trial Offer</th> </tr> </thead> <tbody data-check="0"> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="sponsored nofollow">QuickBooks Online</a> Best Overall</th> <td>$30 (monthly) and up</td> <td>Scalable; widely used by accounting pros</td> <td>Yes; multiple</td> <td>Save 50% for 3 months or free 30-day trial</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://businesscom.go2cloud.org/aff_c?offer_id=19&amp;aff_id=1028" rel="sponsored nofollow">Xero</a> Best for Micro-Business Owners</th> <td>$15 (monthly) and up</td> <td>Feature-rich for smaller businesses at low cost</td> <td>Yes</td> <td>90% off for 3 months</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=960179&amp;u=2366409&amp;m=52946&amp;urllink=" rel="sponsored nofollow">FreshBooks</a> Best for Service-Based Businesses</th> <td>$17 (monthly) and up</td> <td>Rich invoicing and proposal tools</td> <td>Yes</td> <td>70% off for 4 months</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE" rel="noopener noreferrer sponsored nofollow">QuickBooks Solopreneur </a>Best for Part-Time Freelancers</th> <td>$20 (monthly)</td> <td>Easily separates personal and business expenses; integrates with Intuit tax apps</td> <td>Yes</td> <td>Save 50% for 3 months or free 30-day trial</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.waveapps.com/" rel="sponsored nofollow">Wave</a> Best Free Software</th> <td>Free, or $16 monthly</td> <td>Feature-rich free accounting; payments processing for a fee</td> <td>Limited</td> <td>Free edition</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-what-is-accounting-software-for-small-business"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> What Is Accounting Software for Small Business? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accounting-software.asp">Accounting software</a> packages are specialized computer programs that help businesses, track invoices, generate reports, and record and report financial transactions. Large firms may choose complex, customized accounting software packages that track inventory, manage accounts payable and accounts receivable, and handles payroll. For smaller businesses, off-the-shelf packages like those highlighted here can accomplish most or all of the firm's accounting needs.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> Accounting software reduces the amount of time spent on manual data entry by allowing users to sync their business bank accounts and credit cards with the software. Once synced, bank transactions will flow into the accounting software, which can be categorized into various accounts. This process can also reduce human error, and make a time consuming task more efficient. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-7"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>Most accounting software is easy to use, but a general understanding of accounting practices will help ensure that financial reports are prepared correctly. For this reason, many small business owners hire bookkeepers or accountants to maintain or review their books. Cloud-based accounting software makes it convenient for businesses to share their accounting data with their bookkeepers or accountants.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-8"> Many accounting software packages allow third-party application integrations. For example, if a business owner uses a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/point-of-sale.asp">point of sale</a> (POS) system to capture sales transactions, the POS system could potentially integrate with the accounting software to record specific transactions, sales tax liabilities, sales by subcategories, and more. In a service-based business, a time-tracking application could integrate with the accounting software to add labor to a client invoice. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-9"> <span class="mntl-sc-block-subheading__text"> Why Use Accounting Software?<br> </br></span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> Accounting, and accounting software, can often seem like dull chores that take away from the "real work" of running and growing a business, like marketing or sales or delivering your product or service. But avoiding the accounting can be a mistake, especially for businesses that have grown beyond the "micro business" stage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-11"> Accounting software can make the process more efficient and less tedious. And it can help your business in other, more strategic ways:<span class="ql-inline-citation" data-cite="19"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> <li><strong>A broader view of business performance</strong>: Your accounting software can show where your company stands, financially speaking, and help you develop goals, and track your progress toward them.</li><li><strong>Simplified reconciliation processes</strong>: Reconciling bank transactions or matching vendor invoices against payments can be tricky. Accounting software can help you do it more efficiently.</li><li><strong>Better cash flow management</strong>: Greater insight in your financial situation overall also means a better view of cash flow, and how to manage it.</li><li><strong>Identification of profitable (and unprofitable) clients and practices</strong>: Accounting software can show you which clients and business segments are most profitable, and which are not, so you can prioritize your resources accordingly.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-13"> <span class="mntl-sc-block-subheading__text"> Types of Accounting Software </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-14"> Accounting software can be divided into a handful of categories.<span class="ql-inline-citation" data-cite="21"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-15"> <li><strong>Commercial Off-the-Shelf Software</strong>: Widely available, general purpose accounting software designed to be used by a broad range of businesses and organizations. This is the kind of software reviewed here. Customization options are few (if available at all). Some packages feature special functions and reports designed for specific industries. Software may be installed on business computers or delivered online via the internet ("cloud-based" software).</li> <li><strong>Enterprise Resource Planning Software (ERP)</strong>: An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/erp.asp">ERP is a complex software package</a> that ties together all of a firm's systems, including accounting. It's primarily used by large enterprises.</li> <li><strong>Custom Accounting Software</strong>: For businesses with highly particular accounting, reporting, and other needs, a custom system may be required. Development time can be extensive, and the upfront cost can also be significant. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-choose-the-best-accounting-software-for-small-business"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-16"> <span class="mntl-sc-block-heading__text"> How to Choose the Best Accounting Software for Small Business </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-17"> Start your search by understanding your business and what it needs from accounting software.<span class="ql-inline-citation" data-cite="14"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-18"> <li><strong>Your budget</strong>: Free business accounting software is available and the subscription packages reviewed here cost a few dollars per month. Can your budget support a paid option?</li><li><strong>Business-specific needs</strong>: Do you need specialized software such as for a restaurant or retail store or will a basic software system work for your business?</li><li><strong>Accounting needs</strong>: Do you need more than the basics (income and expense tracking, basic financial reports, budgeting, tax reporting and filing)? What about later, as your business grows?</li><li><strong>Usability</strong>: How easy is the software to use? Will you or someone on your staff be able to use it efficiently?</li><li><strong>Integration and collaboration</strong>: Does the software sync with your existing or planned systems (such as payroll, or inventory, or point-of-sale). Is it easy to share details and reports with your accountant or bookkeeper?</li><li><strong>Customer support</strong>: Does the vendor provide adequate resources to help you understand the software, and the underlying accounting and bookkeeping practices such as how-to articles, a knowledge base, or a community forum? Can you get live customer support over the phone or via webchat?</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-19"> <span class="mntl-sc-block-subheading__text"> Essential Features of Accounting Software for Small Business<br/> </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-20"> Depending on the accounting software you choose, you may have access to some of the following features:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-21"> <li><strong>Income and Expense Tracking</strong>: Most accounting software allows you to track and categorize your income and expenses, sometimes through third-party app integrations. You can typically also take photos of your receipts for digital storage. </li><li><strong>Invoicing</strong>: Accounting software allows you to customize and create invoices. The best accounting software also allows for automation of recurring invoices and payment reminders and enables payments directly from the invoice. </li><li><strong>Receiving Payments</strong>: Accounting software can make it easy to accept credit card payments and ACH transfers. Some allow for app payments as well. </li><li><strong>Paying Bills</strong>: Accounting software lets you organize your bills so you don’t miss your due date. You can often pay multiple contractors at once with the right software. </li><li><strong>Project Estimates</strong>: With the right software, you can customize project estimates and even collect mobile signatures. </li><li><strong>Time and Mileage Tracking:</strong> Some accounting software allows you to enter time for your employees and independent contractors or provide them with access to clock in and out from their phones. You can often use your phone’s GPS to automatically track mileage as well. </li><li><strong>Financial Reporting</strong>: Financial reporting helps you get a clear picture of your business finances, from cash flow planning to estimating project profitability to providing profit and loss reports to stakeholders. </li><li><strong>Payroll</strong>: Some accounting software includes payroll features, which may allow you to automate paying your employees with direct deposit.</li><li><strong>Inventory</strong>: Businesses that stock products need accounting software to keep track of when inventory is low. You may also use software to create purchase orders and manage vendors. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-alternatives-to-small-business-accounting-software"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-22"> <span class="mntl-sc-block-heading__text"> Alternatives to Small Business Accounting Software </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-23"> <li><strong>Hiring an accountant</strong>: Freelancers and micro-business owners may not need accounting software if they outsource accounting tasks to a CPA. But in many cases, it’s still helpful to have a platform that keeps your income and expenses organized. </li><li><strong>Using free software</strong>: You can rely on free software, like Wave, to handle your accounting and invoicing needs. There may be other types of free software for other business needs as well, but you’ll lose the benefit of having everything in one place. </li><li><strong>Relying on spreadsheets:</strong> You can manage your business accounting the old-fashioned way, with spreadsheets that track every aspect of your business.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-you-should-trust-us"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-24"> <span class="mntl-sc-block-heading__text"> Why You Should Trust Us </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-25"> Investopedia collected and analyzed scores of key data points from 19 companies to identify the most important factors for readers choosing accounting software for small business. We used this data to review each company based on cost, scalability, reputation, accounting features, and other factors to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best accounting software for small business since 2020. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-26"> <span class="heading-toc" id="toc-frequently-asked-questions-ca8ed772-511d-49c0-b821-4270961ca772"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">How Much Does Accounting Software for Small Business Cost?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Small business accounting software ranges from $0 to $150 or more per month. Basic plans are in roughly the $0 to $40 per month range and are a great place to start. With a basic plan, a small business will be able to categorize income and expenses, send invoices, and prepare financial reports. As a business grows, most software is scalable, and a plan can be easily upgraded to meet new business needs, but it will cost more than a basic package. The cheapest accounting software among the services we reviewed is the free offering from Wave.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Type of Accounting Is Best for Small Business?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>The kind of accounting software a small business chooses to use depends on multiple factors. A freelancer or part-time consultant might need something basic or free, and a growing business might choose software that can be easily upgraded. QuickBooks is a popular choice because the company offers a wide range of products.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">Is QuickBooks for Small Business Worth It?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Yes, QuickBooks is useful for many small businesses, particularly because it is scaleable. That means it can grow with your business. It can also integrate with third-party applications. Additionally, QuickBooks offers a 30-day free trial so you can test out the program to see if it fits your business's needs.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Is the Easiest Accounting Program to Use?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>For businesses that don't need to run a payroll, Wave is the easiest program to use. It allows service-based businesses to send simple invoices and pull reports to prepare a yearly tax return. Wave is also free and does not have transaction or billing limits.<span class="ql-inline-citation" data-cite="9"></span> If you do want to add payroll services, it starts at $20 per month plus $6 per employee.<span class="ql-inline-citation" data-cite="13"></span> A per transaction fee is charged for accepting payments as well.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">Is There Any Free Accounting Software?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>Yes, free accounting software is available, including Wave, which is featured here. Additional services offered by Wave, beyond essential small business accounting needs like payroll and credit card processing, come with fees.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">Can I Do Bookkeeping Without QuickBooks?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>Yes, absolutely. You can choose an alternate accounting software, such as one of those we've reviewed here. Or you can roll your own <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/022615/how-can-i-use-excel-my-businesss-general-ledger.asp">spreadsheet-based accounting system</a> using Excel or Google Sheets.<span class="ql-inline-citation" data-cite="15"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">Can I Use Excel Instead of QuickBooks?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>You can set up a simple small business accounting system using Excel (or Google Sheets). Your system won't be as robust as QuickBooks (for example, your spreadsheets won't be able to connect with your bank to automatically pull transactions), but if your accounting needs are basic, a spreadsheet-based system can work. You'll find templates online to help you get started.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-7" tabindex="-1"> <h3 class="accordion__title">Is Accounting Software Secure?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-7"> <div class="faq-accordion__item-answer"> <p>Cloud-based accounting software systems like QuickBooks online aim to protect client data via multiple layers of data encryption and other resources. First, client data is encrypted during transmittal via SSL.<span class="ql-inline-citation" data-cite="17"></span> Next, providers protect the data on their servers with encryption, firewalls, and other methods.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-how-we-picked-the-best-accounting-software-for-small-business"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-27"> <span class="mntl-sc-block-heading__text"> How We Picked the Best Accounting Software for Small Business </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-28"> We looked at 19 accounting software companies with specialized products for small businesses before choosing our top five software options. We considered cost, scalability, ease of use, reputation, and accounting features. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-29"> Reputation was a key consideration because the longer a company has been around, the more likely that any technological glitches have been resolved, which ensures that a company’s important financial information will be reported accurately. Scalability was the next most important consideration because as a company grows, its accounting needs grow as well, and transferring financial information to new software can be tedious. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-30"> Finally, ease of use and collaboration for business owners, employees, and accountants was considered because it’s important for all users to be able to access and review the financials at the same time. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-learn-more-about-small-business-accounting"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-31"> <span class="mntl-sc-block-heading__text"> Learn More About Small Business Accounting </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-32"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/050815/what-are-most-important-steps-accounting-cycle.asp">The 8 Important Steps in the Accounting Cycle</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accrualaccounting.asp">What Is Accrual Accounting, and How Does It Work?</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/09/accrual-accounting.asp">Accrual Accounting vs. Cash Basis Accounting: What's the<br/>Difference?</a></li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashbasis.asp">Cash Basis Accounting: Definition, Example, Vs. Accrual</a></li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-books-5179543">The 7 Best Accounting Books in 2023</a></li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/small-business-budget.asp">6 Steps to a Better Business Budget</a></li> <li><a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-taxes-8415119">Understanding Small Business Taxes: A Comprehensive Guide</a></li> <li><a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp">Bookkeeping vs. Accounting: What's the Difference?</a></li> <li><a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashaccounting.asp">Cash Accounting Definition, Example &amp; Limitations</a></li> <li><a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-online-bookkeeping-classes-5080723">Best Online Bookkeeping Classes</a></li> <li><a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-5069131">Best Accounting Software</a></li> <li><a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-restaurants-5072023">Best Accounting Software for Restaurants</a></li> <li><a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-tax-software-for-small-business-5072025">Best Tax Software Programs for Small Business</a></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="A man with a close-cropped beard seated at a desk writes on a notepad. Meanwhile a laptop screen and a desktop monitor display an invoice and a spreadsheet, respectively." class="primary-image__image mntl-primary-image--blurry" height="5773" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/B8BIWD_cSncJtiiTzUgVozvMEZQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg" srcset="https://www.investopedia.com/thmb/VgieSRk_cVAD8xyqA7VzAjwaPEk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="8660"/> <noscript> <img alt="A man with a close-cropped beard seated at a desk writes on a notepad. Meanwhile a laptop screen and a desktop monitor display an invoice and a spreadsheet, respectively." class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="5773" sizes="750px" src="https://www.investopedia.com/thmb/B8BIWD_cSncJtiiTzUgVozvMEZQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg" srcset="https://www.investopedia.com/thmb/VgieSRk_cVAD8xyqA7VzAjwaPEk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg 750w" width="8660"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>AndreyPopov / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp finance-taglines mntl-taglines" id="finance-taglines_1-0"><div class="comp mntl-taglines__group mntl-block" id="mntl-taglines__group_1-0"><div class="comp mntl-taglines__item mntl-attribution__item" id="mntl-taglines__item_1-0"> <span class="mntl-attribution__item-descriptor">Updated by</span> <div data-inline-tooltip="true" data-tooltip="A freelance writer with more than three years of researching and writing about personal loans, insurance, credit cards, and more, Lindsay's work has appeared on sites such as Insurify, Bankrate, and The Simple Dollar." tabindex="0"> <a class="mntl-attribution__item-name" data-trigger-link="true" href="https://www.investopedia.com/lindsay-frankel-5208517" rel="nocaes" tabindex="-1">Lindsay Frankel</a> <div class="comp mntl-author-tooltip mntl-tooltip mntl-group" id="mntl-author-tooltip_1-0"> <div class="mntl-author-tooltip__top"> <div class="mntl-author-tooltip__image-wrapper"> <div class="img-placeholder" style="padding-bottom:93.7%;"> <img alt="Lindsay Frankel" class="lazyload mntl-author-tooltip__image" data-sizes="80px" data-src="https://www.investopedia.com/thmb/PNxV9jehXzgiTTpayQVH3dZCSKc=/90x200/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg" data-srcset="https://www.investopedia.com/thmb/eO4J7m9uAMbGZwkXkcTL3qKpi-o=/40x0/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg 40w, 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src="https://www.investopedia.com/thmb/PNxV9jehXzgiTTpayQVH3dZCSKc=/90x200/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg" srcset="https://www.investopedia.com/thmb/eO4J7m9uAMbGZwkXkcTL3qKpi-o=/40x0/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg 40w, https://www.investopedia.com/thmb/eYKsZgnXm_Q8RR_IHvMOE93VUCQ=/58x0/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg 58w, https://www.investopedia.com/thmb/B4-LFQ-5qnB3c8DH1vQ-8wyBr74=/76x0/filters:no_upscale():max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg 76w, 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.smb-gr.com/blogs-laurie-mccabe/why-small-businesses-dont-use-accounting-software-and-why-they-should/">What’s Ahead for SMBs in Financial Management</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>Intuit QuickBooks. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/pricing/" rel="nofollow sponsored">Plans for Every Kind of Business</a>."</p></li> <li class="mntl-sources__source" id="citation-18"><p>Intuit. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.intuit.com/company/">About Intuit.</a>"</p></li> <li class="mntl-sources__source" id="citation-3"><p>Xero. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.xero.com/us/pricing-plans/" rel="nofollow sponsored">Pricing</a>."</p></li> <li class="mntl-sources__source" id="citation-5"><p>Gusto. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://gusto.com/product/pricing" rel="nofollow sponsored">Flexible Plans and Features. Honest Pricing. No Hidden Fees</a>."</p></li> <li class="mntl-sources__source" id="citation-16"><p>Xero. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.xero.com/us/about/" rel="nofollow sponsored">We Help Small Businesses Thrive Worldwide</a>."</p></li> <li class="mntl-sources__source" id="citation-6"><p>FreshBooks. 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According to our research, [QuickBooks Online](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) is the best accounting software for small business due to its popularity with accountants, active user base, and broad collection of helpful tools and resources to help you master the software—and your business finances. The best software accounting packages are easy to use, offer robust tracking and planning tools and reports, integrate with other software, and are easy to share with outside bookkeepers and accountants. Despite these benefits, 51% of small businesses with 19 or fewer employees rely on spreadsheets or non-digital methods to manage and track their funds, according to one recent survey. These software systems can help you manage business finances more efficiently, and set you up to transfer to more complex systems later as your business grows.  We researched 19 different business accounting software products, and evaluated them based on their cost, scalability, ease of use, reputation, and accounting features. ## Best Accounting Software for Small Businesses for May 2024 * **Best Overall:** [QuickBooks Online](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) * **Best for Micro-Business Owners:** [Xero](http://businesscom.go2cloud.org/aff_c?offer_id=19&aff_id=1028&aff_sub2=5069679&aff_sub3=ne41e62c3799146cbb0da7d44b3149f3322) * **Best for Service-Based Businesses:** [FreshBooks](https://shareasale.com/r.cfm?b=960179&u=2366409&m=52946&urllink=) * **Best for Part-Time Freelancers:** [QuickBooks Solopreneur](https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE) * **Best Free Software:** [Wave](https://www.waveapps.com/) ## Our Pick for Micro-Business Owners ## Xero: Accounting Software Born In The Cloud ![xero]() :max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png) Try Xero for free for 30 days. Get set-up with free onboarding support, connect with any of our 1,000+ app partners, and choose which of our 3 subscriptions is best for you * Early at $15 per month * Growing at $42 per month * Established at $78 per month [Sign Up Now](https://try.xero.com/reviews/?utm_source=investopedia&utm_medium=referral) on Xero Best Accounting Software for Small Businesses for May 2024 Expand Best Accounting Software for Small Businesses for May 2024 * [Our Top Picks](#summary-list) * [QuickBooks Online](#toc-best-overall-quickbooks-online) * [Xero](#toc-best-for-micro-business-owners-xero) * [FreshBooks](#toc-best-for-service-based-businesses-freshbooks) * [QuickBooks Solopreneur](#toc-best-for-part-time-freelancers-quickbooks-solopreneur) * [Wave](#toc-best-free-software-wave) * See More (2) * [The Bottom Line](#toc-the-bottom-line) * [Compare Software](#toc-compare-the-best-accounting-software-for-small-businesses) * [How to Choose](#toc-how-to-choose-the-best-accounting-software-for-small-business) * [Alternatives](#toc-alternatives-to-small-business-accounting-software) * [Frequently Asked Questions](#toc-frequently-asked-questions-ca8ed772-511d-49c0-b821-4270961ca772) * [Methodology](#toc-how-we-picked-the-best-accounting-software-for-small-business) ### Best Overall : QuickBooks Online --- ![QuickBooks Online]() :fill(white):max_bytes(150000):strip_icc()/quickbooks-6e475440ecd94ce68c1a6ca124c04884.png) QuickBooks Online [Sign Up Now](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) Key Specs * **Price**: $30 per month and up * **Cloud-based**: Yes * **Mobile app**: Yes (iOS & Android) Why We Chose It We picked QuickBooks Online because of its wide use among small business accounting professionals and its numerous online training resources and forums to get support when you need it. Plus all accounting tools and features can be conveniently accessed through one main dashboard, making [bookkeeping](https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp) more fluid and efficient. Pros & Cons Pros * Scalable * Commonly used by accounting professionals * Integration with third-party applications * Cloud-based * Has mobile app Cons * Upgrade required for more users * Occasional syncing problems with banks and credit cards Overview Intuit’s [QuickBooks Online](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) is one of the most familiar names in accounting software, widely used by small businesses and their bookkeeping and tax professionals. The cloud-based software can be accessed through a web browser or a mobile app. There are four options for monthly subscription plans: * Simple Start ($30 per month) * Essentials ($60 per month) * Plus ($90 per month) * Advanced ($200 per month) You can select to have a 30-day free trial, but if you elect to skip it, you'll receive 50% off the first three months. The monthly subscription for this software can be upgraded as a business grows. The feature-packed mobile app can be used to receive payments, send invoices, capture an image of a receipt, provide estimates, and more. For businesses looking for a payroll solution, QuickBooks Payroll fully integrates with QuickBooks Online. Each plan offers more advanced features like [inventory management](https://www.investopedia.com/terms/i/inventory-management.asp), time tracking, additional users, and cash flow. Most service-based small businesses will find that Simple Start meets all of their needs. Essentials adds additional features for bill and time management. For product-based small businesses, Plus will have more options for inventory and customizations. The Advanced subscription adds many features including expense management, exclusive premium apps, a dedicated account team, and on-demand training. All plans allow integration with third-party apps such as Stripe or PayPal. QuickBooks Online’s app store breaks down all of its apps by function and provides helpful examples of the benefits of each app. Intuit, the company that produces QuickBooks, is a small business accounting and services behemoth, with more than 17,000 employees, and a roster of brands that includes QuickBooks, TurboTax, Mailchimp, and Credit Karma. It is headquartered in Mountain View, California. ### Best for Micro-Business Owners : Xero --- ![Xero]() :fill(white):max_bytes(150000):strip_icc()/Xero-45875dde6ba545d19a5a15bc3d1cda83.png) Xero [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=19&aff_id=1028&aff_sub2=5069679&aff_sub3=ne41e62c3799146cbb0da7d44b3149f3322) Key Specs * **Price**: $15 a month and up * **Cloud-based**: Yes * **Mobile app**: Yes (iOS & Android) Why We Chose It We chose Xero for really small "micro-business" that have just a few invoices and bills per month. For businesses of that size, Xero's "Early" subscription plan may be a good fit. At just $15 per month, it's limited to just 20 invoices (or quotes) and five bills per month. The plan also offers a receipt capture tool and a cashflow tool. Pros & Cons Pros * Cloud-based * Has mobile app * Payroll integration with Gusto * Third-party app marketplace * Simple inventory management Cons * Limited reporting * Fees charged for ACH payments * Limited customer service Overview Xero offers three monthly subscription options and a full-service payroll add-on: * Early at $15 per month * Growing at $42 per month * Established at $78 per month The company offers 50% off for the first three months. The full-service payroll option is offered through Gusto and starts at an additional $40 per month, plus $6 per employee. You can try Gusto free for three months. The Early plan limits usage and only allows entry for 20 invoices or quotes and five bills per month. This limited plan may be suitable for a micro-business with high-ticket transactions but only a few per month, such as a consulting or small service provider. Both the Growing and Established plans offer unlimited invoices and bills. The only difference between the two is that the Established plan has additional features like multi-currency, expense management, and project costing. All three plans offer Hubdoc, a bill and receipt capture solution. [Xero](https://www.xero.com/us/signup/?utm_source=investopedia&utm_medium=referral&utm_campaign=channel+partners&xtid=investopedia) was founded in 2006 in New Zealand and now has over 3.5 million subscribers worldwide. This accounting software is popular in New Zealand, Australia, and the United Kingdom. Xero has over 4,500 employees and is growing rapidly in the U.S., as well. ### Best for Service-Based Businesses : FreshBooks --- ![FreshBooks]() :fill(white):max_bytes(150000):strip_icc()/freshbooks-f5c953441d184040a87d0d10fb0f7a84.png) FreshBooks [Sign Up Now](https://shareasale.com/r.cfm?b=960179&u=2366409&m=52946&urllink=) Key Specs * **Price**: $19 a month and up * **Cloud-based**: Yes * **Mobile app**: Yes (iOS & Android) Why We Chose It We like FreshBooks for service-based businesses because it excels at producing proposals, tracking time on projects, and receiving payments—all key processes for service-based businesses. FreshBooks's primary function is sending, receiving, printing, and paying invoices, but it can also handle a business’s basic bookkeeping needs. Pros & Cons Pros * Cloud-based * User-friendly interface * Third-party app integration * Affordable * Advanced invoicing features Cons * Reporting features not available in mobile app * Additional users cost extra Overview There are four different Freshbooks plans to choose, and businesses can get a 10% discount if they choose to pay yearly rather than monthly. Additionally, FreshBooks often offers discounts for your first months of membership. * Lite ($19/monthly) * Plus ($33/monthly) * Premium ($60/monthly) * Select, which is a custom service with custom pricing The main difference between the four plans is the number of different clients that can be billed per month. In the Lite plan, up to five clients can be billed per month. In the Plus plan, up to 50 clients can be billed per month. In the Premium plan, unlimited clients can be billed per month. The Select plan also does not have a limitation on the number of clients that can be billed per month but adds unique features. It costs an additional $10 per month for multiple team members to use the accounting software, and it includes the advanced payment feature for free ($20 extra each month with other plans), which allows users to charge a credit card in real-time or set up a recurring credit card charge for a client. Many third-party app integrations are available, such as Gusto, G Suite, and more. A unique feature of FreshBooks is that invoices can be highly stylized and customized for a professional look and feel. FreshBooks is a great tool for budgeting out projects, sending estimates or proposals, and collecting customer payments. Founded in 2003 in Toronto, [FreshBooks](https://shareasale.com/r.cfm?b=960179&u=2366409&m=52946&urllink=) started as just an invoicing tool. Over time, more features have been added, and as of 2023, FreshBooks has over 30 million users. ### Best for Part-Time Freelancers : QuickBooks Solopreneur --- ![Intuit QuickBooks logo]() :fill(white):max_bytes(150000):strip_icc()/quickbooks-fb8d0be1585243bea88b156c3123df7f.png) QuickBooks [Sign Up Now](https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE) Key Specs * **Price**: $20 a month and up * **Cloud-based**: Yes * **Mobile app**: Yes (iOS & Android) Why We Chose It This is our top choice for part-time freelancers and [independent contractors](https://www.investopedia.com/terms/i/independent-contractor.asp) who primarily want to track their income and expenses for their tax returns. It's designed for business owners who file a [Schedule C](https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp) on their individual tax returns and need help separating business and personal transactions. QuickBooks Solopreneur replaces QuickBooks Self-Employed, which is no longer available to new subscribers. Existing Self-Employed subscribers can continue to use the older product. QuickBooks has also created a [FAQ page that explains](https://quickbooks.intuit.com/learn-support/en-us/help-article/compare-products/introduction-quickbooks-solopreneur/L8TodvTOE_US_en_US) the differences between the two. Pros & Cons Pros * Cloud-based * Mobile app available * Tracks mileage * Differentiates between business and personal expenses * Syncs with TurboTax Cons * Somewhat difficult to upgrade to QuickBooks Online * Relatively expensive for limited tools Overview QuickBooks Solopreneur is another Intuit product with a cloud-based online interface and a mobile app. This software was created to help freelancers stay organized each year for tax season. Features of QuickBooks Solopreneur include tracking mileage, sorting expenses, organizing receipts, and estimating and filing taxes through TurboTax. There is a 50% discount for the first three months. Solopreneur also gives you access to a tax expert to answer questions throughout the year and during tax season. The mobile app makes it easy to track mileage while driving and capture photos of receipts for business expenses. Most accounting software is not designed to separate business transactions from personal transactions, but a special feature of QuickBooks Solopreneur provides an option to mark each transaction as business or personal. This is helpful for freelancers who don’t have a separate bank account for their business activity. What's the difference between QuickBooks Online and QuickBooks Solopreneur? In short, Online is the more comprehensive and robust option, meant for businesses with lots of vendors, employees, and clients. Solopreneur lacks Online's reporting, inventory, and sales tracking tools. Both track expenses and can help you at tax time. If you're working a side hustle or run a micro business, Solopreneur can help you track receipts and expenses (and keep them separate from your non-business expenses), and it can help you meet your quarterly tax filing requirements. ### Best Free Software : Wave --- ![Wave]() :fill(white):max_bytes(150000):strip_icc()/Wave-3e941bf63b3c47fb8036015199df7ca9.png) Wave [Sign Up Now](https://www.waveapps.com/) Key Specs * **Price**: Free invoicing and expense tracking, plus some paid features; $16 per month Pro plan with additional features * **Cloud-based**: Yes * **Mobile app**: Yes (iOS & Android) Why We Chose it Wave is a good choice for a service-based small business that sends simple invoices and doesn’t need to run payroll. Best of all, it's free (for the basics). At year-end, accountants can pull the necessary reports from Wave to prepare a business’s [tax return](https://www.investopedia.com/terms/t/taxreturn.asp). Pros & Cons Pros * Free accounting and invoicing * No transaction or billing limits * Run multiple businesses in one account * Unlimited number of users * Mobile app available Cons * Integrations only through Zapier * Higher fees for credit card payments * Full-service payroll is limited to only 14 states * Receipt scanning costs $8/month Overview This free software includes the foundational accounting features that most small businesses need, such as income and expense tracking, financial reporting, sending invoices, and scanning receipts. These features can be accessed online or via the mobile app. There's also a more robust "Pro" plan for $16 per month. Wave makes its money to support its free offering on its payment gateway. To process a credit card payment from a customer, Wave charges 2.9% plus 60¢ per transaction for Visa, Mastercard, and Discover and 3.4% plus 60¢ per transaction for American Express. These fees are slightly higher than other accounting software. (The Pro plan includes 10 credit card transactions with no transaction or "swipe" fees per month.) Additionally, Wave charges 1% per transaction with a $1 minimum fee to process an ACH payment rather than a credit card. Wave offers two payroll plans as an add-on service. The first plan is $20 per month plus $6 per employee or contractor. In this plan, Wave will process payroll and prepare payroll tax calculations, but the user is responsible for manually completing payroll tax forms and submitting tax payments. The second plan is $40 per month plus $6 per employee or contractor. In this plan, payroll is full-service, meaning that all tax filings and payments are managed by Wave. It is only available in 14 states. Wave was founded in 2010 and is based in Toronto. Nine years later, it was purchased by H&R Block and has over 250 employees. ## The Bottom Line QuickBooks Online topped our list for its scalability, training resources, and mobile app. But micro-businesses may find their needs more affordably met by Xero, and self-employed individuals will appreciate the ability to categorize personal and business expenses with QuickBooks Solopreneur. Service-based businesses that want the best invoicing tools and customization will be best-served by FreshBooks. And if you’re looking for a free solution to business’s invoicing and accounting needs, Wave is a good option. ## Compare the Best Accounting Software for Small Businesses | **Company** | Price | Key Features | Integrations | Trial Offer | | --- | --- | --- | --- | --- | | [QuickBooks Online](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) Best Overall | $30 (monthly) and up | Scalable; widely used by accounting pros | Yes; multiple | Save 50% for 3 months or free 30-day trial | | [Xero](http://businesscom.go2cloud.org/aff_c?offer_id=19&aff_id=1028) Best for Micro-Business Owners | $15 (monthly) and up | Feature-rich for smaller businesses at low cost | Yes | 90% off for 3 months | | [FreshBooks](https://shareasale.com/r.cfm?b=960179&u=2366409&m=52946&urllink=) Best for Service-Based Businesses | $17 (monthly) and up | Rich invoicing and proposal tools | Yes | 70% off for 4 months | | [QuickBooks Solopreneur](https://quickbooks.intuit.com/solopreneur/?cid=par_DOTDASH_US_INVESTOPEDIA_best-accounting-software-for-small-business-5069679_QBO_QBSE) Best for Part-Time Freelancers | $20 (monthly) | Easily separates personal and business expenses; integrates with Intuit tax apps | Yes | Save 50% for 3 months or free 30-day trial | | [Wave](https://www.waveapps.com/) Best Free Software | Free, or $16 monthly | Feature-rich free accounting; payments processing for a fee | Limited | Free edition | ## What Is Accounting Software for Small Business? [Accounting software](https://www.investopedia.com/terms/a/accounting-software.asp) packages are specialized computer programs that help businesses, track invoices, generate reports, and record and report financial transactions. Large firms may choose complex, customized accounting software packages that track inventory, manage accounts payable and accounts receivable, and handles payroll. For smaller businesses, off-the-shelf packages like those highlighted here can accomplish most or all of the firm's accounting needs. Accounting software reduces the amount of time spent on manual data entry by allowing users to sync their business bank accounts and credit cards with the software. Once synced, bank transactions will flow into the accounting software, which can be categorized into various accounts. This process can also reduce human error, and make a time consuming task more efficient. Most accounting software is easy to use, but a general understanding of accounting practices will help ensure that financial reports are prepared correctly. For this reason, many small business owners hire bookkeepers or accountants to maintain or review their books. Cloud-based accounting software makes it convenient for businesses to share their accounting data with their bookkeepers or accountants. Many accounting software packages allow third-party application integrations. For example, if a business owner uses a [point of sale](https://www.investopedia.com/terms/p/point-of-sale.asp) (POS) system to capture sales transactions, the POS system could potentially integrate with the accounting software to record specific transactions, sales tax liabilities, sales by subcategories, and more. In a service-based business, a time-tracking application could integrate with the accounting software to add labor to a client invoice. ### Why Use Accounting Software? Accounting, and accounting software, can often seem like dull chores that take away from the "real work" of running and growing a business, like marketing or sales or delivering your product or service. But avoiding the accounting can be a mistake, especially for businesses that have grown beyond the "micro business" stage. Accounting software can make the process more efficient and less tedious. And it can help your business in other, more strategic ways: * **A broader view of business performance**: Your accounting software can show where your company stands, financially speaking, and help you develop goals, and track your progress toward them. * **Simplified reconciliation processes**: Reconciling bank transactions or matching vendor invoices against payments can be tricky. Accounting software can help you do it more efficiently. * **Better cash flow management**: Greater insight in your financial situation overall also means a better view of cash flow, and how to manage it. * **Identification of profitable (and unprofitable) clients and practices**: Accounting software can show you which clients and business segments are most profitable, and which are not, so you can prioritize your resources accordingly. ### Types of Accounting Software Accounting software can be divided into a handful of categories. * **Commercial Off-the-Shelf Software**: Widely available, general purpose accounting software designed to be used by a broad range of businesses and organizations. This is the kind of software reviewed here. Customization options are few (if available at all). Some packages feature special functions and reports designed for specific industries. Software may be installed on business computers or delivered online via the internet ("cloud-based" software). * **Enterprise Resource Planning Software (ERP)**: An [ERP is a complex software package](https://www.investopedia.com/terms/e/erp.asp) that ties together all of a firm's systems, including accounting. It's primarily used by large enterprises. * **Custom Accounting Software**: For businesses with highly particular accounting, reporting, and other needs, a custom system may be required. Development time can be extensive, and the upfront cost can also be significant. ## How to Choose the Best Accounting Software for Small Business Start your search by understanding your business and what it needs from accounting software. * **Your budget**: Free business accounting software is available and the subscription packages reviewed here cost a few dollars per month. Can your budget support a paid option? * **Business-specific needs**: Do you need specialized software such as for a restaurant or retail store or will a basic software system work for your business? * **Accounting needs**: Do you need more than the basics (income and expense tracking, basic financial reports, budgeting, tax reporting and filing)? What about later, as your business grows? * **Usability**: How easy is the software to use? Will you or someone on your staff be able to use it efficiently? * **Integration and collaboration**: Does the software sync with your existing or planned systems (such as payroll, or inventory, or point-of-sale). Is it easy to share details and reports with your accountant or bookkeeper? * **Customer support**: Does the vendor provide adequate resources to help you understand the software, and the underlying accounting and bookkeeping practices such as how-to articles, a knowledge base, or a community forum? Can you get live customer support over the phone or via webchat? ### Essential Features of Accounting Software for Small Business Depending on the accounting software you choose, you may have access to some of the following features:  * **Income and Expense Tracking**: Most accounting software allows you to track and categorize your income and expenses, sometimes through third-party app integrations. You can typically also take photos of your receipts for digital storage. * **Invoicing**: Accounting software allows you to customize and create invoices. The best accounting software also allows for automation of recurring invoices and payment reminders and enables payments directly from the invoice. * **Receiving Payments**: Accounting software can make it easy to accept credit card payments and ACH transfers. Some allow for app payments as well. * **Paying Bills**: Accounting software lets you organize your bills so you don’t miss your due date. You can often pay multiple contractors at once with the right software. * **Project Estimates**: With the right software, you can customize project estimates and even collect mobile signatures. * **Time and Mileage Tracking:** Some accounting software allows you to enter time for your employees and independent contractors or provide them with access to clock in and out from their phones. You can often use your phone’s GPS to automatically track mileage as well. * **Financial Reporting**: Financial reporting helps you get a clear picture of your business finances, from cash flow planning to estimating project profitability to providing profit and loss reports to stakeholders. * **Payroll**: Some accounting software includes payroll features, which may allow you to automate paying your employees with direct deposit. * **Inventory**: Businesses that stock products need accounting software to keep track of when inventory is low. You may also use software to create purchase orders and manage vendors. ## Alternatives to Small Business Accounting Software * **Hiring an accountant**: Freelancers and micro-business owners may not need accounting software if they outsource accounting tasks to a CPA. But in many cases, it’s still helpful to have a platform that keeps your income and expenses organized. * **Using free software**: You can rely on free software, like Wave, to handle your accounting and invoicing needs. There may be other types of free software for other business needs as well, but you’ll lose the benefit of having everything in one place. * **Relying on spreadsheets:** You can manage your business accounting the old-fashioned way, with spreadsheets that track every aspect of your business. ## Why You Should Trust Us Investopedia collected and analyzed scores of key data points from 19 companies to identify the most important factors for readers choosing accounting software for small business. We used this data to review each company based on cost, scalability, reputation, accounting features, and other factors to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best accounting software for small business since 2020. ## Frequently Asked Questions * ### How Much Does Accounting Software for Small Business Cost? Small business accounting software ranges from $0 to $150 or more per month. Basic plans are in roughly the $0 to $40 per month range and are a great place to start. With a basic plan, a small business will be able to categorize income and expenses, send invoices, and prepare financial reports. As a business grows, most software is scalable, and a plan can be easily upgraded to meet new business needs, but it will cost more than a basic package. The cheapest accounting software among the services we reviewed is the free offering from Wave. * ### What Type of Accounting Is Best for Small Business? The kind of accounting software a small business chooses to use depends on multiple factors. A freelancer or part-time consultant might need something basic or free, and a growing business might choose software that can be easily upgraded. QuickBooks is a popular choice because the company offers a wide range of products. * ### Is QuickBooks for Small Business Worth It? Yes, QuickBooks is useful for many small businesses, particularly because it is scaleable. That means it can grow with your business. It can also integrate with third-party applications. Additionally, QuickBooks offers a 30-day free trial so you can test out the program to see if it fits your business's needs. * ### What Is the Easiest Accounting Program to Use? For businesses that don't need to run a payroll, Wave is the easiest program to use. It allows service-based businesses to send simple invoices and pull reports to prepare a yearly tax return. Wave is also free and does not have transaction or billing limits. If you do want to add payroll services, it starts at $20 per month plus $6 per employee. A per transaction fee is charged for accepting payments as well. * ### Is There Any Free Accounting Software? Yes, free accounting software is available, including Wave, which is featured here. Additional services offered by Wave, beyond essential small business accounting needs like payroll and credit card processing, come with fees. * ### Can I Do Bookkeeping Without QuickBooks? Yes, absolutely. You can choose an alternate accounting software, such as one of those we've reviewed here. Or you can roll your own [spreadsheet-based accounting system](https://www.investopedia.com/ask/answers/022615/how-can-i-use-excel-my-businesss-general-ledger.asp) using Excel or Google Sheets. * ### Can I Use Excel Instead of QuickBooks? You can set up a simple small business accounting system using Excel (or Google Sheets). Your system won't be as robust as QuickBooks (for example, your spreadsheets won't be able to connect with your bank to automatically pull transactions), but if your accounting needs are basic, a spreadsheet-based system can work. You'll find templates online to help you get started. * ### Is Accounting Software Secure? Cloud-based accounting software systems like QuickBooks online aim to protect client data via multiple layers of data encryption and other resources. First, client data is encrypted during transmittal via SSL. Next, providers protect the data on their servers with encryption, firewalls, and other methods. ## How We Picked the Best Accounting Software for Small Business We looked at 19 accounting software companies with specialized products for small businesses before choosing our top five software options. We considered cost, scalability, ease of use, reputation, and accounting features. Reputation was a key consideration because the longer a company has been around, the more likely that any technological glitches have been resolved, which ensures that a company’s important financial information will be reported accurately. Scalability was the next most important consideration because as a company grows, its accounting needs grow as well, and transferring financial information to new software can be tedious. Finally, ease of use and collaboration for business owners, employees, and accountants was considered because it’s important for all users to be able to access and review the financials at the same time. ## Learn More About Small Business Accounting * [The 8 Important Steps in the Accounting Cycle](https://www.investopedia.com/ask/answers/050815/what-are-most-important-steps-accounting-cycle.asp) * [What Is Accrual Accounting, and How Does It Work?](https://www.investopedia.com/terms/a/accrualaccounting.asp) * [Accrual Accounting vs. Cash Basis Accounting: What's the Difference?](https://www.investopedia.com/ask/answers/09/accrual-accounting.asp) * [Cash Basis Accounting: Definition, Example, Vs. Accrual](https://www.investopedia.com/terms/c/cashbasis.asp) * [The 7 Best Accounting Books in 2023](https://www.investopedia.com/best-accounting-books-5179543) * [6 Steps to a Better Business Budget](https://www.investopedia.com/articles/pf/08/small-business-budget.asp) * [Understanding Small Business Taxes: A Comprehensive Guide](https://www.investopedia.com/small-business-taxes-8415119) * [Bookkeeping vs. Accounting: What's the Difference?](https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp) * [Cash Accounting Definition, Example & Limitations](https://www.investopedia.com/terms/c/cashaccounting.asp) * [Best Online Bookkeeping Classes](https://www.investopedia.com/best-online-bookkeeping-classes-5080723) * [Best Accounting Software](https://www.investopedia.com/best-accounting-software-5069131) * [Best Accounting Software for Restaurants](https://www.investopedia.com/best-accounting-software-for-restaurants-5072023) * [Best Tax Software Programs for Small Business](https://www.investopedia.com/best-tax-software-for-small-business-5072025) :max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg) :max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg) AndreyPopov / Getty Images Updated by [Lindsay Frankel](https://www.investopedia.com/lindsay-frankel-5208517) ![Lindsay Frankel]() :max_bytes(150000):strip_icc()/LindsayFrankel-0e50cf9508f64df899aea94f1640c276-2fc39a1b539547cba44e7b84423e2d0f.jpeg) A freelance writer with more than three years of researching and writing about personal loans, insurance, credit cards, and more, Lindsay's work has appeared on sites such as Insurify, Bankrate, and The Simple Dollar. Learn about our [editorial policies](/legal-4768893#editorial-policy) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. SMB Group. "[What’s Ahead for SMBs in Financial Management](https://www.smb-gr.com/blogs-laurie-mccabe/why-small-businesses-dont-use-accounting-software-and-why-they-should/)." 2. Intuit QuickBooks. "[Plans for Every Kind of Business](https://quickbooks.intuit.com/pricing/)." 3. Intuit. "[About Intuit.](https://www.intuit.com/company/)" 4. Xero. "[Pricing](https://www.xero.com/us/pricing-plans/)." 5. Gusto. "[Flexible Plans and Features. Honest Pricing. No Hidden Fees](https://gusto.com/product/pricing)." 6. Xero. "[We Help Small Businesses Thrive Worldwide](https://www.xero.com/us/about/)." 7. FreshBooks. "[Pricing](https://www.freshbooks.com/pricing)." 8. FreshBooks. "[The FreshBooks Story](https://www.freshbooks.com/about/ourstory)." 9. Wave. "[Online Payments = On-Time Payments](https://www.waveapps.com/payments)." 10. Wave. "[Payroll Software That Pays Off](https://www.waveapps.com/payroll)." 11. Wave. "[We Are Wave](https://www.waveapps.com/about-us/about)." 12. PWC Bookkeeping Connect. "[Five Benefits of Adopting Bookkeeping Software](https://bookkeepingconnect.pwc.com/resources/5-ways-to-simplify-bookkeeping-with-accounting-software/)." 13. Accounting Tools. "[Types of Accounting Software](https://www.accountingtools.com/articles/types-of-accounting-software.html)." 14. Intuit QuickBooks. "[Accounting Software Selection: 7 Factors to Consider for 2023](https://quickbooks.intuit.com/r/accounting/accounting-software-selection/)." 15. Wave. "[Everything You Need. Nothing You Don’t](https://www.waveapps.com/pricing)." 16. Oracle Netsuite. "[How to Use Excel for Accounting (and When to Level Up).](https://www.netsuite.com/portal/resource/articles/accounting/excel-accounting.shtml)" 17. QuickBooks. "[Security Information](https://quickbooks.intuit.com/ie/security/)." 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[more](https://www.investopedia.com/terms/e/erp.asp) [What Is Payroll, With Step-by-Step Calculation of Payroll Taxes](https://www.investopedia.com/terms/p/payroll.asp) Payroll is the compensation a business must pay to its employees for a set period or on a given date. Read about payroll accounting here. [more](https://www.investopedia.com/terms/p/payroll.asp) [Embedded Finance: Everything You Need to Know](https://www.investopedia.com/what-is-embedded-finance-8417153) Embedded finance integrates financial and banking services into platforms for nonfinancial companies. [more](https://www.investopedia.com/what-is-embedded-finance-8417153) [Accounting Explained With Brief History and Modern Job Requirements](https://www.investopedia.com/terms/a/accounting.asp) Accounting is the process of recording, summarizing, and reporting financial transactions to oversight agencies, regulators, and the IRS. 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According to our research, QuickBooks Online is the best accounting software for small business due to its popularity with accountants, active user base, and broad collection of helpful tools and resources to help you master the software—and your business finances. The best software accounting packages are easy to use, offer robust tracking and planning tools and reports, integrate with other software, and are easy to share with outside bookkeepers and accountants. Despite these benefits, 51% of small businesses with 19 or fewer employees rely on spreadsheets or non-digital methods to manage and track their funds, according to one recent survey. These software systems can help you manage business finances more efficiently, and set you up to transfer to more complex systems later as your business grows.  We researched 19 different business accounting software products, and evaluated them based on their cost, scalability, ease of use, reputation, and accounting features. Best Accounting Software for Small Businesses for May 2024 Best Overall: QuickBooks Online Best for Micro-Business Owners: Xero Best for Service-Based Businesses: FreshBooks Best for Part-Time Freelancers: QuickBooks Solopreneur Best Free Software: Wave Our Pick for Micro-Business Owners Xero: Accounting Software Born In The Cloud Try Xero for free for 30 days. Get set-up with free onboarding support, connect with any of our 1,000+ app partners, and choose which of our 3 subscriptions is best for you Early at $15 per month Growing at $42 per month Established at $78 per month Sign Up Now on Xero Best Accounting Software for Small Businesses for May 2024 Expand Best Accounting Software for Small Businesses for May 2024 Our Top Picks QuickBooks Online Xero FreshBooks QuickBooks Solopreneur Wave See More (2) The Bottom Line Compare Software How to Choose Alternatives Frequently Asked Questions Methodology Best Overall : QuickBooks Online QuickBooks Online Sign Up Now Key Specs Price: $30 per month and upCloud-based: YesMobile app: Yes (iOS & Android) Why We Chose It We picked QuickBooks Online because of its wide use among small business accounting professionals and its numerous online training resources and forums to get support when you need it. Plus all accounting tools and features can be conveniently accessed through one main dashboard, making bookkeeping more fluid and efficient. Pros & Cons Pros Scalable Commonly used by accounting professionals Integration with third-party applications Cloud-based Has mobile app Cons Upgrade required for more users Occasional syncing problems with banks and credit cards Overview Intuit’s QuickBooks Online is one of the most familiar names in accounting software, widely used by small businesses and their bookkeeping and tax professionals. The cloud-based software can be accessed through a web browser or a mobile app. There are four options for monthly subscription plans: Simple Start ($30 per month)Essentials ($60 per month)Plus ($90 per month)Advanced ($200 per month) You can select to have a 30-day free trial, but if you elect to skip it, you'll receive 50% off the first three months. The monthly subscription for this software can be upgraded as a business grows. The feature-packed mobile app can be used to receive payments, send invoices, capture an image of a receipt, provide estimates, and more. For businesses looking for a payroll solution, QuickBooks Payroll fully integrates with QuickBooks Online. Each plan offers more advanced features like inventory management, time tracking, additional users, and cash flow. Most service-based small businesses will find that Simple Start meets all of their needs. Essentials adds additional features for bill and time management. For product-based small businesses, Plus will have more options for inventory and customizations. The Advanced subscription adds many features including expense management, exclusive premium apps, a dedicated account team, and on-demand training. All plans allow integration with third-party apps such as Stripe or PayPal. QuickBooks Online’s app store breaks down all of its apps by function and provides helpful examples of the benefits of each app. Intuit, the company that produces QuickBooks, is a small business accounting and services behemoth, with more than 17,000 employees, and a roster of brands that includes QuickBooks, TurboTax, Mailchimp, and Credit Karma. It is headquartered in Mountain View, California. Best for Micro-Business Owners : Xero Xero Sign Up Now Key Specs Price: $15 a month and upCloud-based: YesMobile app: Yes (iOS & Android) Why We Chose It We chose Xero for really small "micro-business" that have just a few invoices and bills per month. For businesses of that size, Xero's "Early" subscription plan may be a good fit. At just $15 per month, it's limited to just 20 invoices (or quotes) and five bills per month. The plan also offers a receipt capture tool and a cashflow tool. Pros & Cons Pros Cloud-based Has mobile app Payroll integration with Gusto Third-party app marketplace Simple inventory management Cons Limited reporting Fees charged for ACH payments Limited customer service Overview Xero offers three monthly subscription options and a full-service payroll add-on: Early at $15 per monthGrowing at $42 per monthEstablished at $78 per month The company offers 50% off for the first three months. The full-service payroll option is offered through Gusto and starts at an additional $40 per month, plus $6 per employee. You can try Gusto free for three months. The Early plan limits usage and only allows entry for 20 invoices or quotes and five bills per month. This limited plan may be suitable for a micro-business with high-ticket transactions but only a few per month, such as a consulting or small service provider. Both the Growing and Established plans offer unlimited invoices and bills. The only difference between the two is that the Established plan has additional features like multi-currency, expense management, and project costing. All three plans offer Hubdoc, a bill and receipt capture solution. Xero was founded in 2006 in New Zealand and now has over 3.5 million subscribers worldwide. This accounting software is popular in New Zealand, Australia, and the United Kingdom. Xero has over 4,500 employees and is growing rapidly in the U.S., as well. Best for Service-Based Businesses : FreshBooks FreshBooks Sign Up Now Key Specs Price: $19 a month and upCloud-based: YesMobile app: Yes (iOS & Android) Why We Chose It We like FreshBooks for service-based businesses because it excels at producing proposals, tracking time on projects, and receiving payments—all key processes for service-based businesses. FreshBooks's primary function is sending, receiving, printing, and paying invoices, but it can also handle a business’s basic bookkeeping needs. Pros & Cons Pros Cloud-based User-friendly interface Third-party app integration Affordable Advanced invoicing features Cons Reporting features not available in mobile app Additional users cost extra Overview There are four different Freshbooks plans to choose, and businesses can get a 10% discount if they choose to pay yearly rather than monthly. Additionally, FreshBooks often offers discounts for your first months of membership. Lite ($19/monthly)Plus ($33/monthly)Premium ($60/monthly)Select, which is a custom service with custom pricing The main difference between the four plans is the number of different clients that can be billed per month. In the Lite plan, up to five clients can be billed per month. In the Plus plan, up to 50 clients can be billed per month. In the Premium plan, unlimited clients can be billed per month. The Select plan also does not have a limitation on the number of clients that can be billed per month but adds unique features. It costs an additional $10 per month for multiple team members to use the accounting software, and it includes the advanced payment feature for free ($20 extra each month with other plans), which allows users to charge a credit card in real-time or set up a recurring credit card charge for a client. Many third-party app integrations are available, such as Gusto, G Suite, and more. A unique feature of FreshBooks is that invoices can be highly stylized and customized for a professional look and feel. FreshBooks is a great tool for budgeting out projects, sending estimates or proposals, and collecting customer payments. Founded in 2003 in Toronto, FreshBooks started as just an invoicing tool. Over time, more features have been added, and as of 2023, FreshBooks has over 30 million users. Best for Part-Time Freelancers : QuickBooks Solopreneur QuickBooks Sign Up Now Key Specs Price: $20 a month and upCloud-based: YesMobile app: Yes (iOS & Android) Why We Chose It This is our top choice for part-time freelancers and independent contractors who primarily want to track their income and expenses for their tax returns. It's designed for business owners who file a Schedule C on their individual tax returns and need help separating business and personal transactions. QuickBooks Solopreneur replaces QuickBooks Self-Employed, which is no longer available to new subscribers. Existing Self-Employed subscribers can continue to use the older product. QuickBooks has also created a FAQ page that explains the differences between the two. Pros & Cons Pros Cloud-based Mobile app available Tracks mileage Differentiates between business and personal expenses Syncs with TurboTax Cons Somewhat difficult to upgrade to QuickBooks Online Relatively expensive for limited tools Overview QuickBooks Solopreneur is another Intuit product with a cloud-based online interface and a mobile app. This software was created to help freelancers stay organized each year for tax season. Features of QuickBooks Solopreneur include tracking mileage, sorting expenses, organizing receipts, and estimating and filing taxes through TurboTax. There is a 50% discount for the first three months. Solopreneur also gives you access to a tax expert to answer questions throughout the year and during tax season. The mobile app makes it easy to track mileage while driving and capture photos of receipts for business expenses. Most accounting software is not designed to separate business transactions from personal transactions, but a special feature of QuickBooks Solopreneur provides an option to mark each transaction as business or personal. This is helpful for freelancers who don’t have a separate bank account for their business activity. What's the difference between QuickBooks Online and QuickBooks Solopreneur? In short, Online is the more comprehensive and robust option, meant for businesses with lots of vendors, employees, and clients. Solopreneur lacks Online's reporting, inventory, and sales tracking tools. Both track expenses and can help you at tax time. If you're working a side hustle or run a micro business, Solopreneur can help you track receipts and expenses (and keep them separate from your non-business expenses), and it can help you meet your quarterly tax filing requirements. Best Free Software : Wave Wave Sign Up Now Key Specs Price: Free invoicing and expense tracking, plus some paid features; $16 per month Pro plan with additional featuresCloud-based: YesMobile app: Yes (iOS & Android) Why We Chose it Wave is a good choice for a service-based small business that sends simple invoices and doesn’t need to run payroll. Best of all, it's free (for the basics). At year-end, accountants can pull the necessary reports from Wave to prepare a business’s tax return. Pros & Cons Pros Free accounting and invoicing No transaction or billing limits Run multiple businesses in one account Unlimited number of users Mobile app available Cons Integrations only through Zapier Higher fees for credit card payments Full-service payroll is limited to only 14 states Receipt scanning costs $8/month Overview This free software includes the foundational accounting features that most small businesses need, such as income and expense tracking, financial reporting, sending invoices, and scanning receipts. These features can be accessed online or via the mobile app. There's also a more robust "Pro" plan for $16 per month. Wave makes its money to support its free offering on its payment gateway. To process a credit card payment from a customer, Wave charges 2.9% plus 60¢ per transaction for Visa, Mastercard, and Discover and 3.4% plus 60¢ per transaction for American Express. These fees are slightly higher than other accounting software. (The Pro plan includes 10 credit card transactions with no transaction or "swipe" fees per month.) Additionally, Wave charges 1% per transaction with a $1 minimum fee to process an ACH payment rather than a credit card. Wave offers two payroll plans as an add-on service. The first plan is $20 per month plus $6 per employee or contractor. In this plan, Wave will process payroll and prepare payroll tax calculations, but the user is responsible for manually completing payroll tax forms and submitting tax payments. The second plan is $40 per month plus $6 per employee or contractor. In this plan, payroll is full-service, meaning that all tax filings and payments are managed by Wave. It is only available in 14 states. Wave was founded in 2010 and is based in Toronto. Nine years later, it was purchased by H&R Block and has over 250 employees. The Bottom Line QuickBooks Online topped our list for its scalability, training resources, and mobile app. But micro-businesses may find their needs more affordably met by Xero, and self-employed individuals will appreciate the ability to categorize personal and business expenses with QuickBooks Solopreneur. Service-based businesses that want the best invoicing tools and customization will be best-served by FreshBooks. And if you’re looking for a free solution to business’s invoicing and accounting needs, Wave is a good option. Compare the Best Accounting Software for Small Businesses Company Price Key Features Integrations Trial Offer QuickBooks Online Best Overall $30 (monthly) and up Scalable; widely used by accounting pros Yes; multiple Save 50% for 3 months or free 30-day trial Xero Best for Micro-Business Owners $15 (monthly) and up Feature-rich for smaller businesses at low cost Yes 90% off for 3 months FreshBooks Best for Service-Based Businesses $17 (monthly) and up Rich invoicing and proposal tools Yes 70% off for 4 months QuickBooks Solopreneur Best for Part-Time Freelancers $20 (monthly) Easily separates personal and business expenses; integrates with Intuit tax apps Yes Save 50% for 3 months or free 30-day trial Wave Best Free Software Free, or $16 monthly Feature-rich free accounting; payments processing for a fee Limited Free edition What Is Accounting Software for Small Business? Accounting software packages are specialized computer programs that help businesses, track invoices, generate reports, and record and report financial transactions. Large firms may choose complex, customized accounting software packages that track inventory, manage accounts payable and accounts receivable, and handles payroll. For smaller businesses, off-the-shelf packages like those highlighted here can accomplish most or all of the firm's accounting needs. Accounting software reduces the amount of time spent on manual data entry by allowing users to sync their business bank accounts and credit cards with the software. Once synced, bank transactions will flow into the accounting software, which can be categorized into various accounts. This process can also reduce human error, and make a time consuming task more efficient. Most accounting software is easy to use, but a general understanding of accounting practices will help ensure that financial reports are prepared correctly. For this reason, many small business owners hire bookkeepers or accountants to maintain or review their books. Cloud-based accounting software makes it convenient for businesses to share their accounting data with their bookkeepers or accountants. Many accounting software packages allow third-party application integrations. For example, if a business owner uses a point of sale (POS) system to capture sales transactions, the POS system could potentially integrate with the accounting software to record specific transactions, sales tax liabilities, sales by subcategories, and more. In a service-based business, a time-tracking application could integrate with the accounting software to add labor to a client invoice. Why Use Accounting Software? Accounting, and accounting software, can often seem like dull chores that take away from the "real work" of running and growing a business, like marketing or sales or delivering your product or service. But avoiding the accounting can be a mistake, especially for businesses that have grown beyond the "micro business" stage. Accounting software can make the process more efficient and less tedious. And it can help your business in other, more strategic ways: A broader view of business performance: Your accounting software can show where your company stands, financially speaking, and help you develop goals, and track your progress toward them.Simplified reconciliation processes: Reconciling bank transactions or matching vendor invoices against payments can be tricky. Accounting software can help you do it more efficiently.Better cash flow management: Greater insight in your financial situation overall also means a better view of cash flow, and how to manage it.Identification of profitable (and unprofitable) clients and practices: Accounting software can show you which clients and business segments are most profitable, and which are not, so you can prioritize your resources accordingly. Types of Accounting Software Accounting software can be divided into a handful of categories. Commercial Off-the-Shelf Software: Widely available, general purpose accounting software designed to be used by a broad range of businesses and organizations. This is the kind of software reviewed here. Customization options are few (if available at all). Some packages feature special functions and reports designed for specific industries. Software may be installed on business computers or delivered online via the internet ("cloud-based" software). Enterprise Resource Planning Software (ERP): An ERP is a complex software package that ties together all of a firm's systems, including accounting. It's primarily used by large enterprises. Custom Accounting Software: For businesses with highly particular accounting, reporting, and other needs, a custom system may be required. Development time can be extensive, and the upfront cost can also be significant. How to Choose the Best Accounting Software for Small Business Start your search by understanding your business and what it needs from accounting software. Your budget: Free business accounting software is available and the subscription packages reviewed here cost a few dollars per month. Can your budget support a paid option?Business-specific needs: Do you need specialized software such as for a restaurant or retail store or will a basic software system work for your business?Accounting needs: Do you need more than the basics (income and expense tracking, basic financial reports, budgeting, tax reporting and filing)? What about later, as your business grows?Usability: How easy is the software to use? Will you or someone on your staff be able to use it efficiently?Integration and collaboration: Does the software sync with your existing or planned systems (such as payroll, or inventory, or point-of-sale). Is it easy to share details and reports with your accountant or bookkeeper?Customer support: Does the vendor provide adequate resources to help you understand the software, and the underlying accounting and bookkeeping practices such as how-to articles, a knowledge base, or a community forum? Can you get live customer support over the phone or via webchat? Essential Features of Accounting Software for Small Business Depending on the accounting software you choose, you may have access to some of the following features:  Income and Expense Tracking: Most accounting software allows you to track and categorize your income and expenses, sometimes through third-party app integrations. You can typically also take photos of your receipts for digital storage. Invoicing: Accounting software allows you to customize and create invoices. The best accounting software also allows for automation of recurring invoices and payment reminders and enables payments directly from the invoice. Receiving Payments: Accounting software can make it easy to accept credit card payments and ACH transfers. Some allow for app payments as well. Paying Bills: Accounting software lets you organize your bills so you don’t miss your due date. You can often pay multiple contractors at once with the right software. Project Estimates: With the right software, you can customize project estimates and even collect mobile signatures. Time and Mileage Tracking: Some accounting software allows you to enter time for your employees and independent contractors or provide them with access to clock in and out from their phones. You can often use your phone’s GPS to automatically track mileage as well. Financial Reporting: Financial reporting helps you get a clear picture of your business finances, from cash flow planning to estimating project profitability to providing profit and loss reports to stakeholders. Payroll: Some accounting software includes payroll features, which may allow you to automate paying your employees with direct deposit.Inventory: Businesses that stock products need accounting software to keep track of when inventory is low. You may also use software to create purchase orders and manage vendors.  Alternatives to Small Business Accounting Software Hiring an accountant: Freelancers and micro-business owners may not need accounting software if they outsource accounting tasks to a CPA. But in many cases, it’s still helpful to have a platform that keeps your income and expenses organized. Using free software: You can rely on free software, like Wave, to handle your accounting and invoicing needs. There may be other types of free software for other business needs as well, but you’ll lose the benefit of having everything in one place. Relying on spreadsheets: You can manage your business accounting the old-fashioned way, with spreadsheets that track every aspect of your business. Why You Should Trust Us Investopedia collected and analyzed scores of key data points from 19 companies to identify the most important factors for readers choosing accounting software for small business. We used this data to review each company based on cost, scalability, reputation, accounting features, and other factors to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best accounting software for small business since 2020. Frequently Asked Questions How Much Does Accounting Software for Small Business Cost? Small business accounting software ranges from $0 to $150 or more per month. Basic plans are in roughly the $0 to $40 per month range and are a great place to start. With a basic plan, a small business will be able to categorize income and expenses, send invoices, and prepare financial reports. As a business grows, most software is scalable, and a plan can be easily upgraded to meet new business needs, but it will cost more than a basic package. The cheapest accounting software among the services we reviewed is the free offering from Wave. What Type of Accounting Is Best for Small Business? The kind of accounting software a small business chooses to use depends on multiple factors. A freelancer or part-time consultant might need something basic or free, and a growing business might choose software that can be easily upgraded. QuickBooks is a popular choice because the company offers a wide range of products. Is QuickBooks for Small Business Worth It? Yes, QuickBooks is useful for many small businesses, particularly because it is scaleable. That means it can grow with your business. It can also integrate with third-party applications. Additionally, QuickBooks offers a 30-day free trial so you can test out the program to see if it fits your business's needs. What Is the Easiest Accounting Program to Use? For businesses that don't need to run a payroll, Wave is the easiest program to use. It allows service-based businesses to send simple invoices and pull reports to prepare a yearly tax return. Wave is also free and does not have transaction or billing limits. If you do want to add payroll services, it starts at $20 per month plus $6 per employee. A per transaction fee is charged for accepting payments as well. Is There Any Free Accounting Software? Yes, free accounting software is available, including Wave, which is featured here. Additional services offered by Wave, beyond essential small business accounting needs like payroll and credit card processing, come with fees. Can I Do Bookkeeping Without QuickBooks? Yes, absolutely. You can choose an alternate accounting software, such as one of those we've reviewed here. Or you can roll your own spreadsheet-based accounting system using Excel or Google Sheets. Can I Use Excel Instead of QuickBooks? You can set up a simple small business accounting system using Excel (or Google Sheets). Your system won't be as robust as QuickBooks (for example, your spreadsheets won't be able to connect with your bank to automatically pull transactions), but if your accounting needs are basic, a spreadsheet-based system can work. You'll find templates online to help you get started. Is Accounting Software Secure? Cloud-based accounting software systems like QuickBooks online aim to protect client data via multiple layers of data encryption and other resources. First, client data is encrypted during transmittal via SSL. Next, providers protect the data on their servers with encryption, firewalls, and other methods. How We Picked the Best Accounting Software for Small Business We looked at 19 accounting software companies with specialized products for small businesses before choosing our top five software options. We considered cost, scalability, ease of use, reputation, and accounting features. Reputation was a key consideration because the longer a company has been around, the more likely that any technological glitches have been resolved, which ensures that a company’s important financial information will be reported accurately. Scalability was the next most important consideration because as a company grows, its accounting needs grow as well, and transferring financial information to new software can be tedious. Finally, ease of use and collaboration for business owners, employees, and accountants was considered because it’s important for all users to be able to access and review the financials at the same time. Learn More About Small Business Accounting The 8 Important Steps in the Accounting Cycle What Is Accrual Accounting, and How Does It Work? Accrual Accounting vs. Cash Basis Accounting: What's theDifference? Cash Basis Accounting: Definition, Example, Vs. Accrual The 7 Best Accounting Books in 2023 6 Steps to a Better Business Budget Understanding Small Business Taxes: A Comprehensive Guide Bookkeeping vs. Accounting: What's the Difference? Cash Accounting Definition, Example & Limitations Best Online Bookkeeping Classes Best Accounting Software Best Accounting Software for Restaurants Best Tax Software Programs for Small Business AndreyPopov / Getty Images Updated by Lindsay Frankel A freelance writer with more than three years of researching and writing about personal loans, insurance, credit cards, and more, Lindsay's work has appeared on sites such as Insurify, Bankrate, and The Simple Dollar. Learn about our editorial policies Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. SMB Group. "What’s Ahead for SMBs in Financial Management." Intuit QuickBooks. "Plans for Every Kind of Business." Intuit. "About Intuit." Xero. "Pricing." Gusto. "Flexible Plans and Features. Honest Pricing. No Hidden Fees." Xero. "We Help Small Businesses Thrive Worldwide." FreshBooks. "Pricing." FreshBooks. "The FreshBooks Story." Wave. "Online Payments = On-Time Payments." Wave. "Payroll Software That Pays Off." Wave. "We Are Wave." PWC Bookkeeping Connect. "Five Benefits of Adopting Bookkeeping Software." Accounting Tools. "Types of Accounting Software." Intuit QuickBooks. "Accounting Software Selection: 7 Factors to Consider for 2023." Wave. "Everything You Need. Nothing You Don’t." Oracle Netsuite. "How to Use Excel for Accounting (and When to Level Up)." QuickBooks. "Security Information." Related Articles Best Accounting Software Best Accounting Software for Nonprofits for May 2024 The Best Payroll Software for 2024 Best Online Accounting Firms for Small Business Best Small Business Bank Accounts for May 2024 Best Accounting Software for Restaurants Related Terms Enterprise Resource Planning (ERP): Meaning, Components, and Examples Enterprise resource planning (ERP) is software used by a company to manage key parts of operations, including accounting and resource management. more What Is Payroll, With Step-by-Step Calculation of Payroll Taxes Payroll is the compensation a business must pay to its employees for a set period or on a given date. Read about payroll accounting here. more Embedded Finance: Everything You Need to Know Embedded finance integrates financial and banking services into platforms for nonfinancial companies. more Accounting Explained With Brief History and Modern Job Requirements Accounting is the process of recording, summarizing, and reporting financial transactions to oversight agencies, regulators, and the IRS. more Cash Concentration and Disbursement (CCD): Definition and Use Cash concentration and disbursement (CCD) is a type of electronic transfer, often used to transfer funds among remote locations and so-called concentration (i.e. collection) accounts. more What Is a Budget? Plus 11 Budgeting Myths Holding You Back Budgeting involves estimating revenue and expenses over a specified future period of time. Budgets are usually established and re-evaluated on a periodic basis. more

https://www.investopedia.com/best-peo-services-5088881

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> A professional employer organization (PEO) is a company that small businesses can hire to manage human resources and other administrative functions on their behalf. A strong PEO provider is one that can scale with a growing business, provide an array of useful benefits, and offer a reasonable price for its services. A PEO should also ensure you remain compliant with federal and state employment laws, so a provider with plenty of experience and a good reputation is also a must. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> According to our research, TriNet offers the best overall PEO service due to its accessibility, contract customization, and industry-specific support. We looked at over 15 PEO providers and then narrowed our field down to companies accredited by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.esac.org/" rel="sponsored nofollow">Employer Services Assurance Corporation (ESAC)</a> and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a>. We spent hundreds of hours researching and evaluating PEO companies based on third-party ratings and customer feedback to bring you the best PEO services for different types of businesses or needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best PEO Services of May 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Industry-Specific Services:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=45&amp;aff_id=1028" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> TriNet</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Support:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://paychex.sjv.io/c/2104074/1550440/16636" rel="nofollow noskim noopener nocaes" target="_blank"> Paychex</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Small Businesses:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=47&amp;aff_id=1028" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Insperity</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Large Businesses:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.infinitihr.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> INFINITI HR</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Customer Service:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://businesscom.go2cloud.org/aff_c?offer_id=43&amp;aff_id=1028" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> ADP TotalSource</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Benefits:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.justworks.com/" rel="nofollow noskim noopener nocaes" target="_blank"> Justworks</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best PEO Services of May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best PEO Services of May 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best PEO Services of May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-TriNet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-TriNet" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-industry-specific-services-trinet" rel="nocaes"> <span class="link__wrapper">TriNet</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Paychex" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Paychex" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-support-paychex" rel="nocaes"> <span class="link__wrapper">Paychex</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Insperity" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Insperity" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-businesses-insperity" rel="nocaes"> <span class="link__wrapper">Insperity</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-INFINITI HR" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-INFINITI HR" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-large-businesses-infiniti-hr" rel="nocaes"> <span class="link__wrapper">INFINITI HR</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-ADP TotalSource" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-ADP TotalSource" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-customer-service-adp-totalsource" rel="nocaes"> <span class="link__wrapper">ADP TotalSource</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Justworks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Justworks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-benefits-justworks" rel="nocaes"> <span class="link__wrapper">Justworks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (3)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is a Certified PEO?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-a-certified-peo" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">What Is a Certified PEO?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-PEO Alternatives" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-peo-alternatives" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">PEO Alternatives</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Why You Should Trust Us" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-why-you-should-trust-us" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Why You Should Trust Us</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faqs-15a64437-686b-4b5e-a6ee-999e8ae452bc" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">FAQs</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-pick-the-best-peo-services" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-for-industry-specific-services-trinet"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Industry-Specific Services</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> TriNet</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 600px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="TriNet" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/Lin5i90iJMh4zUet3R6iquKJn3I=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/TriNet-e5a91d3d859f429f82e71c8ec3c1c8db.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="TriNet" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/Lin5i90iJMh4zUet3R6iquKJn3I=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/TriNet-e5a91d3d859f429f82e71c8ec3c1c8db.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> TriNet</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Five</li><li><strong>Availability</strong>: Nationwide</li><li><strong>Pricing</strong>: Ranges from $80 to $600 per employee per month</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=45&amp;aff_id=1028" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> TriNet not only tailors itself to specific industries, but business owners have a dedicated phone call center with experts from their specific industry, making it our choice for the best industry-specific services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Excellent accessibility</p></li> <li><p>Customized contracts</p></li> <li><p>Industry-specific support</p></li> <li><p>Extensive trends and insights resource center</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Only offers service bundles instead of à la carte</p></li> <li><p>Five-employee minimum</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> TriNet offers a standard, straightforward plan that bundles payroll services, employee benefits, HR administration, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskmanagement.asp">risk management</a>. It’s not the best option if you’re looking for singular services, but for an expanding business that needs support, it can be invaluable. Customer service is available via email, phone, and online chat, and you will also have your HR expertise call center for more specific inquiries. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Services include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> <li>Workers' compensation</li> <li>Payroll processing </li> <li>Human resources administration </li> <li>Risk management and compliance</li> <li>Employee benefits </li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">Retirement plans</a> and 401(k) options </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> Many PEOs on our list will give you a support rep or even a whole team to offer assistance when you need it. However, TriNet takes it one step further, curating a personal team of professionals from your industry so you always receive superior expert advice. This is what earns it our top pick for specialized industries. For the growing small business, TriNet provides invaluable support and expertise that can be very hard to find elsewhere.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> The many tailored industries that TriNet works with include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> <li>Advertising and marketing</li><li>Consulting</li><li>Financial Services</li><li>Life sciences</li><li>Manufacturing and wholesale</li><li>Nonprofit HR</li><li>Retail </li><li>Technology</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> TriNet offers per-employee pricing that matches the size of your business. You will have to sign a contract, but contracts may vary, giving you some flexibility on the length. A representative can work with you to create a more customized contract that works best for you. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> Originally founded in 1988, TriNet is headquartered in Dublin, California, and has branches in 10 additional states as well as India.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="11"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-support-paychex"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Support</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Paychex</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-16" style="--imgWidth: 474px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Paychex" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/6Z_CprPg7oxkP-FxGmWCOpfOqUQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Paychex-cdf97e3623a245cd92311a3ef9e465b9.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Paychex" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/6Z_CprPg7oxkP-FxGmWCOpfOqUQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Paychex-cdf97e3623a245cd92311a3ef9e465b9.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Paychex</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Five</li><li><strong>Availability</strong>:<strong> </strong>U.S. Nationwide and Northern Europe<br/></li><li><strong>Pricing</strong>:<strong> </strong>Yearly contracts, submit request for pricing</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-18"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://paychex.sjv.io/c/2104074/1550440/16636" id="button_1-0-1" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> An established and stable PEO, Paychex is our pick as best for support because it is the perfect autonomous partner that every business owner needs to help manage their employees and will not only work for your team members but with them, offering personal customer support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-22"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Option of onsite HR managers</p></li> <li><p>Personalized risk assessment and management</p></li> <li><p>Enormous online resource center</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Systems could use some updating</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> An established and stable PEO, Paychex works directly with employees for HR support, instead of working as a middleman. That makes it better able to assess a company and provide in-depth <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskmanagement.asp">risk management services</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> If you work with Paychex as your PEO, you’ll benefit from a payroll account manager and human resource generalist. It makes customer service an enjoyable and reliable experience, no matter the company’s size. These services all help Paychex stand out from the competition. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Online processing simplifies the payroll process, and Paychex outsources office management support if needed. If not, there is also the option to sign up for à la carte services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> Paychex offers the following services for businesses: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> <li>Payroll processing</li><li>Retirement services</li><li>Insurance</li><li>Outsourced HR services</li><li>Outsourced employee benefits (HSA, FSA, HRA)</li><li>401(k) plans</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Paychex provides access to a multitude of resources addressing all facets of a business. Owners can focus their attention on growing the business while Paychex steps in to handle payroll, taxes, and compliance. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp">Employee benefits packages</a> are extensive, including health insurance, retirement, vision insurance, dental insurance, and even employee wellness options. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Pricing is assessed on a per-employee basis with a five-employee minimum. Contracts are priced for a year, a reasonable fit for growing businesses, and a no-brainer for larger corporations. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> Despite its name, Paychex offers more than basic services and will do <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/payrolltax.asp">payroll taxes</a> as well. Paychex is IRS-certified and accredited by the ESAC.<span class="ql-inline-citation" data-cite="1"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> Originally founded in 1971, Paychex is headquartered in Rochester, New York, and has branches in 37 additional states as well as Denmark and Germany.<span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="13"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-small-businesses-insperity"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Small Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Insperity</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-33" style="--imgWidth: 220px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Insperity" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/wR_KIbdPdrjMgWvgGOBBXvh3ELE=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Insperity-d3f9b087fb5d43a9b1ae85a6c5b2ff6e.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Insperity" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/wR_KIbdPdrjMgWvgGOBBXvh3ELE=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Insperity-d3f9b087fb5d43a9b1ae85a6c5b2ff6e.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Insperity</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Five</li><li><strong>Availability</strong>:<strong> </strong>Nationwide<br/></li><li><strong>Pricing</strong>: Information not available online</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-35"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=47&amp;aff_id=1028" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> Insperity is our pick for the best small business PEO because it has the experience to adapt itself to the needs of small business owners and help guide their growth. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-39"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Enormous library of online training resources</p></li> <li><p>Customized plans</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Minimum of five employees</p></li> <li><p>No pricing online</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> Scalability is a crucial feature for any PEO, as services designed to meet the HR needs of a massive corporation with thousands of employees would be overkill for a smaller company. Insperity offers the guiding hand that small businesses need as they grow and expand. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> Services available from Insperity include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> <li>Payroll processing</li><li>Employee benefits</li><li>Human resources administration</li><li>Risk management</li><li>Extensive training resources</li><li>Workers’ compensation</li><li>Employee support and onboarding</li><li>Government compliance support</li><li>Tech services</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> Your dedicated team will include an HR services manager, HR specialist, payroll specialist, performance specialist, client liaison, and safety consultant for some of the best support you’ll find anywhere from a PEO. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> There is fantastic accessibility, with the company offering stellar apps for both iOS and Android platforms. It gives you the option to stay plugged in and in touch even when you are on the go.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> Insperity manages to do it all and still maintains high levels of customer support for all of your questions and troubleshooting needs. For more details on pricing, you will need to call in and speak with a representative for a personalized quote. Insperity is accredited by the ESAC and IRS for extra peace of mind.<span class="ql-inline-citation" data-cite="1"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> Originally founded in 1986, Insperity is headquartered in Kingwood, Texas, and has over 90 branches across 34 states and the District of Columbia.<span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="15"></span><span class="ql-inline-citation" data-cite="16"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-large-businesses-infiniti-hr"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Large Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> INFINITI HR</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-48" style="--imgWidth: 600px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Infiniti HR" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/DXcmpgrJ3ijQTCLkiTbh4ipiT2Q=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/InfinitiHR-c4d1bab7da44454193583c93dd30bd5f.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Infiniti HR" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/DXcmpgrJ3ijQTCLkiTbh4ipiT2Q=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/InfinitiHR-c4d1bab7da44454193583c93dd30bd5f.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> Infiniti HR</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Two</li><li><strong>Availability</strong>:<strong> </strong>Nationwide</li><li><strong>Pricing</strong>: Information not available online</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.infinitihr.com/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> INFINITI HR is our pick for the best PEO for large businesses because it is the first PEO created specifically for franchises and hotel management, places a sharp focus on growing your business, and offers specialized <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx">recruitment services</a> that are rarely seen with a PEO. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-54"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Franchise-friendly</p></li> <li><p>Customizable format</p></li> <li><p>Recruitment support</p></li> <li><p>À la carte services</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Slow on mobile apps and tech</p></li> <li><p>May be too much for smaller businesses</p></li> <li><p>Newer company</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> INFINITI HR has extensive experience in working with some of the country’s most popular franchises and largest hotel brands, including Choice Hotels International, Best Western, Hyatt, and Senior Helpers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> INFINITI HR allows businesses to personalize services with the option to pick and choose services for a custom bundle. It separates major services like HR support and payroll so you can opt for one without being stuck with the other. It’s the kind of flexibility that large enterprises often look for when converting to a new provider.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> A unique feature is its recruitment services, which help to keep companies stacked with the top talent they need to keep growing. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> INFINITI HR offers several options for large businesses: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> <li>Payroll services</li><li>Tax filing</li><li>HR management, by state</li><li>Employee benefits</li><li>Workers’ compensation</li><li>Compliance support</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> INFINITI HR offers many attractive employee perks, such as the full bouquet of health, dental, vision, and life insurance. Other benefits include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unemployment.asp">unemployment</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workers-compensation.asp">workers’ compensation</a>, and liability claims support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> For business owners, there are support services available, such as state-specific HR systems with on-demand consulting services and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grc.asp">compliance and risk management</a>. For those focused on growth, there is even recruitment outsourcing services available to scout out talent and advance teams. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-63"> INFINITI HR is still very much the new kid on the block, but it packs a punch with all the services it offers. It is the official premium supplier for the International Franchise Association (IFA). INFINITI HR is a PEO that is franchise-friendly with services designed for the needs of a growing empire. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64"> Originally founded in 2008, INFINITI HR is headquartered in Burtonsville, Maryland.<span class="ql-inline-citation" data-cite="17"></span><span class="ql-inline-citation" data-cite="18"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-customer-service-adp-totalsource"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Customer Service</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> ADP TotalSource</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-65" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="ADP TotalSource" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/pvrJslcDIUubVXKKVL23BaqFLZk=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ADP-fbac88a4a412415b8c3f699d8b321f3d.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="ADP TotalSource" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/pvrJslcDIUubVXKKVL23BaqFLZk=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/ADP-fbac88a4a412415b8c3f699d8b321f3d.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> ADP TotalSource</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Five</li><li><strong>Availability</strong>: International</li><li><strong>Pricing</strong>: Must speak to a rep for pricing</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-67"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="http://businesscom.go2cloud.org/aff_c?offer_id=43&amp;aff_id=1028" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> ADP consistently delivers stellar customer service, even though it is one of the largest PEO providers today, and provides flexibility that works for companies of all kinds and sizes, which is why ADP TotalSource is our pick for the best customer service. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-71"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Self-service payroll for employees</p></li> <li><p>Advanced HR software and tools</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must speak to a rep for pricing</p></li> <li><p>May seem too large to smaller companies</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> ADP TotalSource is a powerhouse, serving as one of today’s biggest PEOs in over 140 countries. It has made a name for itself with exceptionally good customer service. Multiple chat options include email, phone, and live chat, so you can always find help when you need it. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74"> ADP specializes in some specific industries: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-75"> <li>Construction</li><li>Education</li><li>Financial services</li><li>Government</li><li>Retail</li><li>Healthcare</li><li>Hospitality and restaurants</li><li>Manufacturing</li><li>Nonprofit</li><li>Professional services</li><li>Technical services</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> ADP also offers top-rated HR programs, with the company emerging as an industry leader in tech and customer support. Staff are also likely to appreciate the employee self-service payroll system that gives them more autonomy over their earnings. If a computer is not available, the mobile app will help take care of all business needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-77"> There are also optional benefits that include medical, dental, and vision insurance, in addition to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/401kplan.asp">401(k) plans</a>. These are offered through some of the nation’s best providers, as ADP holds some pretty impressive partnerships. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78"> You will need to speak with a customer service representative before receiving pricing. However, this is a company built around small and medium-sized businesses, adapting its plans to best suit these particular needs. There are likely to be more services than startups need right now, but it only lights the way for all that’s to come. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79"> ADP is headquartered in Roseland, New Jersey, and has been in business for over 70 years.<span class="ql-inline-citation" data-cite="21"></span><span class="ql-inline-citation" data-cite="20"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-benefits-justworks"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Benefits</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Justworks</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-80" style="--imgWidth: 476px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Justworks" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/F_2n8G9aEI1OXjDOHhh63_zXTyQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Justworks-b93201ed05e9452ea46ffa27bf83ac5f.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Justworks" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/F_2n8G9aEI1OXjDOHhh63_zXTyQ=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Justworks-b93201ed05e9452ea46ffa27bf83ac5f.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Justworks</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-81"> <li><strong>Minimum no. employees</strong>:<strong> </strong>Two<br/></li><li><strong>Availability</strong>: Nationwide</li><li><strong>Pricing</strong>: Ranges from $59 to $99 per employee per month<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-82"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.justworks.com/" id="button_1-0-5" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84"> Justworks is our pick for the best PEO for benefits because it allows small businesses to enjoy perks that are typically only available to larger businesses. It lets small businesses benefit from advanced perks, like expanded service options, and optional add-on benefits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-86"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Upfront pricing</p></li> <li><p>24/7 customer service</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Relatively new PEO</p></li> <li><p>Basic training services</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-88"> Justworks prioritizes affordability with transparent pricing, gives dedicated account support, and offers expanded customer service options. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-89"> The standard Justworks contract will include payroll processing and HR administration, in addition to compliance and employee benefits. If you have a question or need help with a topic, customer service is standing by 24/7 via phone, email, online chat, Slack, or SMS text. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-90"> Justworks is also the only PEO to openly display its pricing, offering these rates. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_3-0-91"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Plan</th> <th>Services</th> <th>Cost</th> </tr> </thead> <tbody data-check="0"> <tr> <td>Basic</td> <td>Payroll, HR, Benefits, Compliance</td> <td>$59 per month per employee;<br/>$49 per month for your 50th employee onwards</td> </tr> <tr> <td>Plus</td> <td>With medical, dental, and vision insurance</td> <td>$99 per month per employee;<br/>$89 per month for your 50th employee onwards</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-92"> You have the option to pay monthly if that fits into the budget better. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-93"> Justworks, which is headquartered in New York City, has been around since 2012 and is accredited by the ESAC.<span class="ql-inline-citation" data-cite="22"></span><span class="ql-inline-citation" data-cite="2"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> While all of these PEO companies are excellent options, TriNet is our pick for industry-specific because it curates a personal team of professionals from your industry for expert advice. It provides invaluable support and expertise that can be very hard to find elsewhere. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> If you've just started your business and need a PEO that's better suited to a smaller scale, Insperity provides excellent support with the accessibility that a startup needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-3"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>Company</b></td> <td><b>Minimum no. employees</b></td> <td><b>Availability</b></td> <td><b>Pricing</b></td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://businesscom.go2cloud.org/aff_c?offer_id=45&amp;aff_id=1028&amp;aff_sub2=5088881&amp;aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304" rel="sponsored nofollow">TriNet</a><b>Best for Industry-Specific Services</b></td> <td>Five </td> <td>Nationwide</td> <td>Ranges from $80 to $600 per employee per month</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://businesscom.go2cloud.org/aff_c?offer_id=47&amp;aff_id=1028&amp;aff_sub2=5088881&amp;aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304" rel="sponsored nofollow">Insperity</a><b>Best for Small Businesses</b></td> <td>Five</td> <td>Nationwide</td> <td>No pricing online</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.infinitihr.com/" rel="sponsored nofollow">INFINITI HR</a><b>Best for Large Businesses</b></td> <td>Two</td> <td>Nationwide</td> <td>No pricing online</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="aff_sub2=${DOC_ID}&amp;aff_sub3=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://businesscom.go2cloud.org/aff_c?offer_id=43&amp;aff_id=1028&amp;aff_sub2=5088881&amp;aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304" rel="sponsored nofollow">ADP TotalSource</a><b>Best for Customer Service</b></td> <td>Five</td> <td>International</td> <td>Must speak to a rep for pricing</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://paychex.sjv.io/c/2104074/1550440/16636?subid1=5088881&amp;subid2=n5b8e65f05da74f4fa425b3fbc9685e9304" rel="nofollow">Paychex</a><b>Best for Support</b></td> <td>Five</td> <td>U.S. Nationwide and Northern Europe</td> <td>Yearly contracts, submit request for pricing</td> </tr> <tr> <td><a class="summary-list__item-top-pick" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.justworks.com/" rel="nofollow">Justworks</a><b>Best for Benefits</b></td> <td>Two</td> <td>Nationwide</td> <td>Ranges from $59 to $99 per employee per month</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-what-is-a-certified-peo"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> What Is a Certified PEO?<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> A Certified Professional Employer Organization, or CPEO, is a PEO that voluntarily applied to be certified by the IRS. Being certified means that a PEO meets the CPEO program's meticulous background, experience, business location, financial reporting, tax compliance, and bonding requirements. You can verify a PEO's certification status by checking the IRS' <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/pub/irs-utl/list-of-cpeos.pdf">CPEO Public Listings</a>, which includes a full list of currently certified CPEOs as well as former CPEOs whose certification has been suspended or revoked.<span class="ql-inline-citation" data-cite="23"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> In order to qualify for a CPEO certification, a PEO must meet the following requirements:<span class="ql-inline-citation" data-cite="24"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> <li>Be a business entity</li><li>Have at least one physical business location within the United States</li><li>Have a history of financial responsibility, organizational integrity, and tax compliance (federal, state, and local)</li><li>Be managed by individuals (a majority of whom are U.S. citizens or residents) who have knowledge or experience regarding federal and state employment tax compliance and business practices relating to those compliance requirements</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-peo-alternatives"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-8"> <span class="mntl-sc-block-heading__text"> PEO Alternatives<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> While a PEO can provide valuable services to most companies, this type of outsourcing won't be the right solution for every business. Fortunately, a few alternatives are available that may suit your and your company's needs better. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> <li><strong>Administrative service offering (ASO)</strong>: An administrative service offering, sometimes referred to as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/administrative-services-only.asp">administrative services only</a>, is an agreement wherein a company funds its employee benefit plan but hires an outside vendor to administer it. The biggest difference between an ASO and a PEO is that the latter locates third-party partners and lets you pick from their selection. In contrast, you have total control over which third-party partners you outsource to with an ASO.</li> <li><strong>Human resources outsourcing (HRO)</strong>: Also known as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-process-outsourcing.asp">business process outsourcing</a>, an HRO involves subcontracting various business-related operations to third-party vendors. Like an ASO, you choose the third-party partners you want to subcontract under an HRO arrangement.</li> <li><strong>Partial HR solutions</strong>: If you don't require the full suite of services that a PEO can provide, then there are a few smaller-scale options worth considering. An employment agency, for example, can handle the locating and hiring of new employees, and a payroll service provider could be employed to ensure your company's payroll is correctly processed.<span class="ql-inline-citation" data-cite="26"></span><span class="ql-inline-citation" data-cite="25"></span> While using several of these services in tandem might not be as cost effective as hiring a PEO, using just one (or the right combination of services) will likely save you some money in the long run.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-you-should-trust-us"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> Why You Should Trust Us<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> Investopedia collected and analyzed a wide range of key data points from several PEO companies to identify the most important factors for readers choosing the right provider to suit their needs. We used this data to review each company for their services offered, availability, pricing, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best PEO service since 2020. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-13"> <span class="heading-toc" id="toc-faqs-15a64437-686b-4b5e-a6ee-999e8ae452bc"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Are Typical PEO Services?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>A PEO typically provides any of these basic services: Payroll processing, human resources administration, employee benefits, risk and compliance, workers' compensation, employee training, and talent development. However, not all PEOs offer or specialize in the services your business may require, so it’s crucial to adequately vet each company’s options.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Is a PEO Worth It for a Small Business?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Whether or not a PEO will be worth it for a small business will depend on the business owner's needs as well as the company's resources and size. Not every small business owner is qualified or experienced enough to handle all of the HR functions of their growing company, and some businesses may not have sufficient room in their budgets to put together dedicated HR departments. Not to mention the fact that a business owner may simply not have the bandwidth to handle HR responsibilities on their own, given how time consuming these can be. So if you have a decent number of employees and sufficient funds to afford the monthly payments, then a PEO may make sense for your small business.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Companies Should Use a PEO?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Most PEO companies require a minimum number of employees, so companies with fewer employees will not have a need for—or be able to hire—a PEO company. Once a company has sufficiently grown, a PEO will be able to provide valuable products and services.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">How Do I Choose a PEO?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>In order to choose the best PEO for your business, you first must understand your company's needs and determine whether a PEO is the right way to address them. The size of your business operations and your plans for future growth will likely be the two biggest factors you'll have to weigh during this step.<span class="ql-inline-citation" data-cite="3"></span></p><p>Next, shop around for PEOs until you find a few that suit your needs. Finally, to help narrow down your list of options, try to find the answers to the following questions for each company: Is it a member of NAPEO? Is it IRS certified? Does a CPA independently audit its financial statements? Have its practices been independently accredited by ESAC? If the answer to all of these is yes for a given company, then it's a good option.<span class="ql-inline-citation" data-cite="3"></span></p><p>Before you make your final decision, make certain you understand how employee benefits will be funded and tailored, and don't forget to review the service agreement carefully.<span class="ql-inline-citation" data-cite="3"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">How Do PEOs Make Money?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>PEOs make money by billing you, the business owner, in exchange for handling the administrative services they provide. Depending on the company, a PEO will typically charge either a percentage of your total gross payroll or per employee.<span class="ql-inline-citation" data-cite="5"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">What Is the Largest PEO in the US?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>Based in Miami, Florida, ADP has the largest PEO service in the U.S., in addition to the largest one in the world.<span class="ql-inline-citation" data-cite="21"></span> The company employed 41 million workers across 140 countries in June of 2023, and it made over $18 billion in revenue for the year.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="8"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">What Are the Negatives of PEO?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>While it can be cost effective for a growing business to outsource HR responsibilities to a PEO service, there are some downsides to consider as well. Hiring a PEO typically involves outsourcing employee administration tasks. As a result, you'd lose control over certain aspects of your company, particularly regarding employee paperwork.</p><p>Additionally, depending on whether the vendor's system is particularly vulnerable to cyber-attacks, hiring a PEO can potentially present a security issue. An outside company can also influence your company culture.<span class="ql-inline-citation" data-cite="9"></span> While this wouldn't necessarily be a bad thing, it may have unexpected consequences that alter the professional link between you and your employees (also known as your employment relationship).</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-how-we-pick-the-best-peo-services"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-14"> <span class="mntl-sc-block-heading__text"> How We Pick the Best PEO Services </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-15"> There are a multitude of PEOs operating today, but very few are worth their weight. To begin, we look to the industry leaders for their expert ratings and results. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.napeo.org/" rel="sponsored nofollow">National Association of Professional Employer Organizations</a> has been an invaluable resource in researching and uncovering the best secrets regarding today’s top PEO services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-16"> The Employer Services Assurance Corporation (ESAC) and the Internal Revenue Service (IRS) recognize PEOs of superior caliber with official ratings and accreditations that serve as a sign of reliability and customer satisfaction. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-17"> Additionally, we analyze hundreds of real customer reviews, learning about actual customer experience, service offerings, and provider performance. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-18"> Through our research, we ensure that each provider demonstrates best practices, meeting specific financial, state, and regulatory guidelines to best guide you and your business down the path of success. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.7%;"> <img alt="Small business owner using a PEO service to streamline their payroll" class="primary-image__image mntl-primary-image--blurry" height="4912" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" 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These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-10"><p>TriNet. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trinet.com/faqs">Frequently Asked Questions</a>."</p></li> <li class="mntl-sources__source" id="citation-11"><p>TriNet. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trinet.com/locations/">Our Locations</a>."</p></li> <li class="mntl-sources__source" id="citation-1"><p>Internal Revenue Service. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/pub/irs-utl/list-of-cpeos.pdf">List of CPEOs</a>,” Page 2.</p></li> <li class="mntl-sources__source" id="citation-12"><p>Paychex. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.paychex.com/corporate">About Paychex</a>."</p></li> <li class="mntl-sources__source" id="citation-13"><p>Paychex. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.paychex.com/locations">Paychex Locations Near You</a>."</p></li> <li class="mntl-sources__source" id="citation-14"><p>Insperity. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.insperity.com/about-us/">About Insperity</a>."</p></li> <li class="mntl-sources__source" id="citation-15"><p>Insperity. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.insperity.com/about-us/locations/office/corporate-headquarters-houston/">Discover a Different Kind of HR Company in Kingwood</a>."</p></li> <li class="mntl-sources__source" id="citation-16"><p>Insperity. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.insperity.com/about-us/locations/">Insperity Locations</a>."</p></li> <li class="mntl-sources__source" id="citation-17"><p>INFINITY HR. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.infinitihr.com/about/" rel="nofollow sponsored">About</a>."</p></li> <li class="mntl-sources__source" id="citation-18"><p>LinkedIn. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/company/infiniti-hr">INFINITI HR</a>."</p></li> <li class="mntl-sources__source" id="citation-21"><p>LinkedIn. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/company/adp">ADP</a>."</p></li> <li class="mntl-sources__source" id="citation-20"><p>ADP. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.adp.com/about-adp.aspx">Who We Are</a>."</p></li> <li class="mntl-sources__source" id="citation-22"><p>LinkedIn. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/company/justworks-">Justworks</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>Justworks. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.justworks.com/about/our-team">Our Team</a>."</p></li> <li class="mntl-sources__source" id="citation-23"><p>Internal Revenue Service. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/tax-professionals/about-certified-professional-employer-organization">About the Voluntary Certification Program for Professional Employer Organizations (CPEOs)</a>."</p></li> <li class="mntl-sources__source" id="citation-24"><p>Internal Revenue Service. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/tax-professionals/certified-professional-employer-organization">Voluntary Certification Program for Professional Employer Organizations (CPEOs)</a>."</p></li> <li class="mntl-sources__source" id="citation-26"><p>U.S. Equal Employment Opportunity Commission. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.eeoc.gov/laws/guidance/cm-631-employment-agencies">CM-631: Employment Agencies</a>."</p></li> <li class="mntl-sources__source" id="citation-25"><p>ADP. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.adp.com/resources/articles-and-insights/articles/w/what-is-a-payroll-service-provider.aspx">What Is a Payroll Service Provider?</a>"</p></li> <li class="mntl-sources__source" id="citation-3"><p>NAPEO. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.napeo.org/what-is-a-peo/selecting-a-peo/guidelines-for-choosing-a-peo" rel="nofollow sponsored">Guidelines for Choosing a PEO</a>."</p></li> <li class="mntl-sources__source" id="citation-5"><p>Justworks. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.justworks.com/blog/whats-a-peo#what-is-a-peo">What Is a PEO, and How Can It Help Your Small Business Grow?</a>"</p></li> <li class="mntl-sources__source" id="citation-7"><p>U.S. Securities and Exchange Commission. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sec.gov/ix?doc=/Archives/edgar/data/0000008670/000000867023000030/adp-20230630.htm">Automatic Data Processing Form 10-K: June 30, 2023</a>."</p></li> <li class="mntl-sources__source" id="citation-8"><p>ADP. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://s23.q4cdn.com/483669984/files/doc_earnings/2023/q4/earnings-result/ADP-4Q23-Earnings-Release.pdf">ADP Reports Fourth Quarter and Fiscal 2023 Results; Provides Fiscal 2024 Outlook</a>," Page 5.</p></li> <li class="mntl-sources__source" id="citation-9"><p>SHRM. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatisapeoanditsadvantagesanddisadvantages.aspx">What Is a PEO? What Are Its Advantages and Disadvantages?</a>"</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5088638" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-payroll-software-5088638" id="mntl-card-list-items_1-0"> <div class="card__media" data-tag="Small Business"> <img alt="Best Payroll Software" class="lazyload card__img" data-dim-ratio="1.501" 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A professional employer organization (PEO) is a company that small businesses can hire to manage human resources and other administrative functions on their behalf. A strong PEO provider is one that can scale with a growing business, provide an array of useful benefits, and offer a reasonable price for its services. A PEO should also ensure you remain compliant with federal and state employment laws, so a provider with plenty of experience and a good reputation is also a must. According to our research, TriNet offers the best overall PEO service due to its accessibility, contract customization, and industry-specific support. We looked at over 15 PEO providers and then narrowed our field down to companies accredited by the [Employer Services Assurance Corporation (ESAC)](https://www.esac.org/) and the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp). We spent hundreds of hours researching and evaluating PEO companies based on third-party ratings and customer feedback to bring you the best PEO services for different types of businesses or needs. ## Best PEO Services of May 2024 * **Best for Industry-Specific Services:** [TriNet](http://businesscom.go2cloud.org/aff_c?offer_id=45&aff_id=1028) * **Best for Support:** [Paychex](https://paychex.sjv.io/c/2104074/1550440/16636) * **Best for Small Businesses:** [Insperity](http://businesscom.go2cloud.org/aff_c?offer_id=47&aff_id=1028) * **Best for Large Businesses:** [INFINITI HR](https://www.infinitihr.com/) * **Best for Customer Service:** [ADP TotalSource](http://businesscom.go2cloud.org/aff_c?offer_id=43&aff_id=1028) * **Best for Benefits:** [Justworks](https://www.justworks.com/) Best PEO Services of May 2024 Expand Best PEO Services of May 2024 * [Our Top Picks](#summary-list) * [TriNet](#toc-best-for-industry-specific-services-trinet) * [Paychex](#toc-best-for-support-paychex) * [Insperity](#toc-best-for-small-businesses-insperity) * [INFINITI HR](#toc-best-for-large-businesses-infiniti-hr) * [ADP TotalSource](#toc-best-for-customer-service-adp-totalsource) * [Justworks](#toc-best-for-benefits-justworks) * See More (3) * [The Bottom Line](#toc-the-bottom-line) * [What Is a Certified PEO?](#toc-what-is-a-certified-peo) * [PEO Alternatives](#toc-peo-alternatives) * [Why You Should Trust Us](#toc-why-you-should-trust-us) * [FAQs](#toc-faqs-15a64437-686b-4b5e-a6ee-999e8ae452bc) * [Methodology](#toc-how-we-pick-the-best-peo-services) ### Best for Industry-Specific Services : TriNet --- ![TriNet]() :fill(white):max_bytes(150000):strip_icc()/TriNet-e5a91d3d859f429f82e71c8ec3c1c8db.jpg)  TriNet * **Minimum no. employees**:Five * **Availability**: Nationwide * **Pricing**: Ranges from $80 to $600 per employee per month [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=45&aff_id=1028) Why We Chose It TriNet not only tailors itself to specific industries, but business owners have a dedicated phone call center with experts from their specific industry, making it our choice for the best industry-specific services. Pros & Cons Pros * Excellent accessibility * Customized contracts * Industry-specific support * Extensive trends and insights resource center Cons * Only offers service bundles instead of à la carte * Five-employee minimum Overview TriNet offers a standard, straightforward plan that bundles payroll services, employee benefits, HR administration, and [risk management](https://www.investopedia.com/terms/r/riskmanagement.asp). It’s not the best option if you’re looking for singular services, but for an expanding business that needs support, it can be invaluable. Customer service is available via email, phone, and online chat, and you will also have your HR expertise call center for more specific inquiries. Services include: * Workers' compensation * Payroll processing * Human resources administration * Risk management and compliance * Employee benefits * [Retirement plans](https://www.investopedia.com/terms/r/retirement-planning.asp) and 401(k) options Many PEOs on our list will give you a support rep or even a whole team to offer assistance when you need it. However, TriNet takes it one step further, curating a personal team of professionals from your industry so you always receive superior expert advice. This is what earns it our top pick for specialized industries. For the growing small business, TriNet provides invaluable support and expertise that can be very hard to find elsewhere.  The many tailored industries that TriNet works with include: * Advertising and marketing * Consulting * Financial Services * Life sciences * Manufacturing and wholesale * Nonprofit HR * Retail * Technology TriNet offers per-employee pricing that matches the size of your business. You will have to sign a contract, but contracts may vary, giving you some flexibility on the length. A representative can work with you to create a more customized contract that works best for you. Originally founded in 1988, TriNet is headquartered in Dublin, California, and has branches in 10 additional states as well as India. ### Best for Support : Paychex --- ![Paychex]() :fill(white):max_bytes(150000):strip_icc()/Paychex-cdf97e3623a245cd92311a3ef9e465b9.jpg) Paychex * **Minimum no. employees**:Five * **Availability**:U.S. Nationwide and Northern Europe * **Pricing**:Yearly contracts, submit request for pricing [Sign Up Now](https://paychex.sjv.io/c/2104074/1550440/16636) Why We Chose It An established and stable PEO, Paychex is our pick as best for support because it is the perfect autonomous partner that every business owner needs to help manage their employees and will not only work for your team members but with them, offering personal customer support. Pros & Cons Pros * Option of onsite HR managers * Personalized risk assessment and management * Enormous online resource center Cons * Systems could use some updating Overview An established and stable PEO, Paychex works directly with employees for HR support, instead of working as a middleman. That makes it better able to assess a company and provide in-depth [risk management services](https://www.investopedia.com/terms/r/riskmanagement.asp). If you work with Paychex as your PEO, you’ll benefit from a payroll account manager and human resource generalist. It makes customer service an enjoyable and reliable experience, no matter the company’s size. These services all help Paychex stand out from the competition. Online processing simplifies the payroll process, and Paychex outsources office management support if needed. If not, there is also the option to sign up for à la carte services. Paychex offers the following services for businesses: * Payroll processing * Retirement services * Insurance * Outsourced HR services * Outsourced employee benefits (HSA, FSA, HRA) * 401(k) plans Paychex provides access to a multitude of resources addressing all facets of a business. Owners can focus their attention on growing the business while Paychex steps in to handle payroll, taxes, and compliance. [Employee benefits packages](https://www.investopedia.com/articles/pf/09/deciphering-benefits-at-new-job.asp) are extensive, including health insurance, retirement, vision insurance, dental insurance, and even employee wellness options. Pricing is assessed on a per-employee basis with a five-employee minimum. Contracts are priced for a year, a reasonable fit for growing businesses, and a no-brainer for larger corporations. Despite its name, Paychex offers more than basic services and will do [payroll taxes](https://www.investopedia.com/terms/p/payrolltax.asp) as well. Paychex is IRS-certified and accredited by the ESAC. Originally founded in 1971, Paychex is headquartered in Rochester, New York, and has branches in 37 additional states as well as Denmark and Germany. ### Best for Small Businesses : Insperity --- ![Insperity]() :fill(white):max_bytes(150000):strip_icc()/Insperity-d3f9b087fb5d43a9b1ae85a6c5b2ff6e.jpg)  Insperity * **Minimum no. employees**:Five * **Availability**:Nationwide * **Pricing**: Information not available online [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=47&aff_id=1028) Why We Chose It Insperity is our pick for the best small business PEO because it has the experience to adapt itself to the needs of small business owners and help guide their growth. Pros & Cons Pros * Enormous library of online training resources * Customized plans Cons * Minimum of five employees * No pricing online Overview Scalability is a crucial feature for any PEO, as services designed to meet the HR needs of a massive corporation with thousands of employees would be overkill for a smaller company. Insperity offers the guiding hand that small businesses need as they grow and expand. Services available from Insperity include: * Payroll processing * Employee benefits * Human resources administration * Risk management * Extensive training resources * Workers’ compensation * Employee support and onboarding * Government compliance support * Tech services Your dedicated team will include an HR services manager, HR specialist, payroll specialist, performance specialist, client liaison, and safety consultant for some of the best support you’ll find anywhere from a PEO. There is fantastic accessibility, with the company offering stellar apps for both iOS and Android platforms. It gives you the option to stay plugged in and in touch even when you are on the go. Insperity manages to do it all and still maintains high levels of customer support for all of your questions and troubleshooting needs. For more details on pricing, you will need to call in and speak with a representative for a personalized quote. Insperity is accredited by the ESAC and IRS for extra peace of mind. Originally founded in 1986, Insperity is headquartered in Kingwood, Texas, and has over 90 branches across 34 states and the District of Columbia. ### Best for Large Businesses : INFINITI HR --- ![Infiniti HR]() :fill(white):max_bytes(150000):strip_icc()/InfinitiHR-c4d1bab7da44454193583c93dd30bd5f.png)  Infiniti HR * **Minimum no. employees**:Two * **Availability**:Nationwide * **Pricing**: Information not available online [Sign Up Now](https://www.infinitihr.com/) Why We Chose It INFINITI HR is our pick for the best PEO for large businesses because it is the first PEO created specifically for franchises and hotel management, places a sharp focus on growing your business, and offers specialized [recruitment services](https://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx) that are rarely seen with a PEO. Pros & Cons Pros * Franchise-friendly * Customizable format * Recruitment support * À la carte services Cons * Slow on mobile apps and tech * May be too much for smaller businesses * Newer company Overview INFINITI HR has extensive experience in working with some of the country’s most popular franchises and largest hotel brands, including Choice Hotels International, Best Western, Hyatt, and Senior Helpers. INFINITI HR allows businesses to personalize services with the option to pick and choose services for a custom bundle. It separates major services like HR support and payroll so you can opt for one without being stuck with the other. It’s the kind of flexibility that large enterprises often look for when converting to a new provider.  A unique feature is its recruitment services, which help to keep companies stacked with the top talent they need to keep growing. INFINITI HR offers several options for large businesses: * Payroll services * Tax filing * HR management, by state * Employee benefits * Workers’ compensation * Compliance support INFINITI HR offers many attractive employee perks, such as the full bouquet of health, dental, vision, and life insurance. Other benefits include [unemployment](https://www.investopedia.com/terms/u/unemployment.asp), [workers’ compensation](https://www.investopedia.com/terms/w/workers-compensation.asp), and liability claims support. For business owners, there are support services available, such as state-specific HR systems with on-demand consulting services and [compliance and risk management](https://www.investopedia.com/terms/g/grc.asp). For those focused on growth, there is even recruitment outsourcing services available to scout out talent and advance teams. INFINITI HR is still very much the new kid on the block, but it packs a punch with all the services it offers. It is the official premium supplier for the International Franchise Association (IFA). INFINITI HR is a PEO that is franchise-friendly with services designed for the needs of a growing empire. Originally founded in 2008, INFINITI HR is headquartered in Burtonsville, Maryland. ### Best for Customer Service : ADP TotalSource --- ![ADP TotalSource]() :fill(white):max_bytes(150000):strip_icc()/ADP-fbac88a4a412415b8c3f699d8b321f3d.png)  ADP TotalSource * **Minimum no. employees**:Five * **Availability**: International * **Pricing**: Must speak to a rep for pricing [Sign Up Now](http://businesscom.go2cloud.org/aff_c?offer_id=43&aff_id=1028) Why We Chose It ADP consistently delivers stellar customer service, even though it is one of the largest PEO providers today, and provides flexibility that works for companies of all kinds and sizes, which is why ADP TotalSource is our pick for the best customer service. Pros & Cons Pros * Self-service payroll for employees * Advanced HR software and tools Cons * Must speak to a rep for pricing * May seem too large to smaller companies Overview ADP TotalSource is a powerhouse, serving as one of today’s biggest PEOs in over 140 countries. It has made a name for itself with exceptionally good customer service. Multiple chat options include email, phone, and live chat, so you can always find help when you need it. ADP specializes in some specific industries: * Construction * Education * Financial services * Government * Retail * Healthcare * Hospitality and restaurants * Manufacturing * Nonprofit * Professional services * Technical services ADP also offers top-rated HR programs, with the company emerging as an industry leader in tech and customer support. Staff are also likely to appreciate the employee self-service payroll system that gives them more autonomy over their earnings. If a computer is not available, the mobile app will help take care of all business needs. There are also optional benefits that include medical, dental, and vision insurance, in addition to [401(k) plans](https://www.investopedia.com/terms/1/401kplan.asp). These are offered through some of the nation’s best providers, as ADP holds some pretty impressive partnerships. You will need to speak with a customer service representative before receiving pricing. However, this is a company built around small and medium-sized businesses, adapting its plans to best suit these particular needs. There are likely to be more services than startups need right now, but it only lights the way for all that’s to come. ADP is headquartered in Roseland, New Jersey, and has been in business for over 70 years. ### Best for Benefits : Justworks --- ![Justworks]() :fill(white):max_bytes(150000):strip_icc()/Justworks-b93201ed05e9452ea46ffa27bf83ac5f.jpg)  Justworks * **Minimum no. employees**:Two * **Availability**: Nationwide * **Pricing**: Ranges from $59 to $99 per employee per month [Sign Up Now](https://www.justworks.com/) Why We Chose It Justworks is our pick for the best PEO for benefits because it allows small businesses to enjoy perks that are typically only available to larger businesses. It lets small businesses benefit from advanced perks, like expanded service options, and optional add-on benefits. Pros & Cons Pros * Upfront pricing * 24/7 customer service Cons * Relatively new PEO * Basic training services Overview Justworks prioritizes affordability with transparent pricing, gives dedicated account support, and offers expanded customer service options. The standard Justworks contract will include payroll processing and HR administration, in addition to compliance and employee benefits. If you have a question or need help with a topic, customer service is standing by 24/7 via phone, email, online chat, Slack, or SMS text. Justworks is also the only PEO to openly display its pricing, offering these rates. | Plan | Services | Cost | | --- | --- | --- | | Basic | Payroll, HR, Benefits, Compliance | $59 per month per employee;$49 per month for your 50th employee onwards | | Plus | With medical, dental, and vision insurance | $99 per month per employee;$89 per month for your 50th employee onwards | You have the option to pay monthly if that fits into the budget better. Justworks, which is headquartered in New York City, has been around since 2012 and is accredited by the ESAC. ## The Bottom Line While all of these PEO companies are excellent options, TriNet is our pick for industry-specific because it curates a personal team of professionals from your industry for expert advice. It provides invaluable support and expertise that can be very hard to find elsewhere. If you've just started your business and need a PEO that's better suited to a smaller scale, Insperity provides excellent support with the accessibility that a startup needs. | **Company** | **Minimum no. employees** | **Availability** | **Pricing** | | --- | --- | --- | --- | | [TriNet](http://businesscom.go2cloud.org/aff_c?offer_id=45&aff_id=1028&aff_sub2=5088881&aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304)**Best for Industry-Specific Services** | Five | Nationwide | Ranges from $80 to $600 per employee per month | | [Insperity](http://businesscom.go2cloud.org/aff_c?offer_id=47&aff_id=1028&aff_sub2=5088881&aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304)**Best for Small Businesses** | Five | Nationwide | No pricing online | | [INFINITI HR](https://www.infinitihr.com/)**Best for Large Businesses** | Two | Nationwide | No pricing online | | [ADP TotalSource](http://businesscom.go2cloud.org/aff_c?offer_id=43&aff_id=1028&aff_sub2=5088881&aff_sub3=n5b8e65f05da74f4fa425b3fbc9685e9304)**Best for Customer Service** | Five | International | Must speak to a rep for pricing | | [Paychex](https://paychex.sjv.io/c/2104074/1550440/16636?subid1=5088881&subid2=n5b8e65f05da74f4fa425b3fbc9685e9304)**Best for Support** | Five | U.S. Nationwide and Northern Europe | Yearly contracts, submit request for pricing | | [Justworks](https://www.justworks.com/)**Best for Benefits** | Two | Nationwide | Ranges from $59 to $99 per employee per month | ## What Is a Certified PEO? A Certified Professional Employer Organization, or CPEO, is a PEO that voluntarily applied to be certified by the IRS. Being certified means that a PEO meets the CPEO program's meticulous background, experience, business location, financial reporting, tax compliance, and bonding requirements. You can verify a PEO's certification status by checking the IRS' [CPEO Public Listings](https://www.irs.gov/pub/irs-utl/list-of-cpeos.pdf), which includes a full list of currently certified CPEOs as well as former CPEOs whose certification has been suspended or revoked. In order to qualify for a CPEO certification, a PEO must meet the following requirements: * Be a business entity * Have at least one physical business location within the United States * Have a history of financial responsibility, organizational integrity, and tax compliance (federal, state, and local) * Be managed by individuals (a majority of whom are U.S. citizens or residents) who have knowledge or experience regarding federal and state employment tax compliance and business practices relating to those compliance requirements ## PEO Alternatives While a PEO can provide valuable services to most companies, this type of outsourcing won't be the right solution for every business. Fortunately, a few alternatives are available that may suit your and your company's needs better. * **Administrative service offering (ASO)**: An administrative service offering, sometimes referred to as [administrative services only](https://www.investopedia.com/terms/a/administrative-services-only.asp), is an agreement wherein a company funds its employee benefit plan but hires an outside vendor to administer it. The biggest difference between an ASO and a PEO is that the latter locates third-party partners and lets you pick from their selection. In contrast, you have total control over which third-party partners you outsource to with an ASO. * **Human resources outsourcing (HRO)**: Also known as [business process outsourcing](https://www.investopedia.com/terms/b/business-process-outsourcing.asp), an HRO involves subcontracting various business-related operations to third-party vendors. Like an ASO, you choose the third-party partners you want to subcontract under an HRO arrangement. * **Partial HR solutions**: If you don't require the full suite of services that a PEO can provide, then there are a few smaller-scale options worth considering. An employment agency, for example, can handle the locating and hiring of new employees, and a payroll service provider could be employed to ensure your company's payroll is correctly processed. While using several of these services in tandem might not be as cost effective as hiring a PEO, using just one (or the right combination of services) will likely save you some money in the long run. ## Why You Should Trust Us Investopedia collected and analyzed a wide range of key data points from several PEO companies to identify the most important factors for readers choosing the right provider to suit their needs. We used this data to review each company for their services offered, availability, pricing, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best PEO service since 2020. ## Frequently Asked Questions * ### What Are Typical PEO Services? A PEO typically provides any of these basic services: Payroll processing, human resources administration, employee benefits, risk and compliance, workers' compensation, employee training, and talent development. However, not all PEOs offer or specialize in the services your business may require, so it’s crucial to adequately vet each company’s options. * ### Is a PEO Worth It for a Small Business? Whether or not a PEO will be worth it for a small business will depend on the business owner's needs as well as the company's resources and size. Not every small business owner is qualified or experienced enough to handle all of the HR functions of their growing company, and some businesses may not have sufficient room in their budgets to put together dedicated HR departments. Not to mention the fact that a business owner may simply not have the bandwidth to handle HR responsibilities on their own, given how time consuming these can be. So if you have a decent number of employees and sufficient funds to afford the monthly payments, then a PEO may make sense for your small business. * ### What Companies Should Use a PEO? Most PEO companies require a minimum number of employees, so companies with fewer employees will not have a need for—or be able to hire—a PEO company. Once a company has sufficiently grown, a PEO will be able to provide valuable products and services. * ### How Do I Choose a PEO? In order to choose the best PEO for your business, you first must understand your company's needs and determine whether a PEO is the right way to address them. The size of your business operations and your plans for future growth will likely be the two biggest factors you'll have to weigh during this step. Next, shop around for PEOs until you find a few that suit your needs. Finally, to help narrow down your list of options, try to find the answers to the following questions for each company: Is it a member of NAPEO? Is it IRS certified? Does a CPA independently audit its financial statements? Have its practices been independently accredited by ESAC? If the answer to all of these is yes for a given company, then it's a good option. Before you make your final decision, make certain you understand how employee benefits will be funded and tailored, and don't forget to review the service agreement carefully. * ### How Do PEOs Make Money? PEOs make money by billing you, the business owner, in exchange for handling the administrative services they provide. Depending on the company, a PEO will typically charge either a percentage of your total gross payroll or per employee. * ### What Is the Largest PEO in the US? Based in Miami, Florida, ADP has the largest PEO service in the U.S., in addition to the largest one in the world. The company employed 41 million workers across 140 countries in June of 2023, and it made over $18 billion in revenue for the year. * ### What Are the Negatives of PEO? While it can be cost effective for a growing business to outsource HR responsibilities to a PEO service, there are some downsides to consider as well. Hiring a PEO typically involves outsourcing employee administration tasks. As a result, you'd lose control over certain aspects of your company, particularly regarding employee paperwork. Additionally, depending on whether the vendor's system is particularly vulnerable to cyber-attacks, hiring a PEO can potentially present a security issue. An outside company can also influence your company culture. While this wouldn't necessarily be a bad thing, it may have unexpected consequences that alter the professional link between you and your employees (also known as your employment relationship). ## How We Pick the Best PEO Services There are a multitude of PEOs operating today, but very few are worth their weight. To begin, we look to the industry leaders for their expert ratings and results. The [National Association of Professional Employer Organizations](https://www.napeo.org/) has been an invaluable resource in researching and uncovering the best secrets regarding today’s top PEO services. The Employer Services Assurance Corporation (ESAC) and the Internal Revenue Service (IRS) recognize PEOs of superior caliber with official ratings and accreditations that serve as a sign of reliability and customer satisfaction. Additionally, we analyze hundreds of real customer reviews, learning about actual customer experience, service offerings, and provider performance. Through our research, we ensure that each provider demonstrates best practices, meeting specific financial, state, and regulatory guidelines to best guide you and your business down the path of success. :max_bytes(150000):strip_icc()/GettyImages-1022084946-793c713d923a4e3dad19a8312b9840ec.jpg) :max_bytes(150000):strip_icc()/GettyImages-1022084946-793c713d923a4e3dad19a8312b9840ec.jpg) LaylaBird / GettyImages Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. TriNet. "[Frequently Asked Questions](https://www.trinet.com/faqs)." 2. TriNet. "[Our Locations](https://www.trinet.com/locations/)." 3. Internal Revenue Service. “[List of CPEOs](https://www.irs.gov/pub/irs-utl/list-of-cpeos.pdf),” Page 2. 4. Paychex. "[About Paychex](https://www.paychex.com/corporate)." 5. Paychex. "[Paychex Locations Near You](https://www.paychex.com/locations)." 6. Insperity. "[About Insperity](https://www.insperity.com/about-us/)." 7. Insperity. "[Discover a Different Kind of HR Company in Kingwood](https://www.insperity.com/about-us/locations/office/corporate-headquarters-houston/)." 8. Insperity. "[Insperity Locations](https://www.insperity.com/about-us/locations/)." 9. INFINITY HR. "[About](https://www.infinitihr.com/about/)." 10. LinkedIn. "[INFINITI HR](https://www.linkedin.com/company/infiniti-hr)." 11. LinkedIn. "[ADP](https://www.linkedin.com/company/adp)." 12. ADP. "[Who We Are](https://www.adp.com/about-adp.aspx)." 13. LinkedIn. "[Justworks](https://www.linkedin.com/company/justworks-)." 14. Justworks. "[Our Team](https://www.justworks.com/about/our-team)." 15. Internal Revenue Service. "[About the Voluntary Certification Program for Professional Employer Organizations (CPEOs)](https://www.irs.gov/tax-professionals/about-certified-professional-employer-organization)." 16. Internal Revenue Service. "[Voluntary Certification Program for Professional Employer Organizations (CPEOs)](https://www.irs.gov/tax-professionals/certified-professional-employer-organization)." 17. U.S. Equal Employment Opportunity Commission. "[CM-631: Employment Agencies](https://www.eeoc.gov/laws/guidance/cm-631-employment-agencies)." 18. ADP. "[What Is a Payroll Service Provider?](https://www.adp.com/resources/articles-and-insights/articles/w/what-is-a-payroll-service-provider.aspx)" 19. NAPEO. "[Guidelines for Choosing a PEO](https://www.napeo.org/what-is-a-peo/selecting-a-peo/guidelines-for-choosing-a-peo)." 20. Justworks. "[What Is a PEO, and How Can It Help Your Small Business Grow?](https://www.justworks.com/blog/whats-a-peo#what-is-a-peo)" 21. U.S. Securities and Exchange Commission. "[Automatic Data Processing Form 10-K: June 30, 2023](https://www.sec.gov/ix?doc=/Archives/edgar/data/0000008670/000000867023000030/adp-20230630.htm)." 22. ADP. "[ADP Reports Fourth Quarter and Fiscal 2023 Results; Provides Fiscal 2024 Outlook](https://s23.q4cdn.com/483669984/files/doc_earnings/2023/q4/earnings-result/ADP-4Q23-Earnings-Release.pdf)," Page 5. 23. SHRM. "[What Is a PEO? What Are Its Advantages and Disadvantages?](https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/whatisapeoanditsadvantagesanddisadvantages.aspx)" Related Articles [![Best Payroll Software]() :max_bytes(150000):strip_icc()/GettyImages-137552478-c047fffa66434c5fbd5708c4681bd390.jpg) The Best Payroll Software for 2024](https://www.investopedia.com/best-payroll-software-5088638) [![Young man working in his small business]() :max_bytes(150000):strip_icc()/Primary-Image-best-small-business-insurance-4844202-ca360bdfebb84479996490546fffc4f2.jpg) Best Small Business Insurance Companies for May 2024](https://www.investopedia.com/best-small-business-insurance-4844202) [![Female pharmacist sitting on chair and holding coffee, talking with female colleague during break]() :max_bytes(150000):strip_icc()/GettyImages-14343635291-33bf053f368c43f6a792e94775285bbd.jpg) Healthcare Options for Small Businesses: A Comprehensive Guide](https://www.investopedia.com/health-care-options-for-small-businesses-8584711) [![A man with a close-cropped beard seated at a desk writes on a notepad. 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A professional employer organization (PEO) is a company that small businesses can hire to manage human resources and other administrative functions on their behalf. A strong PEO provider is one that can scale with a growing business, provide an array of useful benefits, and offer a reasonable price for its services. A PEO should also ensure you remain compliant with federal and state employment laws, so a provider with plenty of experience and a good reputation is also a must. According to our research, TriNet offers the best overall PEO service due to its accessibility, contract customization, and industry-specific support. We looked at over 15 PEO providers and then narrowed our field down to companies accredited by the Employer Services Assurance Corporation (ESAC) and the Internal Revenue Service (IRS). We spent hundreds of hours researching and evaluating PEO companies based on third-party ratings and customer feedback to bring you the best PEO services for different types of businesses or needs. Best PEO Services of May 2024 Best for Industry-Specific Services: TriNet Best for Support: Paychex Best for Small Businesses: Insperity Best for Large Businesses: INFINITI HR Best for Customer Service: ADP TotalSource Best for Benefits: Justworks Best PEO Services of May 2024 Expand Best PEO Services of May 2024 Our Top Picks TriNet Paychex Insperity INFINITI HR ADP TotalSource Justworks See More (3) The Bottom Line What Is a Certified PEO? PEO Alternatives Why You Should Trust Us FAQs Methodology Best for Industry-Specific Services : TriNet  TriNet Minimum no. employees: FiveAvailability: NationwidePricing: Ranges from $80 to $600 per employee per month Sign Up Now Why We Chose It TriNet not only tailors itself to specific industries, but business owners have a dedicated phone call center with experts from their specific industry, making it our choice for the best industry-specific services. Pros & Cons Pros Excellent accessibility Customized contracts Industry-specific support Extensive trends and insights resource center Cons Only offers service bundles instead of à la carte Five-employee minimum Overview TriNet offers a standard, straightforward plan that bundles payroll services, employee benefits, HR administration, and risk management. It’s not the best option if you’re looking for singular services, but for an expanding business that needs support, it can be invaluable. Customer service is available via email, phone, and online chat, and you will also have your HR expertise call center for more specific inquiries. Services include: Workers' compensation Payroll processing  Human resources administration  Risk management and compliance Employee benefits  Retirement plans and 401(k) options  Many PEOs on our list will give you a support rep or even a whole team to offer assistance when you need it. However, TriNet takes it one step further, curating a personal team of professionals from your industry so you always receive superior expert advice. This is what earns it our top pick for specialized industries. For the growing small business, TriNet provides invaluable support and expertise that can be very hard to find elsewhere.  The many tailored industries that TriNet works with include: Advertising and marketingConsultingFinancial ServicesLife sciencesManufacturing and wholesaleNonprofit HRRetail Technology TriNet offers per-employee pricing that matches the size of your business. You will have to sign a contract, but contracts may vary, giving you some flexibility on the length. A representative can work with you to create a more customized contract that works best for you. Originally founded in 1988, TriNet is headquartered in Dublin, California, and has branches in 10 additional states as well as India. Best for Support : Paychex Paychex Minimum no. employees: FiveAvailability: U.S. Nationwide and Northern EuropePricing: Yearly contracts, submit request for pricing Sign Up Now Why We Chose It An established and stable PEO, Paychex is our pick as best for support because it is the perfect autonomous partner that every business owner needs to help manage their employees and will not only work for your team members but with them, offering personal customer support. Pros & Cons Pros Option of onsite HR managers Personalized risk assessment and management Enormous online resource center Cons Systems could use some updating Overview An established and stable PEO, Paychex works directly with employees for HR support, instead of working as a middleman. That makes it better able to assess a company and provide in-depth risk management services. If you work with Paychex as your PEO, you’ll benefit from a payroll account manager and human resource generalist. It makes customer service an enjoyable and reliable experience, no matter the company’s size. These services all help Paychex stand out from the competition. Online processing simplifies the payroll process, and Paychex outsources office management support if needed. If not, there is also the option to sign up for à la carte services. Paychex offers the following services for businesses: Payroll processingRetirement servicesInsuranceOutsourced HR servicesOutsourced employee benefits (HSA, FSA, HRA)401(k) plans Paychex provides access to a multitude of resources addressing all facets of a business. Owners can focus their attention on growing the business while Paychex steps in to handle payroll, taxes, and compliance. Employee benefits packages are extensive, including health insurance, retirement, vision insurance, dental insurance, and even employee wellness options. Pricing is assessed on a per-employee basis with a five-employee minimum. Contracts are priced for a year, a reasonable fit for growing businesses, and a no-brainer for larger corporations. Despite its name, Paychex offers more than basic services and will do payroll taxes as well. Paychex is IRS-certified and accredited by the ESAC. Originally founded in 1971, Paychex is headquartered in Rochester, New York, and has branches in 37 additional states as well as Denmark and Germany. Best for Small Businesses : Insperity  Insperity Minimum no. employees: FiveAvailability: NationwidePricing: Information not available online Sign Up Now Why We Chose It Insperity is our pick for the best small business PEO because it has the experience to adapt itself to the needs of small business owners and help guide their growth. Pros & Cons Pros Enormous library of online training resources Customized plans Cons Minimum of five employees No pricing online Overview Scalability is a crucial feature for any PEO, as services designed to meet the HR needs of a massive corporation with thousands of employees would be overkill for a smaller company. Insperity offers the guiding hand that small businesses need as they grow and expand. Services available from Insperity include: Payroll processingEmployee benefitsHuman resources administrationRisk managementExtensive training resourcesWorkers’ compensationEmployee support and onboardingGovernment compliance supportTech services Your dedicated team will include an HR services manager, HR specialist, payroll specialist, performance specialist, client liaison, and safety consultant for some of the best support you’ll find anywhere from a PEO. There is fantastic accessibility, with the company offering stellar apps for both iOS and Android platforms. It gives you the option to stay plugged in and in touch even when you are on the go. Insperity manages to do it all and still maintains high levels of customer support for all of your questions and troubleshooting needs. For more details on pricing, you will need to call in and speak with a representative for a personalized quote. Insperity is accredited by the ESAC and IRS for extra peace of mind. Originally founded in 1986, Insperity is headquartered in Kingwood, Texas, and has over 90 branches across 34 states and the District of Columbia. Best for Large Businesses : INFINITI HR  Infiniti HR Minimum no. employees: TwoAvailability: NationwidePricing: Information not available online Sign Up Now Why We Chose It INFINITI HR is our pick for the best PEO for large businesses because it is the first PEO created specifically for franchises and hotel management, places a sharp focus on growing your business, and offers specialized recruitment services that are rarely seen with a PEO. Pros & Cons Pros Franchise-friendly Customizable format Recruitment support À la carte services Cons Slow on mobile apps and tech May be too much for smaller businesses Newer company Overview INFINITI HR has extensive experience in working with some of the country’s most popular franchises and largest hotel brands, including Choice Hotels International, Best Western, Hyatt, and Senior Helpers. INFINITI HR allows businesses to personalize services with the option to pick and choose services for a custom bundle. It separates major services like HR support and payroll so you can opt for one without being stuck with the other. It’s the kind of flexibility that large enterprises often look for when converting to a new provider.  A unique feature is its recruitment services, which help to keep companies stacked with the top talent they need to keep growing. INFINITI HR offers several options for large businesses: Payroll servicesTax filingHR management, by stateEmployee benefitsWorkers’ compensationCompliance support INFINITI HR offers many attractive employee perks, such as the full bouquet of health, dental, vision, and life insurance. Other benefits include unemployment, workers’ compensation, and liability claims support. For business owners, there are support services available, such as state-specific HR systems with on-demand consulting services and compliance and risk management. For those focused on growth, there is even recruitment outsourcing services available to scout out talent and advance teams. INFINITI HR is still very much the new kid on the block, but it packs a punch with all the services it offers. It is the official premium supplier for the International Franchise Association (IFA). INFINITI HR is a PEO that is franchise-friendly with services designed for the needs of a growing empire. Originally founded in 2008, INFINITI HR is headquartered in Burtonsville, Maryland. Best for Customer Service : ADP TotalSource  ADP TotalSource Minimum no. employees: FiveAvailability: InternationalPricing: Must speak to a rep for pricing Sign Up Now Why We Chose It ADP consistently delivers stellar customer service, even though it is one of the largest PEO providers today, and provides flexibility that works for companies of all kinds and sizes, which is why ADP TotalSource is our pick for the best customer service. Pros & Cons Pros Self-service payroll for employees Advanced HR software and tools Cons Must speak to a rep for pricing May seem too large to smaller companies Overview ADP TotalSource is a powerhouse, serving as one of today’s biggest PEOs in over 140 countries. It has made a name for itself with exceptionally good customer service. Multiple chat options include email, phone, and live chat, so you can always find help when you need it. ADP specializes in some specific industries: ConstructionEducationFinancial servicesGovernmentRetailHealthcareHospitality and restaurantsManufacturingNonprofitProfessional servicesTechnical services ADP also offers top-rated HR programs, with the company emerging as an industry leader in tech and customer support. Staff are also likely to appreciate the employee self-service payroll system that gives them more autonomy over their earnings. If a computer is not available, the mobile app will help take care of all business needs. There are also optional benefits that include medical, dental, and vision insurance, in addition to 401(k) plans. These are offered through some of the nation’s best providers, as ADP holds some pretty impressive partnerships. You will need to speak with a customer service representative before receiving pricing. However, this is a company built around small and medium-sized businesses, adapting its plans to best suit these particular needs. There are likely to be more services than startups need right now, but it only lights the way for all that’s to come. ADP is headquartered in Roseland, New Jersey, and has been in business for over 70 years. Best for Benefits : Justworks  Justworks Minimum no. employees: TwoAvailability: NationwidePricing: Ranges from $59 to $99 per employee per month Sign Up Now Why We Chose It Justworks is our pick for the best PEO for benefits because it allows small businesses to enjoy perks that are typically only available to larger businesses. It lets small businesses benefit from advanced perks, like expanded service options, and optional add-on benefits. Pros & Cons Pros Upfront pricing 24/7 customer service Cons Relatively new PEO Basic training services Overview Justworks prioritizes affordability with transparent pricing, gives dedicated account support, and offers expanded customer service options. The standard Justworks contract will include payroll processing and HR administration, in addition to compliance and employee benefits. If you have a question or need help with a topic, customer service is standing by 24/7 via phone, email, online chat, Slack, or SMS text. Justworks is also the only PEO to openly display its pricing, offering these rates. Plan Services Cost Basic Payroll, HR, Benefits, Compliance $59 per month per employee;$49 per month for your 50th employee onwards Plus With medical, dental, and vision insurance $99 per month per employee;$89 per month for your 50th employee onwards You have the option to pay monthly if that fits into the budget better. Justworks, which is headquartered in New York City, has been around since 2012 and is accredited by the ESAC. The Bottom Line While all of these PEO companies are excellent options, TriNet is our pick for industry-specific because it curates a personal team of professionals from your industry for expert advice. It provides invaluable support and expertise that can be very hard to find elsewhere. If you've just started your business and need a PEO that's better suited to a smaller scale, Insperity provides excellent support with the accessibility that a startup needs. Company Minimum no. employees Availability Pricing TriNetBest for Industry-Specific Services Five  Nationwide Ranges from $80 to $600 per employee per month InsperityBest for Small Businesses Five Nationwide No pricing online INFINITI HRBest for Large Businesses Two Nationwide No pricing online ADP TotalSourceBest for Customer Service Five International Must speak to a rep for pricing PaychexBest for Support Five U.S. Nationwide and Northern Europe Yearly contracts, submit request for pricing JustworksBest for Benefits Two Nationwide Ranges from $59 to $99 per employee per month What Is a Certified PEO? A Certified Professional Employer Organization, or CPEO, is a PEO that voluntarily applied to be certified by the IRS. Being certified means that a PEO meets the CPEO program's meticulous background, experience, business location, financial reporting, tax compliance, and bonding requirements. You can verify a PEO's certification status by checking the IRS' CPEO Public Listings, which includes a full list of currently certified CPEOs as well as former CPEOs whose certification has been suspended or revoked. In order to qualify for a CPEO certification, a PEO must meet the following requirements: Be a business entityHave at least one physical business location within the United StatesHave a history of financial responsibility, organizational integrity, and tax compliance (federal, state, and local)Be managed by individuals (a majority of whom are U.S. citizens or residents) who have knowledge or experience regarding federal and state employment tax compliance and business practices relating to those compliance requirements PEO Alternatives While a PEO can provide valuable services to most companies, this type of outsourcing won't be the right solution for every business. Fortunately, a few alternatives are available that may suit your and your company's needs better. Administrative service offering (ASO): An administrative service offering, sometimes referred to as administrative services only, is an agreement wherein a company funds its employee benefit plan but hires an outside vendor to administer it. The biggest difference between an ASO and a PEO is that the latter locates third-party partners and lets you pick from their selection. In contrast, you have total control over which third-party partners you outsource to with an ASO. Human resources outsourcing (HRO): Also known as business process outsourcing, an HRO involves subcontracting various business-related operations to third-party vendors. Like an ASO, you choose the third-party partners you want to subcontract under an HRO arrangement. Partial HR solutions: If you don't require the full suite of services that a PEO can provide, then there are a few smaller-scale options worth considering. An employment agency, for example, can handle the locating and hiring of new employees, and a payroll service provider could be employed to ensure your company's payroll is correctly processed. While using several of these services in tandem might not be as cost effective as hiring a PEO, using just one (or the right combination of services) will likely save you some money in the long run. Why You Should Trust Us Investopedia collected and analyzed a wide range of key data points from several PEO companies to identify the most important factors for readers choosing the right provider to suit their needs. We used this data to review each company for their services offered, availability, pricing, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best PEO service since 2020. Frequently Asked Questions What Are Typical PEO Services? A PEO typically provides any of these basic services: Payroll processing, human resources administration, employee benefits, risk and compliance, workers' compensation, employee training, and talent development. However, not all PEOs offer or specialize in the services your business may require, so it’s crucial to adequately vet each company’s options. Is a PEO Worth It for a Small Business? Whether or not a PEO will be worth it for a small business will depend on the business owner's needs as well as the company's resources and size. Not every small business owner is qualified or experienced enough to handle all of the HR functions of their growing company, and some businesses may not have sufficient room in their budgets to put together dedicated HR departments. Not to mention the fact that a business owner may simply not have the bandwidth to handle HR responsibilities on their own, given how time consuming these can be. So if you have a decent number of employees and sufficient funds to afford the monthly payments, then a PEO may make sense for your small business. What Companies Should Use a PEO? Most PEO companies require a minimum number of employees, so companies with fewer employees will not have a need for—or be able to hire—a PEO company. Once a company has sufficiently grown, a PEO will be able to provide valuable products and services. How Do I Choose a PEO? In order to choose the best PEO for your business, you first must understand your company's needs and determine whether a PEO is the right way to address them. The size of your business operations and your plans for future growth will likely be the two biggest factors you'll have to weigh during this step.Next, shop around for PEOs until you find a few that suit your needs. Finally, to help narrow down your list of options, try to find the answers to the following questions for each company: Is it a member of NAPEO? Is it IRS certified? Does a CPA independently audit its financial statements? Have its practices been independently accredited by ESAC? If the answer to all of these is yes for a given company, then it's a good option.Before you make your final decision, make certain you understand how employee benefits will be funded and tailored, and don't forget to review the service agreement carefully. How Do PEOs Make Money? PEOs make money by billing you, the business owner, in exchange for handling the administrative services they provide. Depending on the company, a PEO will typically charge either a percentage of your total gross payroll or per employee. What Is the Largest PEO in the US? Based in Miami, Florida, ADP has the largest PEO service in the U.S., in addition to the largest one in the world. The company employed 41 million workers across 140 countries in June of 2023, and it made over $18 billion in revenue for the year. What Are the Negatives of PEO? While it can be cost effective for a growing business to outsource HR responsibilities to a PEO service, there are some downsides to consider as well. Hiring a PEO typically involves outsourcing employee administration tasks. As a result, you'd lose control over certain aspects of your company, particularly regarding employee paperwork.Additionally, depending on whether the vendor's system is particularly vulnerable to cyber-attacks, hiring a PEO can potentially present a security issue. An outside company can also influence your company culture. While this wouldn't necessarily be a bad thing, it may have unexpected consequences that alter the professional link between you and your employees (also known as your employment relationship). How We Pick the Best PEO Services There are a multitude of PEOs operating today, but very few are worth their weight. To begin, we look to the industry leaders for their expert ratings and results. The National Association of Professional Employer Organizations has been an invaluable resource in researching and uncovering the best secrets regarding today’s top PEO services. The Employer Services Assurance Corporation (ESAC) and the Internal Revenue Service (IRS) recognize PEOs of superior caliber with official ratings and accreditations that serve as a sign of reliability and customer satisfaction. Additionally, we analyze hundreds of real customer reviews, learning about actual customer experience, service offerings, and provider performance. Through our research, we ensure that each provider demonstrates best practices, meeting specific financial, state, and regulatory guidelines to best guide you and your business down the path of success. LaylaBird / GettyImages Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. TriNet. "Frequently Asked Questions." TriNet. "Our Locations." Internal Revenue Service. “List of CPEOs,” Page 2. Paychex. "About Paychex." Paychex. "Paychex Locations Near You." Insperity. "About Insperity." Insperity. "Discover a Different Kind of HR Company in Kingwood." Insperity. "Insperity Locations." INFINITY HR. "About." LinkedIn. "INFINITI HR." LinkedIn. "ADP." ADP. "Who We Are." LinkedIn. "Justworks." Justworks. "Our Team." Internal Revenue Service. "About the Voluntary Certification Program for Professional Employer Organizations (CPEOs)." Internal Revenue Service. "Voluntary Certification Program for Professional Employer Organizations (CPEOs)." U.S. Equal Employment Opportunity Commission. "CM-631: Employment Agencies." ADP. "What Is a Payroll Service Provider?" NAPEO. "Guidelines for Choosing a PEO." Justworks. "What Is a PEO, and How Can It Help Your Small Business Grow?" U.S. Securities and Exchange Commission. "Automatic Data Processing Form 10-K: June 30, 2023." ADP. "ADP Reports Fourth Quarter and Fiscal 2023 Results; Provides Fiscal 2024 Outlook," Page 5. SHRM. "What Is a PEO? What Are Its Advantages and Disadvantages?" Related Articles The Best Payroll Software for 2024 Best Small Business Insurance Companies for May 2024 Healthcare Options for Small Businesses: A Comprehensive Guide Best Accounting Software for Small Businesses for May 2024 The Best Small Business Loans for Bad Credit for May 2024 Best Small Business Bank Accounts for May 2024 Related Terms Professional Employer Organization (PEO): Overview A professional employer organization (PEO) is a human resources company that works with small businesses to help them handle administrative, payroll, and other functions. more What Is Payroll, With Step-by-Step Calculation of Payroll Taxes Payroll is the compensation a business must pay to its employees for a set period or on a given date. Read about payroll accounting here. more Enterprise Resource Planning (ERP): Meaning, Components, and Examples Enterprise resource planning (ERP) is software used by a company to manage key parts of operations, including accounting and resource management. more Overhead: What It Means in Business, Major Types, and Examples Overhead refers to the ongoing business expenses not directly attributed to creating a product or service. more Entrepreneur: What It Means to Be One and How to Get Started Entrepreneurs create new businesses, taking on all the risks and rewards of their company. Learn about entrepreneurship and the challenges facing entrepreneurs. more Passive Income: What It Is and Ideas for 2024 Passive income is earnings from a rental property, limited partnership, or other enterprise in which a person is not actively involved. more

https://www.investopedia.com/best-small-business-bank-accounts-4797849

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> The best small business bank accounts are provided by Chase, Axos, U.S. Bank, LendingClub, and Wells Fargo. They're easily accessible with relatively low fees and minimum balances, along with generous transaction limits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> As of 2021, the most recent year for which there is census data, there were 33.2 million small businesses in the U.S., which amounted to 99.9% of all U.S. businesses.<span class="ql-inline-citation" data-cite="35"></span> If you're one of those small business owners, a business bank account can help you separate your business and personal finances, which is essential for proper bookkeeping. The right accounts give you a way to deposit, hold, and spend money, and some account types enable you to accept credit and debit card payments. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> We chose the checking accounts below based on our research into the small business account landscape. We evaluated accounts on important factors, like fees, minimum balance and deposit requirements, and APYs, to recommend the best products for a variety of circumstances. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Small Business Bank Accounts for May 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Rewards:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=1188344.133&amp;type=3&amp;subid=0" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Chase Business Complete Checking®</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Online Business Checking Account:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=898668.82&amp;type=3&amp;subid=0" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Axos Bank Basic Business Checking</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Brick-and-Mortar Bank:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.tkqlhce.com/click-8366961-15414290" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> U.S. Bank Silver Business Checking</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Interest-Bearing Business Checking Account:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.lendingclub.com/pd/af/business-checking/tailored-checking" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> LendingClub Tailored Checking</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Cash Deposits:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.wellsfargo.com/biz/checking/platinum/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Wells Fargo Navigate Business Checking</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Small Business Bank Accounts for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Small Business Bank Accounts for May 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Small Business Bank Accounts for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Chase Business Complete Checking®" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Chase Business Complete Checking®" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-rewards-chase-business-complete-checking" rel="nocaes"> <span class="link__wrapper">Chase Business Complete Checking®</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Axos Bank Basic Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Axos Bank Basic Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-online-business-checking-account-axos-bank-basic-business-checking" rel="nocaes"> <span class="link__wrapper">Axos Bank Basic Business Checking</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-U.S. Bank Silver Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-U.S. Bank Silver Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-brick-and-mortar-bank-us-bank-silver-business-checking" rel="nocaes"> <span class="link__wrapper">U.S. Bank Silver Business Checking</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-LendingClub Tailored Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-LendingClub Tailored Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-interest-bearing-business-checking-account-lendingclub-tailored-checking" rel="nocaes"> <span class="link__wrapper">LendingClub Tailored Checking</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Wells Fargo Navigate Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Wells Fargo Navigate Business Checking" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-cash-deposits-wells-fargo-navigate-business-checking" rel="nocaes"> <span class="link__wrapper">Wells Fargo Navigate Business Checking</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (2)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Banks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-small-business-bank-accounts" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Banks</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is a Business Bank Account?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-a-business-bank-account" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">What Is a Business Bank Account?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Types of Business Bank Accounts" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-types-of-business-bank-accounts" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Types of Business Bank Accounts</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Pros and Cons of Small Business Bank Accounts" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-and-cons-of-small-business-bank-accounts" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Pros and Cons of Small Business Bank Accounts</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Choose a Business Bank Account" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-a-business-bank-account" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">How to Choose a Business Bank Account</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Apply for a Business Bank Account" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-apply-for-a-business-bank-account" id="mntl-toc__list-item-link_1-0-6" rel="nocaes"><span class="link__wrapper">How to Apply for a Business Bank Account</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-7"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-7"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Alternatives and Additions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternativesadditions-to-small-business-bank-accounts" id="mntl-toc__list-item-link_1-0-7" rel="nocaes"><span class="link__wrapper">Alternatives and Additions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-8"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-8"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Why You Should Trust Us" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-why-you-should-trust-us" id="mntl-toc__list-item-link_1-0-8" rel="nocaes"><span class="link__wrapper">Why You Should Trust Us</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-9"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-9"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-bcd9e579-107b-4ddf-a6f4-b293cc099673" id="mntl-toc__list-item-link_1-0-9" rel="nocaes"><span class="link__wrapper">FAQ</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-10"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-10"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How We Picked the Best Business Bank Accounts" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-picked-the-best-business-bank-accounts" id="mntl-toc__list-item-link_1-0-10" rel="nocaes"><span class="link__wrapper">How We Picked the Best Business Bank Accounts</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-11"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-11"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Learn More" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-guide-to-business-bank-accounts" id="mntl-toc__list-item-link_1-0-11" rel="nocaes"><span class="link__wrapper">Learn More</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-for-rewards-chase-business-complete-checking"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Rewards</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Chase Business Complete Checking®</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 370px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Chase for Business logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/yfH0khXBmfa756GZLT-rLL8y_W4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-Business-logo-1d74e27f90d841b49122bb2a6c881991.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Chase for Business logo" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/yfH0khXBmfa756GZLT-rLL8y_W4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chase-Business-logo-1d74e27f90d841b49122bb2a6c881991.jpg" width="1500"/> </noscript> </div> </div> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Minimum balance</strong>: $0</li><li><strong>APY</strong>: 0%</li><li><strong>Transaction Limits</strong>: Unlimited electronic deposits, ACH, and Chase QuickDeposit</li><li><strong>Fees</strong>: $15 monthly fee, waived with $2,000 daily balance<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Chase" data-retailer-type="other" data-tracking-container="true" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=1188344.133&amp;type=3&amp;subid=0" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> Chase Bank offers several types of business accounts geared to the size of your venture and incentives for signing up. New customers can often get a bonus for opening a business checking account and meeting certain requirements. Chase offers generous rewards-earning credit cards and a huge branch network, too. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-6"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Generous new account bonuses</p></li> <li><p>Big bank features: rewards-earning credit cards, large branch network</p></li> <li><p>Advantages to linking personal accounts</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must meet balance requirement within 30 days for bonus</p></li> <li><p>Balances cannot dip below minimum for 60 days or bonus will be lost</p></li> <li><p>Low transaction limits before fees are charged</p></li> <li><p>Account holder must complete 5 qualifying transactions within 90 days</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> Chase Bank, based in New York City, is the consumer and banking arm of J.P. Morgan Chase, and it has over $2.6 trillion in assets and operations worldwide. It also provides an ATM network of 15,000 ATMs plus more than 4,700 branches. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Its size alone provides big-bank features beneficial to small business owners, such as generous rewards and account bonuses, plus access to brick-and-mortar banks for in-person services around North America. Small business owners can also take advantage of Chase offerings such as small business loans, credit cards, and savings accounts in addition to checking.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-online-business-checking-account-axos-bank-basic-business-checking"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Online Business Checking Account</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Axos Bank Basic Business Checking</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-10" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Axos Bank Banking Evolved logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/yMzDkJd6oNzlJxBFjSVaMu_ozu4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/AxosBankLogo_Large_JPEG1-fbc14d844a024ffbb9728ce67d8b0010.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Axos Bank Banking Evolved logo" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/yMzDkJd6oNzlJxBFjSVaMu_ozu4=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/AxosBankLogo_Large_JPEG1-fbc14d844a024ffbb9728ce67d8b0010.jpg" width="1500"/> </noscript> </div> </div> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> <li><strong>Minimum balance</strong>: $0</li><li><strong>APY</strong>: 0%</li><li><strong>Transaction Limits</strong>: Unlimited debit, credit, and deposited item processing</li><li><strong>Fees</strong>: None<strong><br/></strong></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-12"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Axos" data-retailer-type="other" data-tracking-container="true" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=898668.82&amp;type=3&amp;subid=0" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Axos Bank was designed as a digital bank from its inception in 2000. It's now a publicly traded company with over $18.4 billion in assets. Its Basic Business Checking account is "for the busy business owner with modest checking needs." The account has no monthly service fees and unlimited domestic ATM fee reimbursement. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-16"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No monthly service charges</p></li> <li><p>Unlimited domestic ATM fee reimbursement</p></li> <li><p>First set of 50 checks is free</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No branches/in person interaction</p></li> <li><p>Some accounts, such as interest-bearing checking, come with a fee</p></li> <li><p>More than 50 checks will cost you</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> If you don't need a brick-and-mortar branch to do your banking, this leader in online operations may be a good choice, especially for customers on the go. Axos Bank has a robust mobile app that received 4.4 stars from customers using Android and 4.7 stars from iOS users. You can deposit checks, pay your bills, manage accounts, and transfer funds right from your phone, and all domestic ATM fees are reimbursed. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> Axos Bank has headquarters in California, with offices and affiliate offices in several other states. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-brick-and-mortar-bank-us-bank-silver-business-checking"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Brick-and-Mortar Bank</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> U.S. Bank Silver Business Checking</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-20" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="US Bank" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/Rjc05y-r73aL5xVpjbAjEKXAoSo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/us-bank_3x1-97ff2236b1ed4869b7e98ccccc2b6d6f.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="US Bank" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/Rjc05y-r73aL5xVpjbAjEKXAoSo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/us-bank_3x1-97ff2236b1ed4869b7e98ccccc2b6d6f.png" width="1500"/> </noscript> </div> </div> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> <li><strong>Minimum balance</strong>: $0</li><li><strong>APY</strong>: 0%</li><li><strong>Transaction Limits</strong>: 125 per month; 25 free cash deposit units per month</li><li><strong>Fees</strong>: $2 paper statement fee<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-22"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at U.S. Bank" data-retailer-type="other" data-tracking-container="true" href="https://www.tkqlhce.com/click-8366961-15414290" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> Small business customers are U.S. Bank's specialty. The Silver Business Checking Package has no monthly maintenance fees and allows for up to 125 transactions, which is adequate for many small businesses. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-26"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No monthly fees</p></li> <li><p>No minimum balance requirements</p></li> <li><p>Up to 125 transactions allowed monthly</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>$0.50 charge for each transaction exceeding 125 monthly maximum</p></li> <li><p>Not located in every state</p></li> <li><p>No interest-earning accounts</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> U.S. Bank is America's fifth-largest bank, with nearly 77,000 employees and $587 billion in assets.<span class="ql-inline-citation" data-cite="23"></span> Founded in 1863 and headquartered in Minnesota, it has over 2,000 branches in 26 states across the country. It offers no minimum balance or monthly fees, and allotted monthly transactions go up to 125 for a Silver account. The bank offers gold, platinum, and premium business accounts with a larger allotment of free transactions and deposits, so as your business grows, so can your accounts.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-interest-bearing-business-checking-account-lendingclub-tailored-checking"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Interest-Bearing Business Checking Account</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> LendingClub Tailored Checking</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="LendingClub" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="LendingClub" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>LendingClub</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> <li><strong>Minimum balance</strong>: None; $100 min. opening deposit</li><li><strong>APY</strong>: 1.50% on up to $100,000</li><li><strong>Transaction Limits</strong>: No limit, no per-transaction fees</li><li><strong>Fees</strong>: $10 per month for accounts with less than $500 average balance</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-31"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at LendingClub" data-retailer-type="other" data-tracking-container="true" href="https://www.lendingclub.com/pd/af/business-checking/tailored-checking" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> The LendingClub Tailored Checking account offers an interest rate of 1.50% on balances up to $100,000. Customer benefits include unlimited transactions with no fees, including free ATM withdrawals (it rebates any incurred surcharge) and bill pay. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-35"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Unlimited ATM surcharge rebates</p></li> <li><p>Pays interest (currently 1.50% on balances up to $100,000)</p></li> <li><p>Unlimited no-fee transactions</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No physical branches</p></li> <li><p>No interest on balances under $500</p></li> <li><p>High minimum balance required to waive monthly fee</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> LendingClub offers the same FDIC insurance as traditional brick-and-mortar banks and has over $8 billion in assets.<span class="ql-inline-citation" data-cite="24"></span> Its Tailored Checking account for small businesses is designed to allow accountholders to accrue interest, similar to a savings account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> With unlimited no-fee transactions, unlimited ATM surcharge rebates, and attached cash-back rewards, this account also comes with a full mobile money management system for business on the go. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> LendingClub's corporate headquarters are in San Francisco, California. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-cash-deposits-wells-fargo-navigate-business-checking"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Cash Deposits</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Wells Fargo Navigate Business Checking</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-40" style="--imgWidth: 29px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Wells Fargo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/DMajWvqAZGtbR9baRtKspHaEOmY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wells_Fargo-9dc927e937384c7d9c45cb66ee774600.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Wells Fargo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/DMajWvqAZGtbR9baRtKspHaEOmY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wells_Fargo-9dc927e937384c7d9c45cb66ee774600.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p> Wells Fargo</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> <li><strong>Minimum balance</strong>: None; $25 min. opening deposit</li><li><strong>APY</strong>: Rates not available online</li><li><strong>Transaction Limits</strong>: 250 per month, then $0.50 per transaction; $20,000 in cash deposits per month, then $0.30 per $100 deposited</li><li><strong>Fees</strong>: $25 monthly fee; waived with $10,000 average balance or $15,000 in combined balances<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-42"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Wells Fargo" data-retailer-type="other" data-tracking-container="true" href="https://www.wellsfargo.com/biz/checking/platinum/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> The Wells Fargo Navigate Business Checking account is best for depositing cash because the first 250 transactions and $20,000 in cash deposits per month are included at no extra charge. The bank's wide network of branches and ATMs, plus its strong online and mobile app, allows for flexible and secure banking, and you won't pay fees for most business services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-46"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>High number of monthly transactions allowed</p></li> <li><p>Large branch network</p></li> <li><p>No fees for stop payments, cashier’s checks, and other business services</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>High monthly service charge/high balance to waive fees</p></li> <li><p>$0.50 per item and $0.30 per $100 over transaction limits</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> Founded in 1852, Wells Fargo has grown into the third-largest bank in the U.S., with over $1.7 trillion in assets.<span class="ql-inline-citation" data-cite="26"></span> It's based in San Francisco, California, and has approximately 4,900 locations and more than 12,000 ATMs across the United States. Its Navigate Business Checking account is suitable for small business owners looking to pay no to low fees and access a high number of monthly transactions. Its robust branch network means it is easy to speak in person to a representative about your account concerns, and its newly revamped online banking and mobile app allow you to handle your financial dealings from anywhere. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> As Navigate Business Checking customers grow their business, the bank offers a premium Optimized Business Checking account for larger, more experienced business owners. If you are new to the business world and just starting out, Wells Fargo offers Initiate Business Checking, an account geared towards fledgling small businesses needing digital tools and support. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Chase Bank is our top pick for small business banking. It offers many positive features, including a signing bonus, easy cash deposits, cash-back reward cards, and access to a global banking network. If the minimum balance is too high for you, we recommend Axos Bank Basic Business Checking or U.S. Bank Silver Business Checking for checking accounts with no minimum balance requirement. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-small-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Compare the Best Small Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-3"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th> Bank</th> <th>Minimum Balance</th> <th>APY</th> <th>Transaction Limits</th> <th>Fees</th> </tr> </thead> <tbody data-check="0"> <tr> <td><b>Best for Rewards</b> <a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chase.com/business/banking/checking/business-complete-banking" rel="sponsored nofollow">Chase Business Complete Checking®</a></td> <td>$0</td> <td>0%</td> <td>Unlimited</td> <td>$15 or $0, depending on activities</td> </tr> <tr> <td><b>Best Online Account</b> <a class="null" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=898668.82&amp;type=3&amp;subid=0" rel="sponsored nofollow">Axos Bank Basic Business Checking</a></td> <td>$0</td> <td>$0</td> <td>Unlimited</td> <td>None</td> </tr> <tr> <td><b>Best Brick-and-Mortar Bank</b> <a class="null" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.tkqlhce.com/click-8366961-15414290" rel="sponsored nofollow">U.S. Bank Silver Business Checking Package</a></td> <td>$0</td> <td>$0</td> <td>125 per month, including 25 free cash deposits</td> <td>$2 paper statement fee</td> </tr> <tr> <td><b>Best Interest-Bearing Account</b> <a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://go.radiusbank.com/tailored-checking/" rel="sponsored nofollow">LendingClub Tailored Checking</a></td> <td>$100 opening deposit, no minimum balance</td> <td>1.50% on up to $100,000</td> <td>Unlimited</td> <td>$10 per month with less than $500 balance</td> </tr> <tr> <td><b>Best for Cash Deposits</b> <a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.wellsfargo.com/biz/checking/platinum/" rel="sponsored nofollow">Wells Fargo Navigate Business Checking</a></td> <td>$25 opening deposit, no minimum balance</td> <td>N/A</td> <td>250 per month</td> <td>$25 depending on balances</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-what-is-a-business-bank-account"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> What Is a Business Bank Account? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-banking.asp">business bank account</a> is a bank account designed to meet the needs of a business. Some are designed for self-employed people and small businesses, while others have features more suited to large corporations. And there are many basic, general-purpose accounts in between. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> Business bank accounts are used only for business finances, not personal finances. But you'll need to provide both personal and business information to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-business-bank-account-7152479">open a business bank account</a>. Depending on the account, you may need to show that you own a legitimate business; this could require your business name, Employee Identification Number (EIN), licenses, registration, formation documents, operating agreements, and more. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> Business bank accounts provide many benefits. They allow you to separate business and personal spending, which can protect your personal assets and simplify bookkeeping and tax preparation. Your business will need a certain type of account to accept credit and debit card payments. And a dedicated bank account can also help make your business look more professional. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-types-of-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-8"> <span class="mntl-sc-block-heading__text"> Types of Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> <li><strong>Business checking accounts: </strong>Business checking accounts function <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/checkingaccount.asp">similarly to personal checking accounts</a>.</li> <li><strong>Business savings accounts: </strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-business-savings-accounts-7486188">Business savings accounts</a> function similarly to personal savings accounts. Like any savings account, it pays to look for a high APY while considering the bank's other features.</li> <li><strong>Business CDs: </strong>Like personal CDs, business CDs allow you to earn a fixed rate on a balance for a predetermined period of time, and there are typically early withdrawal penalties.</li> <li><strong>Business money market accounts: </strong>Business money market accounts provide interest on the balance like a savings account, but comes with some features of a checking account, like check-writing ability.</li> <li><strong>Merchant accounts:</strong> A <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/merchant-account.asp">merchant account</a> allows a business to accept and process electronic card transactions.</li> <li><strong>Cash management accounts (CMAs): </strong>A <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cash-management-account-vs-brokerage-account-7498122">cash management account</a> combines the features of checking, savings, and investment accounts.</li> <li><strong>Commercial accounts:</strong> <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercial-account.asp">Commercial accounts</a> are any kind of account used by a corporation or other business; they're usually checking or other demand deposit accounts.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-10"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Business bank accounts don't usually come in specific "types" for certain kinds of businesses. There isn't a common, designated account type for LLCs, for example (although some banks may offer "LLC bank accounts"). But different business bank accounts come with different features and restrictions, making some better for certain businesses than others.</p><p>Bank accounts that are most attractive to LLCs, for example, do more than just allow you to keep personal and business expenses separate. They also usually come with features to help you keep tabs on revenue and expenses, and tools to make tax season easier. Sole proprietors may be more interested in accounts that are as light as possible on fees, with features that can help save money.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-pros-and-cons-of-small-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Small Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-12"> <span class="mntl-sc-block-subheading__text"> Pros </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> <li><strong>Business-oriented features: </strong>Small business accounts offer services that personal accounts do not, such as allowing employees to handle daily business transactions and merchant services with business debit cards. Certain accounts may also include small-business benefits like free business checks, new account bonuses, and access to lines of credit and business credit cards.<span class="ql-inline-citation" data-cite="30"></span></li> <li><strong>Separates business and personal expenses:</strong> If you own a small business, having a separate account for your personal and business funds can be helpful. It can also simplify tax time.</li> <li><strong>FDIC-insured:</strong> At participating banks, the FDIC insures <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/110915/does-fdic-cover-business-accounts.asp">$250,000 of your business bank deposits</a> in the event of bank failure.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-14"> <span class="mntl-sc-block-subheading__text"> Cons </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-15"> <li><strong>Fees may apply:</strong> As with personal bank accounts, fees that typically range from $12 to $30 per month may apply in a variety of situations, including transaction fees.<span class="ql-inline-citation" data-cite="31"></span> Depending on the bank, monthly fees may be waived if you meet specific requirements, like minimum balance requirements.</li><li><strong>More paperwork than personal accounts:</strong> To set up a bank account, you may need to provide your business license, Employer Identification Number (EIN), and any formation documents and ownership agreements.</li><li><strong>Many don’t earn interest:</strong> It’s unusual to find a small business checking account accumulating interest, even among the best small business accounts.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-16"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Thinking about starting a business? See the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-llc-filing-companies-5113499">best LLC filing services</a> to check prices and options.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-how-to-choose-a-business-bank-account"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-17"> <span class="mntl-sc-block-heading__text"> How to Choose a Business Bank Account </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-18"> Compare business bank accounts based on these features to find an account that fits your financial situation.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-19"> <li><strong>Minimum required balance: </strong>Some banks have no minimum required balance, while others may require $25 or $100, for example. In some cases you'll find a minimum opening deposit, but no minimum required ongoing balance.</li> <li><strong>Monthly fees: </strong>Bank accounts often come with monthly service fees but they usually provide ways to waive them, such as by maintaining a certain account balance or having a certain amount of deposits per month.</li> <li><strong>Other fees: </strong>Check the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank-fees.asp">other fees associated with the account</a>, such as ATM fees, electronic transfer fees, check fees, and paper statement fees.</li> <li><strong>Relationship management tools: </strong>A trusted business banking relationship manager to handle your accounts and make recommendations can be invaluable.</li> <li><strong>Online and mobile tools:</strong> Having quick and easy access to your accounts—with an intuitive, modern interface—can help you keep an eye on your business and move fast when necessary.</li> <li><strong>Business software integration: </strong>Easily connecting your business software to your bank accounts can simplify daily operations and tax season.</li> <li><strong>Access to credit:</strong> Access to credit is vital for many businesses. A 2023 McKinsey study found that 39% of small and medium-sized businesses that were likely to switch banks cited easier access to credit as a primary reason.<span class="ql-inline-citation" data-cite="34"></span></li> <li><strong>ATM network: </strong>Pay attention to the ATM network used by the bank, and ensure you'll have access to in-network ATMs if necessary.</li> <li><strong>State availability:</strong> Many online bank accounts are available nationwide, but it's worth checking.</li> <li><strong>Branch availability:</strong> Although many excellent bank accounts can be found online, in-person banking may be a priority to some.</li> <li><strong>APY: </strong>Most business checking accounts don't offer much or any <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apy.asp">interest</a>, although business interest checking accounts do exist. But if earning interest is important to you, see the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-business-savings-accounts-7486188">best high-yield business savings accounts</a> to see the highest available rates.<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-whatyouneedtoknow mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-20"> <h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> By the Numbers</h3><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p><strong>By the Numbers:</strong> The same 2023 McKinsey study mentioned above found that most small and medium-sized businesses prefer banks over credit unions and nonbanks. When asked about their top three reasons for choosing a primary bank (one that holds at least 40% of the business' deposits), 47% of businesses said "robust relationship management/servicing", 42% said "online and mobile tools available," and 35% said "integration with business operations software and SaaS." Physical proximity to the bank was relatively unimportant, except for businesses with less than $1 million in annual revenue; 50% of those businesses said physical proximity was one of their three most important considerations.<span class="ql-inline-citation" data-cite="34"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-whatyouneedtoknow mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-how-to-apply-for-a-business-bank-account"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-21"> <span class="mntl-sc-block-heading__text"> How to Apply for a Business Bank Account </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-22"> Once you're ready to make a decision, you can follow these steps to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-business-bank-account-7152479">open a business bank account</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ol class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-23"> <li><strong>Investigate your account of choice in detail:</strong> Take the time to understand the fees and policies of the account, like deposit and withdrawal limits.<br/></li><li><strong>Gather business documents:</strong> You'll need to verify personal information, and business information that may include your business name and EIN, other registered DBA names, licenses, registration, and ownership agreements. LLCs may need articles of organization, operating agreements, etc.<br/></li><li><strong>Apply for the account:</strong> You may be able to apply online, over the phone, or in person.</li><li><strong>Fund the account:</strong> Depending on the account type, you may need to make a specific minimum opening deposit (such as for a savings account) as part of the terms, or to earn the best rate.</li><li><strong>Close old account, if necessary: </strong>If you have a former account you no longer need, transfer out the funds and consider closing it to avoid mistaken charges and potential fraud.</li> </ol><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-alternativesadditions-to-small-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-24"> <span class="mntl-sc-block-heading__text"> Alternatives/Additions to Small Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-25"> <span class="mntl-sc-block-subheading__text"> Credit Unions </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-26"> Federal credit unions and local credit unions might be a decent alternative to traditional banks for small business owners. Membership is required at credit unions, though it’s often relatively easy to become a member. A credit union’s small business accounts may offer lower fees on deposit accounts and pay higher interest, compared to a traditional bank, while also offering $250,000 in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua-insured-institution.asp">NCUA insurance</a>.<span class="ql-inline-citation" data-cite="32"></span>   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-27"> <span class="mntl-sc-block-subheading__text"> Business Payment Apps </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-28"> Business payment apps and devices like Stripe, Square, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="sponsored nofollow">Quickbooks Online Mobile</a>, and Google Pay for Business process business transactions securely. However, many apps must still integrate with your current bank or work with underlying banks to provide FDIC protection.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-29"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>Not only does separating your business and personal finances help you stay organized, but it may also make you appear more professional and established to your clients. Clients will pay your business directly instead of sending payments to your personal account. </p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-30"> <span class="mntl-sc-block-subheading__text"> Online Lenders </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-31"> Around one-third of small businesses use fintechs and online lenders for borrowing. Online lenders may offer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-working-capital-loans-7373488">working capital loans</a> and merchant cash advances. However, some businesses have reported frustration with understanding loan terms, as business lenders aren’t required to disclose loan terms in the same way as personal loan lenders.<span class="ql-inline-citation" data-cite="33"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-you-should-trust-us"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-32"> <span class="mntl-sc-block-heading__text"> Why You Should Trust Us </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-33"> Investopedia collected key data points from banks to identify the most important factors for readers who want to open a business bank account. We used this data to review each account for minimum required balance, APY, fees, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best small business bank accounts since 2020. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-34"> <span class="heading-toc" id="toc-faq-bcd9e579-107b-4ddf-a6f4-b293cc099673"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">Which Bank Is Best to Open a Business Account?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chase.com/business/banking/checking/business-complete-banking" rel="sponsored nofollow">Chase Business Complete Checking Account</a> is our top-rated business bank account for rewards, since you can often find a hefty <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chase-bank-promotions-7099363">new account bonus</a> as an incentive to sign up. While it does charge a monthly maintenance fee, Chase will waive this fee if you maintain an average daily balance of at least $2,000. Other top picks include the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=898668.82&amp;type=3&amp;subid=0&amp;u1=nd25d9c1990a4455182cbb78a28b5c47018-4797849" rel="sponsored nofollow">Axos Bank Basic Business Checking</a>, if you’re looking for a purely online account; the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://go.radiusbank.com/tailored-checking/" rel="sponsored nofollow">LendingClub Tailored Checking</a> account is excellent if you want to earn interest; and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://www.wellsfargo.com/biz/checking/platinum/" rel="sponsored nofollow">Wells Fargo’s Navigate Business Checking</a> is good for cash deposits.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Is the Difference Between a Business and a Personal Bank Account?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Although business and personal bank accounts are similar in many ways, they have their differences. A business bank account has more requirements to open than a personal account; its fees and required balances are often higher, but its interest rates are lower than a personal account. Since a business bank account represents the business and not a person, authorized signers can be added or removed at any time without needing to close the account.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Do You Need to Open a Small Business Bank Account?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Requirements to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-business-bank-account-7152479">open a business bank account</a> vary by the financial institution. However, most banks require the following:</p><ul><li>Employer Identification Number (EIN) or Social Security number for sole proprietors</li><li>Business formation documents</li><li>Ownership agreements</li><li>Business license</li></ul><p>Account signers need to bring their personal identification to open the account. Most banks require an initial deposit to fund the account when it is opened; the minimum opening deposit requirements vary by the bank—and can be a key factor, along with ongoing minimum account balances, to consider when choosing one.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">Can I Open a Small Business Bank Account Online?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>Yes, there are many banks that allow you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/040715/what-are-pros-and-cons-online-checking-accounts.asp">open an account online</a> in just a few minutes. Several of these banks are mentioned above. To open your business bank account online, the bank will require all of the same paperwork as if you opened the account in person.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">Can I Use My Personal Bank Account for My Small Business?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>You can use your personal bank account for a small business, like a sole proprietorship. However, it is best not to. Having a dedicated bank account for your business allows you to keep your business deposits and expenses separate from personal transactions. This is very important when it comes to filing taxes.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">Do I Need a Business Account If I Am Self-employed?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>You do not need a separate business account if you are operating your business under your own name. However, it is recommended that you have a dedicated, separate bank account to make it easier to track business revenue and expenses. If you are operating your sole proprietorship under a fictitious business name or as a separate legal entity (e.g. C-Corp, S-Corp, LLC), you will want to have a separate business bank account.<br/><br/>Some banks allow you (and, like Chase, even encourage you) to link your personal and business accounts and will allow your business and personal accounts to be viewed on the same online banking screen, making transfers between accounts simple and quick.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">Do You Need a Merchant Account?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>If you plan to accept electronic payment card transactions, like credit cards and debit cards, you'll likely need a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/merchant-account.asp">merchant account</a>. Many businesses use them. Merchant accounts are a type of commercial bank account, and they play a role in authenticating card transactions. Merchant accounts come with a fee for every processed transaction, along with monthly fees and fees for special situations.<br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-7" tabindex="-1"> <h3 class="accordion__title">Can You Open a Bank Account With Just an EIN?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-7"> <div class="faq-accordion__item-answer"> <p>It’s possible to open a business bank account with an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/employer-identification-number.asp">Employer Identification Number (EIN)</a>, though you’ll need to provide additional information to prove you’re operating a real business. For instance, your bank may ask for your business name and email, as well as some personal information like your name and phone number.<span class="ql-inline-citation" data-cite="30"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-how-we-picked-the-best-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-35"> <span class="mntl-sc-block-heading__text"> How We Picked the Best Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-36"> Research for this article encompassed business bank accounts from across the U.S. We evaluated the benefits offered, transaction limits, fees charged, and customer service of each business bank account reviewed to determine the "best of" designation for each category. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-guide-to-business-bank-accounts"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-37"> <span class="mntl-sc-block-heading__text"> Guide to Business Bank Accounts </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-38"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/business-banking.asp">What is business banking?</a>: Business banking is a company's financial dealings with an institution that provides business loans, credit, savings accounts, and checking accounts, specifically designed for companies rather than for individuals.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/merchant-account.asp">What is a merchant account?</a>: A merchant account is a type of business bank account that allows a business to accept and process electronic payment card transactions. A merchant account requires a partnership with a merchant acquiring bank.</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-business-bank-account-7152479">How to open a business bank account</a>: Learn the steps to take to open a business bank account, from comparison shopping to opening deposits.</li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/establish-business-credit-7972523">How to get business credit</a>: Learn how to establish and build business credit, and how it differs from personal credit.</li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/13/business-financing-primer.asp">How to finance a business</a>: Learn about debt financing, equity financing, mezzanine capital, and more.</li> <li><a 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data-type="internalLink" href="https://www.investopedia.com/best-credit-card-processing-companies-5080522">Best Credit Card Processing Companies</a></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Best Small Business Bank Accounts" class="primary-image__image mntl-primary-image--blurry" height="1414" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/kouFmGW4XkGHRWwiMwhcwlJ1t_o=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1349722339-e9ff160baf8f4c8ca4fbe0fa4f45d4fc.jpg" srcset="https://www.investopedia.com/thmb/oev8SIY53I9ugP3-0MXxlYB0gSI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1349722339-e9ff160baf8f4c8ca4fbe0fa4f45d4fc.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="2121"/> <noscript> <img alt="Best Small Business Bank Accounts" class="loaded 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These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-35"><p>U.S. Chamber of Commerce. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.uschamber.com/small-business/state-of-small-business-now">The State of Small Business Now</a>."</p></li> <li class="mntl-sources__source" id="citation-23"><p>Federal Reserve Board. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.federalreserve.gov/releases/lbr/current/">Large Commercial Banks</a>."</p></li> <li class="mntl-sources__source" id="citation-24"><p>Lending Club. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ir.lendingclub.com/news/news-details/2023/LendingClub-Reports-Fourth-Quarter-and-Full-Year-2022-Results/default.aspx" rel="nofollow sponsored">Press Release: LendingClub Reports Fourth Quarter and Full Year 2022 Results</a>."</p></li> <li class="mntl-sources__source" id="citation-26"><p>Federal Reserve Board. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.federalreserve.gov/releases/lbr/current/">Large Commercial Banks</a>."</p></li> <li class="mntl-sources__source" id="citation-30"><p>U.S. Small Business Administration. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account">Open a Business Bank Account.</a>"</p></li> <li class="mntl-sources__source" id="citation-31"><p>University of Houston Small Business Development Center. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sbdc.uh.edu/sbdc/small-business-bank-account.asp">What to Look for in a Small Business Bank Account</a>."</p></li> <li class="mntl-sources__source" id="citation-34"><p>McKinsey &amp; Company. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/five-ways-for-banks-to-better-serve-small-business-clients">Five ways for banks to better serve small-business clients</a>."</p></li> <li class="mntl-sources__source" id="citation-32"><p>NCUA. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://ncua.gov/support-services/share-insurance-fund">Share Insurance Fund Overview.</a>"</p></li> <li class="mntl-sources__source" id="citation-33"><p>Board of Governors of the Federal Reserve System. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.federalreserve.gov/publications/2019-november-consumer-community-context.htm">Access to Financial Services Matters to Small Businesses</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="8644041" data-ordinal="1" data-tax-levels="" 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The best small business bank accounts are provided by Chase, Axos, U.S. Bank, LendingClub, and Wells Fargo. They're easily accessible with relatively low fees and minimum balances, along with generous transaction limits. As of 2021, the most recent year for which there is census data, there were 33.2 million small businesses in the U.S., which amounted to 99.9% of all U.S. businesses. If you're one of those small business owners, a business bank account can help you separate your business and personal finances, which is essential for proper bookkeeping. The right accounts give you a way to deposit, hold, and spend money, and some account types enable you to accept credit and debit card payments. We chose the checking accounts below based on our research into the small business account landscape. We evaluated accounts on important factors, like fees, minimum balance and deposit requirements, and APYs, to recommend the best products for a variety of circumstances. ## Best Small Business Bank Accounts for May 2024 * **Best for Rewards:** [Chase Business Complete Checking®](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=1188344.133&type=3&subid=0) * **Best Online Business Checking Account:** [Axos Bank Basic Business Checking](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=898668.82&type=3&subid=0) * **Best Brick-and-Mortar Bank:** [U.S. Bank Silver Business Checking](https://www.tkqlhce.com/click-8366961-15414290) * **Best Interest-Bearing Business Checking Account:** [LendingClub Tailored Checking](https://www.lendingclub.com/pd/af/business-checking/tailored-checking) * **Best for Cash Deposits:** [Wells Fargo Navigate Business Checking](https://www.wellsfargo.com/biz/checking/platinum/) Best Small Business Bank Accounts for May 2024 Expand Best Small Business Bank Accounts for May 2024 * [Our Top Picks](#summary-list) * [Chase Business Complete Checking®](#toc-best-for-rewards-chase-business-complete-checking) * [Axos Bank Basic Business Checking](#toc-best-online-business-checking-account-axos-bank-basic-business-checking) * [U.S. Bank Silver Business Checking](#toc-best-brick-and-mortar-bank-us-bank-silver-business-checking) * [LendingClub Tailored Checking](#toc-best-interest-bearing-business-checking-account-lendingclub-tailored-checking) * [Wells Fargo Navigate Business Checking](#toc-best-for-cash-deposits-wells-fargo-navigate-business-checking) * See More (2) * [Final Verdict](#toc-final-verdict) * [Compare Banks](#toc-compare-the-best-small-business-bank-accounts) * [What Is a Business Bank Account?](#toc-what-is-a-business-bank-account) * [Types of Business Bank Accounts](#toc-types-of-business-bank-accounts) * [Pros and Cons of Small Business Bank Accounts](#toc-pros-and-cons-of-small-business-bank-accounts) * [How to Choose a Business Bank Account](#toc-how-to-choose-a-business-bank-account) * [How to Apply for a Business Bank Account](#toc-how-to-apply-for-a-business-bank-account) * [Alternatives and Additions](#toc-alternativesadditions-to-small-business-bank-accounts) * [Why You Should Trust Us](#toc-why-you-should-trust-us) * [FAQ](#toc-faq-bcd9e579-107b-4ddf-a6f4-b293cc099673) * [How We Picked the Best Business Bank Accounts](#toc-how-we-picked-the-best-business-bank-accounts) * [Learn More](#toc-guide-to-business-bank-accounts) ### Best for Rewards : Chase Business Complete Checking® --- ![Chase for Business logo]() :fill(white):max_bytes(150000):strip_icc()/Chase-Business-logo-1d74e27f90d841b49122bb2a6c881991.jpg) * **Minimum balance**: $0 * **APY**: 0% * **Transaction Limits**: Unlimited electronic deposits, ACH, and Chase QuickDeposit * **Fees**: $15 monthly fee, waived with $2,000 daily balance [Learn More](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=1188344.133&type=3&subid=0) Why We Chose It Chase Bank offers several types of business accounts geared to the size of your venture and incentives for signing up. New customers can often get a bonus for opening a business checking account and meeting certain requirements. Chase offers generous rewards-earning credit cards and a huge branch network, too. Pros & Cons Pros * Generous new account bonuses * Big bank features: rewards-earning credit cards, large branch network * Advantages to linking personal accounts Cons * Must meet balance requirement within 30 days for bonus * Balances cannot dip below minimum for 60 days or bonus will be lost * Low transaction limits before fees are charged * Account holder must complete 5 qualifying transactions within 90 days Overview Chase Bank, based in New York City, is the consumer and banking arm of J.P. Morgan Chase, and it has over $2.6 trillion in assets and operations worldwide. It also provides an ATM network of 15,000 ATMs plus more than 4,700 branches. Its size alone provides big-bank features beneficial to small business owners, such as generous rewards and account bonuses, plus access to brick-and-mortar banks for in-person services around North America. Small business owners can also take advantage of Chase offerings such as small business loans, credit cards, and savings accounts in addition to checking. ### Best Online Business Checking Account : Axos Bank Basic Business Checking --- ![Axos Bank Banking Evolved logo]() :fill(white):max_bytes(150000):strip_icc()/AxosBankLogo_Large_JPEG1-fbc14d844a024ffbb9728ce67d8b0010.jpg) * **Minimum balance**: $0 * **APY**: 0% * **Transaction Limits**: Unlimited debit, credit, and deposited item processing * **Fees**: None [Learn More](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=898668.82&type=3&subid=0) Why We Chose It Axos Bank was designed as a digital bank from its inception in 2000. It's now a publicly traded company with over $18.4 billion in assets. Its Basic Business Checking account is "for the busy business owner with modest checking needs." The account has no monthly service fees and unlimited domestic ATM fee reimbursement. Pros & Cons Pros * No monthly service charges * Unlimited domestic ATM fee reimbursement * First set of 50 checks is free Cons * No branches/in person interaction * Some accounts, such as interest-bearing checking, come with a fee * More than 50 checks will cost you Overview If you don't need a brick-and-mortar branch to do your banking, this leader in online operations may be a good choice, especially for customers on the go. Axos Bank has a robust mobile app that received 4.4 stars from customers using Android and 4.7 stars from iOS users. You can deposit checks, pay your bills, manage accounts, and transfer funds right from your phone, and all domestic ATM fees are reimbursed. Axos Bank has headquarters in California, with offices and affiliate offices in several other states. ### Best Brick-and-Mortar Bank : U.S. Bank Silver Business Checking --- ![US Bank]() :fill(white):max_bytes(150000):strip_icc()/us-bank_3x1-97ff2236b1ed4869b7e98ccccc2b6d6f.png) * **Minimum balance**: $0 * **APY**: 0% * **Transaction Limits**: 125 per month; 25 free cash deposit units per month * **Fees**: $2 paper statement fee [Learn More](https://www.tkqlhce.com/click-8366961-15414290) Why We Chose It Small business customers are U.S. Bank's specialty. The Silver Business Checking Package has no monthly maintenance fees and allows for up to 125 transactions, which is adequate for many small businesses. Pros & Cons Pros * No monthly fees * No minimum balance requirements * Up to 125 transactions allowed monthly Cons * $0.50 charge for each transaction exceeding 125 monthly maximum * Not located in every state * No interest-earning accounts Overview U.S. Bank is America's fifth-largest bank, with nearly 77,000 employees and $587 billion in assets. Founded in 1863 and headquartered in Minnesota, it has over 2,000 branches in 26 states across the country. It offers no minimum balance or monthly fees, and allotted monthly transactions go up to 125 for a Silver account. The bank offers gold, platinum, and premium business accounts with a larger allotment of free transactions and deposits, so as your business grows, so can your accounts. ### Best Interest-Bearing Business Checking Account : LendingClub Tailored Checking --- ![LendingClub]() :fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png) LendingClub * **Minimum balance**: None; $100 min. opening deposit * **APY**: 1.50% on up to $100,000 * **Transaction Limits**: No limit, no per-transaction fees * **Fees**: $10 per month for accounts with less than $500 average balance [Learn More](https://www.lendingclub.com/pd/af/business-checking/tailored-checking) Why We Chose It The LendingClub Tailored Checking account offers an interest rate of 1.50% on balances up to $100,000. Customer benefits include unlimited transactions with no fees, including free ATM withdrawals (it rebates any incurred surcharge) and bill pay. Pros & Cons Pros * Unlimited ATM surcharge rebates * Pays interest (currently 1.50% on balances up to $100,000) * Unlimited no-fee transactions Cons * No physical branches * No interest on balances under $500 * High minimum balance required to waive monthly fee Overview LendingClub offers the same FDIC insurance as traditional brick-and-mortar banks and has over $8 billion in assets. Its Tailored Checking account for small businesses is designed to allow accountholders to accrue interest, similar to a savings account. With unlimited no-fee transactions, unlimited ATM surcharge rebates, and attached cash-back rewards, this account also comes with a full mobile money management system for business on the go. LendingClub's corporate headquarters are in San Francisco, California. ### Best for Cash Deposits : Wells Fargo Navigate Business Checking --- ![Wells Fargo]() :fill(white):max_bytes(150000):strip_icc()/Wells_Fargo-9dc927e937384c7d9c45cb66ee774600.jpg)  Wells Fargo * **Minimum balance**: None; $25 min. opening deposit * **APY**: Rates not available online * **Transaction Limits**: 250 per month, then $0.50 per transaction; $20,000 in cash deposits per month, then $0.30 per $100 deposited * **Fees**: $25 monthly fee; waived with $10,000 average balance or $15,000 in combined balances [Learn More](https://www.wellsfargo.com/biz/checking/platinum/) Why We Chose It The Wells Fargo Navigate Business Checking account is best for depositing cash because the first 250 transactions and $20,000 in cash deposits per month are included at no extra charge. The bank's wide network of branches and ATMs, plus its strong online and mobile app, allows for flexible and secure banking, and you won't pay fees for most business services. Pros & Cons Pros * High number of monthly transactions allowed * Large branch network * No fees for stop payments, cashier’s checks, and other business services Cons * High monthly service charge/high balance to waive fees * $0.50 per item and $0.30 per $100 over transaction limits Overview Founded in 1852, Wells Fargo has grown into the third-largest bank in the U.S., with over $1.7 trillion in assets. It's based in San Francisco, California, and has approximately 4,900 locations and more than 12,000 ATMs across the United States. Its Navigate Business Checking account is suitable for small business owners looking to pay no to low fees and access a high number of monthly transactions. Its robust branch network means it is easy to speak in person to a representative about your account concerns, and its newly revamped online banking and mobile app allow you to handle your financial dealings from anywhere. As Navigate Business Checking customers grow their business, the bank offers a premium Optimized Business Checking account for larger, more experienced business owners. If you are new to the business world and just starting out, Wells Fargo offers Initiate Business Checking, an account geared towards fledgling small businesses needing digital tools and support. ## Final Verdict Chase Bank is our top pick for small business banking. It offers many positive features, including a signing bonus, easy cash deposits, cash-back reward cards, and access to a global banking network. If the minimum balance is too high for you, we recommend Axos Bank Basic Business Checking or U.S. Bank Silver Business Checking for checking accounts with no minimum balance requirement. ## Compare the Best Small Business Bank Accounts | Bank | Minimum Balance | APY | Transaction Limits | Fees | | --- | --- | --- | --- | --- | | **Best for Rewards** [Chase Business Complete Checking®](https://www.chase.com/business/banking/checking/business-complete-banking) | $0 | 0% | Unlimited | $15 or $0, depending on activities | | **Best Online Account** [Axos Bank Basic Business Checking](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=898668.82&type=3&subid=0) | $0 | $0 | Unlimited | None | | **Best Brick-and-Mortar Bank** [U.S. Bank Silver Business Checking Package](https://www.tkqlhce.com/click-8366961-15414290) | $0 | $0 | 125 per month, including 25 free cash deposits | $2 paper statement fee | | **Best Interest-Bearing Account** [LendingClub Tailored Checking](https://go.radiusbank.com/tailored-checking/) | $100 opening deposit, no minimum balance | 1.50% on up to $100,000 | Unlimited | $10 per month with less than $500 balance | | **Best for Cash Deposits** [Wells Fargo Navigate Business Checking](https://www.wellsfargo.com/biz/checking/platinum/) | $25 opening deposit, no minimum balance | N/A | 250 per month | $25 depending on balances | ## What Is a Business Bank Account? A [business bank account](https://www.investopedia.com/terms/b/business-banking.asp) is a bank account designed to meet the needs of a business. Some are designed for self-employed people and small businesses, while others have features more suited to large corporations. And there are many basic, general-purpose accounts in between. Business bank accounts are used only for business finances, not personal finances. But you'll need to provide both personal and business information to [open a business bank account](https://www.investopedia.com/how-to-open-a-business-bank-account-7152479). Depending on the account, you may need to show that you own a legitimate business; this could require your business name, Employee Identification Number (EIN), licenses, registration, formation documents, operating agreements, and more. Business bank accounts provide many benefits. They allow you to separate business and personal spending, which can protect your personal assets and simplify bookkeeping and tax preparation. Your business will need a certain type of account to accept credit and debit card payments. And a dedicated bank account can also help make your business look more professional. ## Types of Business Bank Accounts * **Business checking accounts:** Business checking accounts function [similarly to personal checking accounts](https://www.investopedia.com/terms/c/checkingaccount.asp). * **Business savings accounts:** [Business savings accounts](https://www.investopedia.com/best-high-yield-business-savings-accounts-7486188) function similarly to personal savings accounts. Like any savings account, it pays to look for a high APY while considering the bank's other features. * **Business CDs:** Like personal CDs, business CDs allow you to earn a fixed rate on a balance for a predetermined period of time, and there are typically early withdrawal penalties. * **Business money market accounts:** Business money market accounts provide interest on the balance like a savings account, but comes with some features of a checking account, like check-writing ability. * **Merchant accounts:** A [merchant account](https://www.investopedia.com/terms/m/merchant-account.asp) allows a business to accept and process electronic card transactions. * **Cash management accounts (CMAs):** A [cash management account](https://www.investopedia.com/cash-management-account-vs-brokerage-account-7498122) combines the features of checking, savings, and investment accounts. * **Commercial accounts:** [Commercial accounts](https://www.investopedia.com/terms/c/commercial-account.asp) are any kind of account used by a corporation or other business; they're usually checking or other demand deposit accounts. Business bank accounts don't usually come in specific "types" for certain kinds of businesses. There isn't a common, designated account type for LLCs, for example (although some banks may offer "LLC bank accounts"). But different business bank accounts come with different features and restrictions, making some better for certain businesses than others. Bank accounts that are most attractive to LLCs, for example, do more than just allow you to keep personal and business expenses separate. They also usually come with features to help you keep tabs on revenue and expenses, and tools to make tax season easier. Sole proprietors may be more interested in accounts that are as light as possible on fees, with features that can help save money. ## Pros and Cons of Small Business Bank Accounts ### Pros * **Business-oriented features:** Small business accounts offer services that personal accounts do not, such as allowing employees to handle daily business transactions and merchant services with business debit cards. Certain accounts may also include small-business benefits like free business checks, new account bonuses, and access to lines of credit and business credit cards. * **Separates business and personal expenses:** If you own a small business, having a separate account for your personal and business funds can be helpful. It can also simplify tax time. * **FDIC-insured:** At participating banks, the FDIC insures [$250,000 of your business bank deposits](https://www.investopedia.com/ask/answers/110915/does-fdic-cover-business-accounts.asp) in the event of bank failure. ### Cons * **Fees may apply:** As with personal bank accounts, fees that typically range from $12 to $30 per month may apply in a variety of situations, including transaction fees. Depending on the bank, monthly fees may be waived if you meet specific requirements, like minimum balance requirements. * **More paperwork than personal accounts:** To set up a bank account, you may need to provide your business license, Employer Identification Number (EIN), and any formation documents and ownership agreements. * **Many don’t earn interest:** It’s unusual to find a small business checking account accumulating interest, even among the best small business accounts. Thinking about starting a business? See the [best LLC filing services](https://www.investopedia.com/best-llc-filing-companies-5113499) to check prices and options. ## How to Choose a Business Bank Account Compare business bank accounts based on these features to find an account that fits your financial situation. * **Minimum required balance:** Some banks have no minimum required balance, while others may require $25 or $100, for example. In some cases you'll find a minimum opening deposit, but no minimum required ongoing balance. * **Monthly fees:** Bank accounts often come with monthly service fees but they usually provide ways to waive them, such as by maintaining a certain account balance or having a certain amount of deposits per month. * **Other fees:** Check the [other fees associated with the account](https://www.investopedia.com/terms/b/bank-fees.asp), such as ATM fees, electronic transfer fees, check fees, and paper statement fees. * **Relationship management tools:** A trusted business banking relationship manager to handle your accounts and make recommendations can be invaluable. * **Online and mobile tools:** Having quick and easy access to your accounts—with an intuitive, modern interface—can help you keep an eye on your business and move fast when necessary. * **Business software integration:** Easily connecting your business software to your bank accounts can simplify daily operations and tax season. * **Access to credit:** Access to credit is vital for many businesses. A 2023 McKinsey study found that 39% of small and medium-sized businesses that were likely to switch banks cited easier access to credit as a primary reason. * **ATM network:** Pay attention to the ATM network used by the bank, and ensure you'll have access to in-network ATMs if necessary. * **State availability:** Many online bank accounts are available nationwide, but it's worth checking. * **Branch availability:** Although many excellent bank accounts can be found online, in-person banking may be a priority to some. * **APY:** Most business checking accounts don't offer much or any [interest](https://www.investopedia.com/terms/a/apy.asp), although business interest checking accounts do exist. But if earning interest is important to you, see the [best high-yield business savings accounts](https://www.investopedia.com/best-high-yield-business-savings-accounts-7486188) to see the highest available rates. ### By the Numbers **By the Numbers:** The same 2023 McKinsey study mentioned above found that most small and medium-sized businesses prefer banks over credit unions and nonbanks. When asked about their top three reasons for choosing a primary bank (one that holds at least 40% of the business' deposits), 47% of businesses said "robust relationship management/servicing", 42% said "online and mobile tools available," and 35% said "integration with business operations software and SaaS." Physical proximity to the bank was relatively unimportant, except for businesses with less than $1 million in annual revenue; 50% of those businesses said physical proximity was one of their three most important considerations. ## How to Apply for a Business Bank Account Once you're ready to make a decision, you can follow these steps to [open a business bank account](https://www.investopedia.com/how-to-open-a-business-bank-account-7152479). 1. **Investigate your account of choice in detail:** Take the time to understand the fees and policies of the account, like deposit and withdrawal limits. 2. **Gather business documents:** You'll need to verify personal information, and business information that may include your business name and EIN, other registered DBA names, licenses, registration, and ownership agreements. LLCs may need articles of organization, operating agreements, etc. 3. **Apply for the account:** You may be able to apply online, over the phone, or in person. 4. **Fund the account:** Depending on the account type, you may need to make a specific minimum opening deposit (such as for a savings account) as part of the terms, or to earn the best rate. 5. **Close old account, if necessary:** If you have a former account you no longer need, transfer out the funds and consider closing it to avoid mistaken charges and potential fraud. ## Alternatives/Additions to Small Business Bank Accounts ### Credit Unions Federal credit unions and local credit unions might be a decent alternative to traditional banks for small business owners. Membership is required at credit unions, though it’s often relatively easy to become a member. A credit union’s small business accounts may offer lower fees on deposit accounts and pay higher interest, compared to a traditional bank, while also offering $250,000 in [NCUA insurance](https://www.investopedia.com/terms/n/ncua-insured-institution.asp).   ### Business Payment Apps Business payment apps and devices like Stripe, Square, [Quickbooks Online Mobile](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/), and Google Pay for Business process business transactions securely. However, many apps must still integrate with your current bank or work with underlying banks to provide FDIC protection.  Not only does separating your business and personal finances help you stay organized, but it may also make you appear more professional and established to your clients. Clients will pay your business directly instead of sending payments to your personal account.  ### Online Lenders Around one-third of small businesses use fintechs and online lenders for borrowing. Online lenders may offer [working capital loans](https://www.investopedia.com/best-working-capital-loans-7373488) and merchant cash advances. However, some businesses have reported frustration with understanding loan terms, as business lenders aren’t required to disclose loan terms in the same way as personal loan lenders.  ## Why You Should Trust Us Investopedia collected key data points from banks to identify the most important factors for readers who want to open a business bank account. We used this data to review each account for minimum required balance, APY, fees, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best small business bank accounts since 2020. ## Frequently Asked Questions * ### Which Bank Is Best to Open a Business Account? The [Chase Business Complete Checking Account](https://www.chase.com/business/banking/checking/business-complete-banking) is our top-rated business bank account for rewards, since you can often find a hefty [new account bonus](https://www.investopedia.com/chase-bank-promotions-7099363) as an incentive to sign up. While it does charge a monthly maintenance fee, Chase will waive this fee if you maintain an average daily balance of at least $2,000. Other top picks include the [Axos Bank Basic Business Checking](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=898668.82&type=3&subid=0&u1=nd25d9c1990a4455182cbb78a28b5c47018-4797849), if you’re looking for a purely online account; the [LendingClub Tailored Checking](https://go.radiusbank.com/tailored-checking/) account is excellent if you want to earn interest; and [Wells Fargo’s Navigate Business Checking](https://www.wellsfargo.com/biz/checking/platinum/) is good for cash deposits. * ### What Is the Difference Between a Business and a Personal Bank Account? Although business and personal bank accounts are similar in many ways, they have their differences. A business bank account has more requirements to open than a personal account; its fees and required balances are often higher, but its interest rates are lower than a personal account. Since a business bank account represents the business and not a person, authorized signers can be added or removed at any time without needing to close the account. * ### What Do You Need to Open a Small Business Bank Account? Requirements to [open a business bank account](https://www.investopedia.com/how-to-open-a-business-bank-account-7152479) vary by the financial institution. However, most banks require the following: + Employer Identification Number (EIN) or Social Security number for sole proprietors + Business formation documents + Ownership agreements + Business licenseAccount signers need to bring their personal identification to open the account. Most banks require an initial deposit to fund the account when it is opened; the minimum opening deposit requirements vary by the bank—and can be a key factor, along with ongoing minimum account balances, to consider when choosing one. * ### Can I Open a Small Business Bank Account Online? Yes, there are many banks that allow you to [open an account online](https://www.investopedia.com/ask/answers/040715/what-are-pros-and-cons-online-checking-accounts.asp) in just a few minutes. Several of these banks are mentioned above. To open your business bank account online, the bank will require all of the same paperwork as if you opened the account in person. * ### Can I Use My Personal Bank Account for My Small Business? You can use your personal bank account for a small business, like a sole proprietorship. However, it is best not to. Having a dedicated bank account for your business allows you to keep your business deposits and expenses separate from personal transactions. This is very important when it comes to filing taxes. * ### Do I Need a Business Account If I Am Self-employed? You do not need a separate business account if you are operating your business under your own name. However, it is recommended that you have a dedicated, separate bank account to make it easier to track business revenue and expenses. If you are operating your sole proprietorship under a fictitious business name or as a separate legal entity (e.g. C-Corp, S-Corp, LLC), you will want to have a separate business bank account. Some banks allow you (and, like Chase, even encourage you) to link your personal and business accounts and will allow your business and personal accounts to be viewed on the same online banking screen, making transfers between accounts simple and quick. * ### Do You Need a Merchant Account? If you plan to accept electronic payment card transactions, like credit cards and debit cards, you'll likely need a [merchant account](https://www.investopedia.com/terms/m/merchant-account.asp). Many businesses use them. Merchant accounts are a type of commercial bank account, and they play a role in authenticating card transactions. Merchant accounts come with a fee for every processed transaction, along with monthly fees and fees for special situations. * ### Can You Open a Bank Account With Just an EIN? It’s possible to open a business bank account with an [Employer Identification Number (EIN)](https://www.investopedia.com/terms/e/employer-identification-number.asp), though you’ll need to provide additional information to prove you’re operating a real business. For instance, your bank may ask for your business name and email, as well as some personal information like your name and phone number. ## How We Picked the Best Business Bank Accounts Research for this article encompassed business bank accounts from across the U.S. We evaluated the benefits offered, transaction limits, fees charged, and customer service of each business bank account reviewed to determine the "best of" designation for each category. ## Guide to Business Bank Accounts * [What is business banking?](https://www.investopedia.com/terms/b/business-banking.asp): Business banking is a company's financial dealings with an institution that provides business loans, credit, savings accounts, and checking accounts, specifically designed for companies rather than for individuals. * [What is a merchant account?](https://www.investopedia.com/terms/m/merchant-account.asp): A merchant account is a type of business bank account that allows a business to accept and process electronic payment card transactions. A merchant account requires a partnership with a merchant acquiring bank. * [How to open a business bank account](https://www.investopedia.com/how-to-open-a-business-bank-account-7152479): Learn the steps to take to open a business bank account, from comparison shopping to opening deposits. * [How to get business credit](https://www.investopedia.com/establish-business-credit-7972523): Learn how to establish and build business credit, and how it differs from personal credit. * [How to finance a business](https://www.investopedia.com/articles/pf/13/business-financing-primer.asp): Learn about debt financing, equity financing, mezzanine capital, and more. * [Does the FDIC cover business bank accounts?](https://www.investopedia.com/ask/answers/110915/does-fdic-cover-business-accounts.asp): The FDIC does cover business bank accounts, but there are eligibility requirements and limitations. * [Retail banking vs. corporate banking](https://www.investopedia.com/articles/general/071213/retail-banking-vs-commercial-banking.asp): Retail banking refers to bank services that deal directly with consumers, while corporate banking serves business and corporate customers. * [Best Free Business Bank Accounts](https://www.investopedia.com/best-free-business-accounts-7167591) * [Best Credit Card Processing Companies](https://www.investopedia.com/best-credit-card-processing-companies-5080522) :max_bytes(150000):strip_icc()/GettyImages-1349722339-e9ff160baf8f4c8ca4fbe0fa4f45d4fc.jpg) :max_bytes(150000):strip_icc()/GettyImages-1349722339-e9ff160baf8f4c8ca4fbe0fa4f45d4fc.jpg) AsiaVision / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. U.S. Chamber of Commerce. "[The State of Small Business Now](https://www.uschamber.com/small-business/state-of-small-business-now)." 2. Federal Reserve Board. "[Large Commercial Banks](https://www.federalreserve.gov/releases/lbr/current/)." 3. Lending Club. "[Press Release: LendingClub Reports Fourth Quarter and Full Year 2022 Results](https://ir.lendingclub.com/news/news-details/2023/LendingClub-Reports-Fourth-Quarter-and-Full-Year-2022-Results/default.aspx)." 4. Federal Reserve Board. "[Large Commercial Banks](https://www.federalreserve.gov/releases/lbr/current/)." 5. U.S. Small Business Administration. "[Open a Business Bank Account.](https://www.sba.gov/business-guide/launch-your-business/open-business-bank-account)" 6. University of Houston Small Business Development Center. "[What to Look for in a Small Business Bank Account](https://www.sbdc.uh.edu/sbdc/small-business-bank-account.asp)." 7. McKinsey & Company. "[Five ways for banks to better serve small-business clients](https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/five-ways-for-banks-to-better-serve-small-business-clients)." 8. NCUA. "[Share Insurance Fund Overview.](https://ncua.gov/support-services/share-insurance-fund)" 9. Board of Governors of the Federal Reserve System. "[Access to Financial Services Matters to Small Businesses](https://www.federalreserve.gov/publications/2019-november-consumer-community-context.htm)." 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The best small business bank accounts are provided by Chase, Axos, U.S. Bank, LendingClub, and Wells Fargo. They're easily accessible with relatively low fees and minimum balances, along with generous transaction limits. As of 2021, the most recent year for which there is census data, there were 33.2 million small businesses in the U.S., which amounted to 99.9% of all U.S. businesses. If you're one of those small business owners, a business bank account can help you separate your business and personal finances, which is essential for proper bookkeeping. The right accounts give you a way to deposit, hold, and spend money, and some account types enable you to accept credit and debit card payments. We chose the checking accounts below based on our research into the small business account landscape. We evaluated accounts on important factors, like fees, minimum balance and deposit requirements, and APYs, to recommend the best products for a variety of circumstances. Best Small Business Bank Accounts for May 2024 Best for Rewards: Chase Business Complete Checking® Best Online Business Checking Account: Axos Bank Basic Business Checking Best Brick-and-Mortar Bank: U.S. Bank Silver Business Checking Best Interest-Bearing Business Checking Account: LendingClub Tailored Checking Best for Cash Deposits: Wells Fargo Navigate Business Checking Best Small Business Bank Accounts for May 2024 Expand Best Small Business Bank Accounts for May 2024 Our Top Picks Chase Business Complete Checking® Axos Bank Basic Business Checking U.S. Bank Silver Business Checking LendingClub Tailored Checking Wells Fargo Navigate Business Checking See More (2) Final Verdict Compare Banks What Is a Business Bank Account? Types of Business Bank Accounts Pros and Cons of Small Business Bank Accounts How to Choose a Business Bank Account How to Apply for a Business Bank Account Alternatives and Additions Why You Should Trust Us FAQ How We Picked the Best Business Bank Accounts Learn More Best for Rewards : Chase Business Complete Checking® Minimum balance: $0APY: 0%Transaction Limits: Unlimited electronic deposits, ACH, and Chase QuickDepositFees: $15 monthly fee, waived with $2,000 daily balance Learn More Why We Chose It Chase Bank offers several types of business accounts geared to the size of your venture and incentives for signing up. New customers can often get a bonus for opening a business checking account and meeting certain requirements. Chase offers generous rewards-earning credit cards and a huge branch network, too. Pros & Cons Pros Generous new account bonuses Big bank features: rewards-earning credit cards, large branch network Advantages to linking personal accounts Cons Must meet balance requirement within 30 days for bonus Balances cannot dip below minimum for 60 days or bonus will be lost Low transaction limits before fees are charged Account holder must complete 5 qualifying transactions within 90 days Overview Chase Bank, based in New York City, is the consumer and banking arm of J.P. Morgan Chase, and it has over $2.6 trillion in assets and operations worldwide. It also provides an ATM network of 15,000 ATMs plus more than 4,700 branches. Its size alone provides big-bank features beneficial to small business owners, such as generous rewards and account bonuses, plus access to brick-and-mortar banks for in-person services around North America. Small business owners can also take advantage of Chase offerings such as small business loans, credit cards, and savings accounts in addition to checking. Best Online Business Checking Account : Axos Bank Basic Business Checking Minimum balance: $0APY: 0%Transaction Limits: Unlimited debit, credit, and deposited item processingFees: None Learn More Why We Chose It Axos Bank was designed as a digital bank from its inception in 2000. It's now a publicly traded company with over $18.4 billion in assets. Its Basic Business Checking account is "for the busy business owner with modest checking needs." The account has no monthly service fees and unlimited domestic ATM fee reimbursement. Pros & Cons Pros No monthly service charges Unlimited domestic ATM fee reimbursement First set of 50 checks is free Cons No branches/in person interaction Some accounts, such as interest-bearing checking, come with a fee More than 50 checks will cost you Overview If you don't need a brick-and-mortar branch to do your banking, this leader in online operations may be a good choice, especially for customers on the go. Axos Bank has a robust mobile app that received 4.4 stars from customers using Android and 4.7 stars from iOS users. You can deposit checks, pay your bills, manage accounts, and transfer funds right from your phone, and all domestic ATM fees are reimbursed. Axos Bank has headquarters in California, with offices and affiliate offices in several other states. Best Brick-and-Mortar Bank : U.S. Bank Silver Business Checking Minimum balance: $0APY: 0%Transaction Limits: 125 per month; 25 free cash deposit units per monthFees: $2 paper statement fee Learn More Why We Chose It Small business customers are U.S. Bank's specialty. The Silver Business Checking Package has no monthly maintenance fees and allows for up to 125 transactions, which is adequate for many small businesses. Pros & Cons Pros No monthly fees No minimum balance requirements Up to 125 transactions allowed monthly Cons $0.50 charge for each transaction exceeding 125 monthly maximum Not located in every state No interest-earning accounts Overview U.S. Bank is America's fifth-largest bank, with nearly 77,000 employees and $587 billion in assets. Founded in 1863 and headquartered in Minnesota, it has over 2,000 branches in 26 states across the country. It offers no minimum balance or monthly fees, and allotted monthly transactions go up to 125 for a Silver account. The bank offers gold, platinum, and premium business accounts with a larger allotment of free transactions and deposits, so as your business grows, so can your accounts. Best Interest-Bearing Business Checking Account : LendingClub Tailored Checking LendingClub Minimum balance: None; $100 min. opening depositAPY: 1.50% on up to $100,000Transaction Limits: No limit, no per-transaction feesFees: $10 per month for accounts with less than $500 average balance Learn More Why We Chose It The LendingClub Tailored Checking account offers an interest rate of 1.50% on balances up to $100,000. Customer benefits include unlimited transactions with no fees, including free ATM withdrawals (it rebates any incurred surcharge) and bill pay. Pros & Cons Pros Unlimited ATM surcharge rebates Pays interest (currently 1.50% on balances up to $100,000) Unlimited no-fee transactions Cons No physical branches No interest on balances under $500 High minimum balance required to waive monthly fee Overview LendingClub offers the same FDIC insurance as traditional brick-and-mortar banks and has over $8 billion in assets. Its Tailored Checking account for small businesses is designed to allow accountholders to accrue interest, similar to a savings account. With unlimited no-fee transactions, unlimited ATM surcharge rebates, and attached cash-back rewards, this account also comes with a full mobile money management system for business on the go. LendingClub's corporate headquarters are in San Francisco, California. Best for Cash Deposits : Wells Fargo Navigate Business Checking  Wells Fargo Minimum balance: None; $25 min. opening depositAPY: Rates not available onlineTransaction Limits: 250 per month, then $0.50 per transaction; $20,000 in cash deposits per month, then $0.30 per $100 depositedFees: $25 monthly fee; waived with $10,000 average balance or $15,000 in combined balances Learn More Why We Chose It The Wells Fargo Navigate Business Checking account is best for depositing cash because the first 250 transactions and $20,000 in cash deposits per month are included at no extra charge. The bank's wide network of branches and ATMs, plus its strong online and mobile app, allows for flexible and secure banking, and you won't pay fees for most business services. Pros & Cons Pros High number of monthly transactions allowed Large branch network No fees for stop payments, cashier’s checks, and other business services Cons High monthly service charge/high balance to waive fees $0.50 per item and $0.30 per $100 over transaction limits Overview Founded in 1852, Wells Fargo has grown into the third-largest bank in the U.S., with over $1.7 trillion in assets. It's based in San Francisco, California, and has approximately 4,900 locations and more than 12,000 ATMs across the United States. Its Navigate Business Checking account is suitable for small business owners looking to pay no to low fees and access a high number of monthly transactions. Its robust branch network means it is easy to speak in person to a representative about your account concerns, and its newly revamped online banking and mobile app allow you to handle your financial dealings from anywhere. As Navigate Business Checking customers grow their business, the bank offers a premium Optimized Business Checking account for larger, more experienced business owners. If you are new to the business world and just starting out, Wells Fargo offers Initiate Business Checking, an account geared towards fledgling small businesses needing digital tools and support. Final Verdict Chase Bank is our top pick for small business banking. It offers many positive features, including a signing bonus, easy cash deposits, cash-back reward cards, and access to a global banking network. If the minimum balance is too high for you, we recommend Axos Bank Basic Business Checking or U.S. Bank Silver Business Checking for checking accounts with no minimum balance requirement. Compare the Best Small Business Bank Accounts  Bank Minimum Balance APY Transaction Limits Fees Best for Rewards Chase Business Complete Checking® $0 0% Unlimited $15 or $0, depending on activities Best Online Account Axos Bank Basic Business Checking $0 $0 Unlimited None Best Brick-and-Mortar Bank U.S. Bank Silver Business Checking Package $0 $0 125 per month, including 25 free cash deposits $2 paper statement fee Best Interest-Bearing Account LendingClub Tailored Checking $100 opening deposit, no minimum balance 1.50% on up to $100,000 Unlimited $10 per month with less than $500 balance Best for Cash Deposits Wells Fargo Navigate Business Checking $25 opening deposit, no minimum balance N/A 250 per month $25 depending on balances What Is a Business Bank Account? A business bank account is a bank account designed to meet the needs of a business. Some are designed for self-employed people and small businesses, while others have features more suited to large corporations. And there are many basic, general-purpose accounts in between. Business bank accounts are used only for business finances, not personal finances. But you'll need to provide both personal and business information to open a business bank account. Depending on the account, you may need to show that you own a legitimate business; this could require your business name, Employee Identification Number (EIN), licenses, registration, formation documents, operating agreements, and more. Business bank accounts provide many benefits. They allow you to separate business and personal spending, which can protect your personal assets and simplify bookkeeping and tax preparation. Your business will need a certain type of account to accept credit and debit card payments. And a dedicated bank account can also help make your business look more professional. Types of Business Bank Accounts Business checking accounts: Business checking accounts function similarly to personal checking accounts. Business savings accounts: Business savings accounts function similarly to personal savings accounts. Like any savings account, it pays to look for a high APY while considering the bank's other features. Business CDs: Like personal CDs, business CDs allow you to earn a fixed rate on a balance for a predetermined period of time, and there are typically early withdrawal penalties. Business money market accounts: Business money market accounts provide interest on the balance like a savings account, but comes with some features of a checking account, like check-writing ability. Merchant accounts: A merchant account allows a business to accept and process electronic card transactions. Cash management accounts (CMAs): A cash management account combines the features of checking, savings, and investment accounts. Commercial accounts: Commercial accounts are any kind of account used by a corporation or other business; they're usually checking or other demand deposit accounts. Business bank accounts don't usually come in specific "types" for certain kinds of businesses. There isn't a common, designated account type for LLCs, for example (although some banks may offer "LLC bank accounts"). But different business bank accounts come with different features and restrictions, making some better for certain businesses than others.Bank accounts that are most attractive to LLCs, for example, do more than just allow you to keep personal and business expenses separate. They also usually come with features to help you keep tabs on revenue and expenses, and tools to make tax season easier. Sole proprietors may be more interested in accounts that are as light as possible on fees, with features that can help save money. Pros and Cons of Small Business Bank Accounts Pros Business-oriented features: Small business accounts offer services that personal accounts do not, such as allowing employees to handle daily business transactions and merchant services with business debit cards. Certain accounts may also include small-business benefits like free business checks, new account bonuses, and access to lines of credit and business credit cards. Separates business and personal expenses: If you own a small business, having a separate account for your personal and business funds can be helpful. It can also simplify tax time. FDIC-insured: At participating banks, the FDIC insures $250,000 of your business bank deposits in the event of bank failure. Cons Fees may apply: As with personal bank accounts, fees that typically range from $12 to $30 per month may apply in a variety of situations, including transaction fees. Depending on the bank, monthly fees may be waived if you meet specific requirements, like minimum balance requirements.More paperwork than personal accounts: To set up a bank account, you may need to provide your business license, Employer Identification Number (EIN), and any formation documents and ownership agreements.Many don’t earn interest: It’s unusual to find a small business checking account accumulating interest, even among the best small business accounts. Thinking about starting a business? See the best LLC filing services to check prices and options. How to Choose a Business Bank Account Compare business bank accounts based on these features to find an account that fits your financial situation. Minimum required balance: Some banks have no minimum required balance, while others may require $25 or $100, for example. In some cases you'll find a minimum opening deposit, but no minimum required ongoing balance. Monthly fees: Bank accounts often come with monthly service fees but they usually provide ways to waive them, such as by maintaining a certain account balance or having a certain amount of deposits per month. Other fees: Check the other fees associated with the account, such as ATM fees, electronic transfer fees, check fees, and paper statement fees. Relationship management tools: A trusted business banking relationship manager to handle your accounts and make recommendations can be invaluable. Online and mobile tools: Having quick and easy access to your accounts—with an intuitive, modern interface—can help you keep an eye on your business and move fast when necessary. Business software integration: Easily connecting your business software to your bank accounts can simplify daily operations and tax season. Access to credit: Access to credit is vital for many businesses. A 2023 McKinsey study found that 39% of small and medium-sized businesses that were likely to switch banks cited easier access to credit as a primary reason. ATM network: Pay attention to the ATM network used by the bank, and ensure you'll have access to in-network ATMs if necessary. State availability: Many online bank accounts are available nationwide, but it's worth checking. Branch availability: Although many excellent bank accounts can be found online, in-person banking may be a priority to some. APY: Most business checking accounts don't offer much or any interest, although business interest checking accounts do exist. But if earning interest is important to you, see the best high-yield business savings accounts to see the highest available rates. By the Numbers By the Numbers: The same 2023 McKinsey study mentioned above found that most small and medium-sized businesses prefer banks over credit unions and nonbanks. When asked about their top three reasons for choosing a primary bank (one that holds at least 40% of the business' deposits), 47% of businesses said "robust relationship management/servicing", 42% said "online and mobile tools available," and 35% said "integration with business operations software and SaaS." Physical proximity to the bank was relatively unimportant, except for businesses with less than $1 million in annual revenue; 50% of those businesses said physical proximity was one of their three most important considerations. How to Apply for a Business Bank Account Once you're ready to make a decision, you can follow these steps to open a business bank account. Investigate your account of choice in detail: Take the time to understand the fees and policies of the account, like deposit and withdrawal limits.Gather business documents: You'll need to verify personal information, and business information that may include your business name and EIN, other registered DBA names, licenses, registration, and ownership agreements. LLCs may need articles of organization, operating agreements, etc.Apply for the account: You may be able to apply online, over the phone, or in person.Fund the account: Depending on the account type, you may need to make a specific minimum opening deposit (such as for a savings account) as part of the terms, or to earn the best rate.Close old account, if necessary: If you have a former account you no longer need, transfer out the funds and consider closing it to avoid mistaken charges and potential fraud. Alternatives/Additions to Small Business Bank Accounts Credit Unions Federal credit unions and local credit unions might be a decent alternative to traditional banks for small business owners. Membership is required at credit unions, though it’s often relatively easy to become a member. A credit union’s small business accounts may offer lower fees on deposit accounts and pay higher interest, compared to a traditional bank, while also offering $250,000 in NCUA insurance.   Business Payment Apps Business payment apps and devices like Stripe, Square, Quickbooks Online Mobile, and Google Pay for Business process business transactions securely. However, many apps must still integrate with your current bank or work with underlying banks to provide FDIC protection.  Not only does separating your business and personal finances help you stay organized, but it may also make you appear more professional and established to your clients. Clients will pay your business directly instead of sending payments to your personal account.  Online Lenders Around one-third of small businesses use fintechs and online lenders for borrowing. Online lenders may offer working capital loans and merchant cash advances. However, some businesses have reported frustration with understanding loan terms, as business lenders aren’t required to disclose loan terms in the same way as personal loan lenders.  Why You Should Trust Us Investopedia collected key data points from banks to identify the most important factors for readers who want to open a business bank account. We used this data to review each account for minimum required balance, APY, fees, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best small business bank accounts since 2020. Frequently Asked Questions Which Bank Is Best to Open a Business Account? The Chase Business Complete Checking Account is our top-rated business bank account for rewards, since you can often find a hefty new account bonus as an incentive to sign up. While it does charge a monthly maintenance fee, Chase will waive this fee if you maintain an average daily balance of at least $2,000. Other top picks include the Axos Bank Basic Business Checking, if you’re looking for a purely online account; the LendingClub Tailored Checking account is excellent if you want to earn interest; and Wells Fargo’s Navigate Business Checking is good for cash deposits. What Is the Difference Between a Business and a Personal Bank Account? Although business and personal bank accounts are similar in many ways, they have their differences. A business bank account has more requirements to open than a personal account; its fees and required balances are often higher, but its interest rates are lower than a personal account. Since a business bank account represents the business and not a person, authorized signers can be added or removed at any time without needing to close the account. What Do You Need to Open a Small Business Bank Account? Requirements to open a business bank account vary by the financial institution. However, most banks require the following:Employer Identification Number (EIN) or Social Security number for sole proprietorsBusiness formation documentsOwnership agreementsBusiness licenseAccount signers need to bring their personal identification to open the account. Most banks require an initial deposit to fund the account when it is opened; the minimum opening deposit requirements vary by the bank—and can be a key factor, along with ongoing minimum account balances, to consider when choosing one. Can I Open a Small Business Bank Account Online? Yes, there are many banks that allow you to open an account online in just a few minutes. Several of these banks are mentioned above. To open your business bank account online, the bank will require all of the same paperwork as if you opened the account in person. Can I Use My Personal Bank Account for My Small Business? You can use your personal bank account for a small business, like a sole proprietorship. However, it is best not to. Having a dedicated bank account for your business allows you to keep your business deposits and expenses separate from personal transactions. This is very important when it comes to filing taxes. Do I Need a Business Account If I Am Self-employed? You do not need a separate business account if you are operating your business under your own name. However, it is recommended that you have a dedicated, separate bank account to make it easier to track business revenue and expenses. If you are operating your sole proprietorship under a fictitious business name or as a separate legal entity (e.g. C-Corp, S-Corp, LLC), you will want to have a separate business bank account.Some banks allow you (and, like Chase, even encourage you) to link your personal and business accounts and will allow your business and personal accounts to be viewed on the same online banking screen, making transfers between accounts simple and quick. Do You Need a Merchant Account? If you plan to accept electronic payment card transactions, like credit cards and debit cards, you'll likely need a merchant account. Many businesses use them. Merchant accounts are a type of commercial bank account, and they play a role in authenticating card transactions. Merchant accounts come with a fee for every processed transaction, along with monthly fees and fees for special situations. Can You Open a Bank Account With Just an EIN? It’s possible to open a business bank account with an Employer Identification Number (EIN), though you’ll need to provide additional information to prove you’re operating a real business. For instance, your bank may ask for your business name and email, as well as some personal information like your name and phone number. How We Picked the Best Business Bank Accounts Research for this article encompassed business bank accounts from across the U.S. We evaluated the benefits offered, transaction limits, fees charged, and customer service of each business bank account reviewed to determine the "best of" designation for each category. Guide to Business Bank Accounts What is business banking?: Business banking is a company's financial dealings with an institution that provides business loans, credit, savings accounts, and checking accounts, specifically designed for companies rather than for individuals. What is a merchant account?: A merchant account is a type of business bank account that allows a business to accept and process electronic payment card transactions. A merchant account requires a partnership with a merchant acquiring bank. How to open a business bank account: Learn the steps to take to open a business bank account, from comparison shopping to opening deposits. How to get business credit: Learn how to establish and build business credit, and how it differs from personal credit. How to finance a business: Learn about debt financing, equity financing, mezzanine capital, and more. Does the FDIC cover business bank accounts?: The FDIC does cover business bank accounts, but there are eligibility requirements and limitations. Retail banking vs. corporate banking: Retail banking refers to bank services that deal directly with consumers, while corporate banking serves business and corporate customers. Best Free Business Bank Accounts Best Credit Card Processing Companies AsiaVision / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. U.S. Chamber of Commerce. "The State of Small Business Now." Federal Reserve Board. "Large Commercial Banks." Lending Club. "Press Release: LendingClub Reports Fourth Quarter and Full Year 2022 Results." Federal Reserve Board. "Large Commercial Banks." U.S. Small Business Administration. "Open a Business Bank Account." University of Houston Small Business Development Center. "What to Look for in a Small Business Bank Account." McKinsey & Company. "Five ways for banks to better serve small-business clients." NCUA. "Share Insurance Fund Overview." Board of Governors of the Federal Reserve System. "Access to Financial Services Matters to Small Businesses." Related Articles Regions Bank Review 2024 Best Free Business Accounts for May 2024 KeyBank Review 2024 M&T Bank Review 2024 TD Bank Extends $300 Checking Account Bonus to May 31, 2024 Best High-Yield Business Savings Accounts for May 2024 Related Terms What Is a Checking Account? Here's Everything You Need To Know A checking account is an account held at a financial institution that allows deposits and withdrawals. Learn how checking accounts work and how to get one. more What Is a Merchant Account? How Accounts and Processing Works A merchant account is a business bank account allowing companies to accept payments and pay bills. more What Is a High-Yield Checking Account? A high-yield checking account provides interest at an above-average rate, in some cases above 5% or 6% APY. But these accounts usually come with stringent requirements. more What Is a Deposit? Definition, Meaning, Types, and Example A deposit is a transfer of funds to another party, such as a bank, for safekeeping or funds used as collateral for a loan. Here's how it works. more What Is a Student Bank Account? Student bank accounts are accounts designed for teens and young adults. Learn about the features of a typical student bank account and how to compare them. more How Banking Works, Types of Banks, and How To Choose the Best Bank for You A bank is a financial institution licensed to receive deposits and provide other services such as mortgage loans and individual retirement accounts. more

https://www.investopedia.com/which-tax-deductions-apply-to-self-employed-parents-5084256

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> If you are self-employed and a parent, you qualify for a number of additional tax deductions and other benefits. Most of the benefits derive from deductions and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxcredit.asp">tax credits</a> on your income tax. Deductible expenses include health care, childcare, and education. As a parent, you may also qualify for special benefits. With this in mind, the following expenses could decrease your annual tax liability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The child and dependent care tax credit allows you to deduct up to $1,050 in childcare expenses ($2,100 for two or more children) every year the child qualifies.<span class="ql-inline-citation" data-cite="34"></span></li><li>Families can deduct most healthcare expenses over 7.5% of their adjusted gross income (AGI).<span class="ql-inline-citation" data-cite="47"></span></li><li>Some deductions for education expenses can be filed retroactively for previous tax years, starting as far back as 2018.</li><li>Self-employed parents can employ their children and pay them a small salary that is tax-free.<span class="ql-inline-citation" data-cite="7"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-childdependent-tax-benefits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Child/Dependent Tax Benefits </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-subheading__text"> Child Tax Credit and Other Dependent Credit </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> With an estimated 16 million <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/self-employed.asp">self-employed</a> workers in the U.S.,<span class="ql-inline-citation" data-cite="48"></span> these deductions can impact millions of households. See which of them apply to you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> You can claim a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/childtaxcredit.asp">child tax credit</a> of $2,000 for each child under the age of 17 and $500 for children 17 and older or other dependents. In order to claim the full credit, your modified adjusted gross income (MAGI) must have been $200,000 or less if you file single or $400,000 if you are married filing jointly.<span class="ql-inline-citation" data-cite="28"></span> The maximum refundable portion of the credit in 2022 is $1,500 with this refundable portion increasing to $1,600 in 2023.<span class="ql-inline-citation" data-cite="41"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-subheading__text"> Childcare Benefits </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Paying a daycare center, babysitter, or even summer camp fees for a child can be a lot <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/taxes/taxadvantaged-ways-pay-preschool/">cheaper with tax benefits</a>. Taxpayers with a child under the age of 13 or a disabled <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/tax/09/claim-a-dependent.asp">dependent</a> of any age is eligible for a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nonrefundabletaxcredit.asp">non-refundable tax credit</a> worth: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <li>Up to 35% of $3,000 in qualifying expenses (for a maximum benefit of $1,050) for one dependent, or</li><li>Up to 35% of $6,000 in qualifying expenses (for a maximum benefit of $2,100) for two or more dependents.<span class="ql-inline-citation" data-cite="50"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> This tax credit is intended for both employed and self-employed parents and guardians who earn income regularly. Individuals and couples who have been unemployed for a part of the year can also use it. To qualify, all the following conditions must be met: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li>You must have earned income in the past <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxyear.asp">tax year</a> (both your spouse and you if you are filing together).</li> <li>You must be the child’s (or dependent’s) custodial parent or caretaker.</li> <li>You must either work and earn an income, or actively be looking for employment.</li> <li>Your child or dependent must be under age 13—unless they have a physical or mental disability that makes them unable to care for themselves.</li> <li>The provider(s) of childcare must not be your dependent or spouse, nor the child’s parent.<span class="ql-inline-citation" data-cite="8"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The IRS has a broad spectrum of expenses it considers childcare-related, which are not limited to daycare and babysitters. The full list of potentially eligible expenses includes the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>Babysitter or licensed childcare center</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/120815/maid-worth-money-or-should-i-clean-myself.asp">Maid, housekeeper</a>, or cook who cares for the child or dependent</li> <li>Summer camps, day camps, and even sports camps can qualify if they care for the child or dependent while the parents are working. Overnight camps are not included and do not qualify</li> <li>Before-school and after-school care for children under age 13</li> <li>Nurse, or other care providers for disabled children or dependent.<span class="ql-inline-citation" data-cite="1"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-medical-expenses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Medical Expenses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Since Jan. 1, 2020, all qualified health expenses that exceed 7.5% of your AGI, including premiums, are tax-deductible. This applies to unreimbursed medical expenses and doesn’t cover cosmetic treatments.<span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Qualified health expenses that apply to children and their parents are as follows:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li>Preventing, diagnosing, and treating mental or physical ailments</li> <li>Surgery and body modification strictly for health purposes (and not cosmetic)</li> <li>Transportation to a healthcare provider</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-health-insurance-for-self-employed-5078989">Health insurance</a> premiums</li> <li>Prescribed medication<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_32-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The IRS revised its previous decision and lowered the minimum AGI requirement for medical expense deductions from 10% to 7.5%.<span class="ql-inline-citation" data-cite="37"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Qualified self-employed individuals can write off 100% of their health insurance premiums. Taxpayers can apply this deduction on the first page of Form 1040—this is available to self-employed individuals regardless of whether they <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/itemizeddeduction.asp">itemized</a> or not.<span class="ql-inline-citation" data-cite="29"></span><span class="ql-inline-citation" data-cite="30"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-education-expenses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Education Expenses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Since education is not considered a necessary expense in most cases, there are fewer avenues to decrease your annual tax liability through your child’s school and college fees. However, there are still several cases that could apply. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> College Tuition Fees and Expenses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> This deduction expired at the end of 2020. You could deduct expenses of up to $4,000 for 2020 and all years prior if your income was $65,000 or lower ($130,000 for married couples).<span class="ql-inline-citation" data-cite="39"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> However, individuals with income between $65,001 and $80,000 ($130,001 and $160,000 for married couples) only qualified for a $2,000 deduction. If you didn’t claim the deduction for a prior year, you need to file an amended tax return with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/pub/irs-pdf/f1040x.pdf">Form 1040X</a>.<span class="ql-inline-citation" data-cite="39"></span><span class="ql-inline-citation" data-cite="40"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> College Tax Credits </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Taxpayers with a modified adjusted gross income (MAGI) of $90,000 or less (and married couples with a MAGI of $180,000 or less) are eligible for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/american-opportunity-tax-credit.asp">American Opportunity tax credit</a>. This credit can reduce your taxes by up to $2,500 per year for four years of college.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> If this option isn’t available, you can try the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lifelearningcredit.asp">Lifetime Learning Credit</a>. It can lower your tax by 20% of the first $10,000 you spend on enrollment and tuition fees with a cap of $2,000.<span class="ql-inline-citation" data-cite="31"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Single taxpayers must have a MAGI of $90,000 or less to qualify ($180,000 for married couples). For 2022 and 2023, the Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).<span class="ql-inline-citation" data-cite="25"></span><span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-subheading__text"> Coverdell Education Savings Account (ESA) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> You can invest $2,000 per child each year into a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coverdellesa.asp">Coverdell ESA</a>. These contributions are not deductible, but all distributions you make through this savings account are tax-free to the beneficiary—as long as they are used to pay the costs of lower, middle, or higher education.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> The contributions can be made for children under 18. If your child does not go to college when the time comes, you can transfer the funds to another child or relative. High-income individuals and families are not eligible for an ESA.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-subheading__text"> Student Loan Interest Deduction </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Interest on loans for college tuition or vocational school is also deductible. The deduction limit for qualified students is $2,500, but higher-income families are phased out. The tax deduction gets reduced and eventually phased out, depending on your income.<span class="ql-inline-citation" data-cite="43"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> For 2022 and 2023, individuals with an income of $70,000 or higher ($145,000 for married couples) will see a gradual reduction in the amount of interest that's deductible. You can't claim the deduction at all if your income is $85,000 or more ($175,000 for married couples filing a joint return).<span class="ql-inline-citation" data-cite="32"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <span class="heading-toc" id="toc-child-support-for-self-employed-parents"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_60-0"> <span class="mntl-sc-block-heading__text"> Child Support for Self-Employed Parents </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> Income received from child support is not taxable according to the IRS.<span class="ql-inline-citation" data-cite="44"></span> Child support payments are typically calculated based on the net income of the paying individual. If that individual is self-employed, a number of issues can arise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> This is due to the subjectivity found in calculating <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netincome.asp">net income</a> for the self-employed. Generally speaking, self-employed income is calculated by <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/tax/09/self-employed-tax-deductions.asp">deducting expenses</a> required to operate the business from the total income generated by the business. Under such a scenario, the self-employed parent could potentially deflate income by claiming unnecessary business expenses, thereby reducing a child support obligation.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_65-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_66-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Income used to calculate child support payments for self-employed parents varies widely by state. Certain courts do not permit the consideration of tax exemptions or expenses that would have been incurred irrespective of the business, such as utility bills.<span class="ql-inline-citation" data-cite="18"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Due to the inherent subjectivity and potential for manipulation in claiming net income, the self-employed parent could be required to legally prove their income.<span class="ql-inline-citation" data-cite="18"></span> The means to achieve this would vary depending on the applicable jurisdiction but is likely to require financial records, tax documents, and even bank statements to justify income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> If the spouse of the self-employed parent suspects inaccurate income reporting, they may turn to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certified-fraud-examiner.asp">certified fraud examiner</a> to uncover concealed assets or a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forensicaccounting.asp">forensic accountant</a> to examine financial records for exclusions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <span class="heading-toc" id="toc-hiring-your-child"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-heading__text"> Hiring Your Child </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Sole proprietors (or partners, if they're both the parent of that child) and self-employed individuals can hire their children if they are under 18 years of age.<span class="ql-inline-citation" data-cite="7"></span> You can pay your child up to the standard deduction—$12,950 for 2022 or $13,850 for 2023 for single filers—and they will not owe income tax or most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/payrolltax.asp">employment taxes</a>. You can even deduct this wage as a business expense.<span class="ql-inline-citation" data-cite="45"></span><span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_74-0"><span class="heading-toc" id="toc-do-parents-pay-taxes-on-a-childs-income"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Parents Pay Taxes on a Child's Income?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Dependent child pay is considered earned income for that individual. The child is subject to its own income tax assessment at their own individual tax rate. Be mindful that state tax treatment may vary.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-does-my-child-need-to-file-a-tax-return"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does My Child Need to File a Tax Return?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If your child earned less than the standard deduction amount during the tax year, the child will not be subject to taxes and does not need to file. If they earned more than the standard deduction amount, they may have a tax liability or may be owed a refund. In addition, a child who earns more than $1,150 in 2022 in unearned income such as dividends or interest must file a tax return.<span class="ql-inline-citation" data-cite="42"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-how-much-can-i-make-being-self-employed-before-filing-taxes"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Can I Make Being Self-Employed Before Filing Taxes?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The IRS requires if you have net earnings of $400 or more, you must file a federal income tax return. You may not owe much (or anything) in regards to income taxes, but the IRS sets this limit arbitrarily low to ensure self-employed individuals remit self-employment taxes subject at much lower income thresholds.<span class="ql-inline-citation" data-cite="46"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Self-employed parents have many avenues through which they can strategically approach their federal income taxes. If they have a child, the taxpayer is still eligible for many child or dependent tax credits. In addition, the taxpayer may receive favorable tax benefits when their child goes to higher education or incurs medical costs. </p></div>

If you are self-employed and a parent, you qualify for a number of additional tax deductions and other benefits. Most of the benefits derive from deductions and [tax credits](https://www.investopedia.com/terms/t/taxcredit.asp) on your income tax. Deductible expenses include health care, childcare, and education. As a parent, you may also qualify for special benefits. With this in mind, the following expenses could decrease your annual tax liability. ### Key Takeaways * The child and dependent care tax credit allows you to deduct up to $1,050 in childcare expenses ($2,100 for two or more children) every year the child qualifies. * Families can deduct most healthcare expenses over 7.5% of their adjusted gross income (AGI). * Some deductions for education expenses can be filed retroactively for previous tax years, starting as far back as 2018. * Self-employed parents can employ their children and pay them a small salary that is tax-free. ## Child/Dependent Tax Benefits ### Child Tax Credit and Other Dependent Credit With an estimated 16 million [self-employed](https://www.investopedia.com/terms/s/self-employed.asp) workers in the U.S., these deductions can impact millions of households. See which of them apply to you. You can claim a [child tax credit](https://www.investopedia.com/terms/c/childtaxcredit.asp) of $2,000 for each child under the age of 17 and $500 for children 17 and older or other dependents. In order to claim the full credit, your modified adjusted gross income (MAGI) must have been $200,000 or less if you file single or $400,000 if you are married filing jointly. The maximum refundable portion of the credit in 2022 is $1,500 with this refundable portion increasing to $1,600 in 2023. ### Childcare Benefits Paying a daycare center, babysitter, or even summer camp fees for a child can be a lot [cheaper with tax benefits](https://www.investopedia.com/taxes/taxadvantaged-ways-pay-preschool/). Taxpayers with a child under the age of 13 or a disabled [dependent](https://www.investopedia.com/articles/tax/09/claim-a-dependent.asp) of any age is eligible for a [non-refundable tax credit](https://www.investopedia.com/terms/n/nonrefundabletaxcredit.asp) worth: * Up to 35% of $3,000 in qualifying expenses (for a maximum benefit of $1,050) for one dependent, or * Up to 35% of $6,000 in qualifying expenses (for a maximum benefit of $2,100) for two or more dependents. This tax credit is intended for both employed and self-employed parents and guardians who earn income regularly. Individuals and couples who have been unemployed for a part of the year can also use it. To qualify, all the following conditions must be met: * You must have earned income in the past [tax year](https://www.investopedia.com/terms/t/taxyear.asp) (both your spouse and you if you are filing together). * You must be the child’s (or dependent’s) custodial parent or caretaker. * You must either work and earn an income, or actively be looking for employment. * Your child or dependent must be under age 13—unless they have a physical or mental disability that makes them unable to care for themselves. * The provider(s) of childcare must not be your dependent or spouse, nor the child’s parent. The IRS has a broad spectrum of expenses it considers childcare-related, which are not limited to daycare and babysitters. The full list of potentially eligible expenses includes the following: * Babysitter or licensed childcare center * [Maid, housekeeper](https://www.investopedia.com/articles/personal-finance/120815/maid-worth-money-or-should-i-clean-myself.asp), or cook who cares for the child or dependent * Summer camps, day camps, and even sports camps can qualify if they care for the child or dependent while the parents are working. Overnight camps are not included and do not qualify * Before-school and after-school care for children under age 13 * Nurse, or other care providers for disabled children or dependent. ## Medical Expenses Since Jan. 1, 2020, all qualified health expenses that exceed 7.5% of your AGI, including premiums, are tax-deductible. This applies to unreimbursed medical expenses and doesn’t cover cosmetic treatments. Qualified health expenses that apply to children and their parents are as follows:  * Preventing, diagnosing, and treating mental or physical ailments * Surgery and body modification strictly for health purposes (and not cosmetic) * Transportation to a healthcare provider * [Health insurance](https://www.investopedia.com/best-health-insurance-for-self-employed-5078989) premiums * Prescribed medication ### The IRS revised its previous decision and lowered the minimum AGI requirement for medical expense deductions from 10% to 7.5%. Qualified self-employed individuals can write off 100% of their health insurance premiums. Taxpayers can apply this deduction on the first page of Form 1040—this is available to self-employed individuals regardless of whether they [itemized](https://www.investopedia.com/terms/i/itemizeddeduction.asp) or not. ## Education Expenses Since education is not considered a necessary expense in most cases, there are fewer avenues to decrease your annual tax liability through your child’s school and college fees. However, there are still several cases that could apply. ### College Tuition Fees and Expenses This deduction expired at the end of 2020. You could deduct expenses of up to $4,000 for 2020 and all years prior if your income was $65,000 or lower ($130,000 for married couples).  However, individuals with income between $65,001 and $80,000 ($130,001 and $160,000 for married couples) only qualified for a $2,000 deduction. If you didn’t claim the deduction for a prior year, you need to file an amended tax return with [Form 1040X](https://www.irs.gov/pub/irs-pdf/f1040x.pdf). ### College Tax Credits Taxpayers with a modified adjusted gross income (MAGI) of $90,000 or less (and married couples with a MAGI of $180,000 or less) are eligible for the [American Opportunity tax credit](https://www.investopedia.com/terms/a/american-opportunity-tax-credit.asp). This credit can reduce your taxes by up to $2,500 per year for four years of college. If this option isn’t available, you can try the [Lifetime Learning Credit](https://www.investopedia.com/terms/l/lifelearningcredit.asp). It can lower your tax by 20% of the first $10,000 you spend on enrollment and tuition fees with a cap of $2,000. Single taxpayers must have a MAGI of $90,000 or less to qualify ($180,000 for married couples). For 2022 and 2023, the Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns). ### Coverdell Education Savings Account (ESA) You can invest $2,000 per child each year into a [Coverdell ESA](https://www.investopedia.com/terms/c/coverdellesa.asp). These contributions are not deductible, but all distributions you make through this savings account are tax-free to the beneficiary—as long as they are used to pay the costs of lower, middle, or higher education. The contributions can be made for children under 18. If your child does not go to college when the time comes, you can transfer the funds to another child or relative. High-income individuals and families are not eligible for an ESA. ### Student Loan Interest Deduction Interest on loans for college tuition or vocational school is also deductible. The deduction limit for qualified students is $2,500, but higher-income families are phased out. The tax deduction gets reduced and eventually phased out, depending on your income. For 2022 and 2023, individuals with an income of $70,000 or higher ($145,000 for married couples) will see a gradual reduction in the amount of interest that's deductible. You can't claim the deduction at all if your income is $85,000 or more ($175,000 for married couples filing a joint return). ## Child Support for Self-Employed Parents Income received from child support is not taxable according to the IRS. Child support payments are typically calculated based on the net income of the paying individual. If that individual is self-employed, a number of issues can arise. This is due to the subjectivity found in calculating [net income](https://www.investopedia.com/terms/n/netincome.asp) for the self-employed. Generally speaking, self-employed income is calculated by [deducting expenses](https://www.investopedia.com/articles/tax/09/self-employed-tax-deductions.asp) required to operate the business from the total income generated by the business. Under such a scenario, the self-employed parent could potentially deflate income by claiming unnecessary business expenses, thereby reducing a child support obligation. ### Income used to calculate child support payments for self-employed parents varies widely by state. Certain courts do not permit the consideration of tax exemptions or expenses that would have been incurred irrespective of the business, such as utility bills. Due to the inherent subjectivity and potential for manipulation in claiming net income, the self-employed parent could be required to legally prove their income. The means to achieve this would vary depending on the applicable jurisdiction but is likely to require financial records, tax documents, and even bank statements to justify income. If the spouse of the self-employed parent suspects inaccurate income reporting, they may turn to a [certified fraud examiner](https://www.investopedia.com/terms/c/certified-fraud-examiner.asp) to uncover concealed assets or a [forensic accountant](https://www.investopedia.com/terms/f/forensicaccounting.asp) to examine financial records for exclusions. ## Hiring Your Child Sole proprietors (or partners, if they're both the parent of that child) and self-employed individuals can hire their children if they are under 18 years of age. You can pay your child up to the standard deduction—$12,950 for 2022 or $13,850 for 2023 for single filers—and they will not owe income tax or most [employment taxes](https://www.investopedia.com/terms/p/payrolltax.asp). You can even deduct this wage as a business expense. ## Do Parents Pay Taxes on a Child's Income? Dependent child pay is considered earned income for that individual. The child is subject to its own income tax assessment at their own individual tax rate. Be mindful that state tax treatment may vary. ## Does My Child Need to File a Tax Return? If your child earned less than the standard deduction amount during the tax year, the child will not be subject to taxes and does not need to file. If they earned more than the standard deduction amount, they may have a tax liability or may be owed a refund. In addition, a child who earns more than $1,150 in 2022 in unearned income such as dividends or interest must file a tax return. ## How Much Can I Make Being Self-Employed Before Filing Taxes? The IRS requires if you have net earnings of $400 or more, you must file a federal income tax return. You may not owe much (or anything) in regards to income taxes, but the IRS sets this limit arbitrarily low to ensure self-employed individuals remit self-employment taxes subject at much lower income thresholds. ## The Bottom Line Self-employed parents have many avenues through which they can strategically approach their federal income taxes. If they have a child, the taxpayer is still eligible for many child or dependent tax credits. In addition, the taxpayer may receive favorable tax benefits when their child goes to higher education or incurs medical costs.

If you are self-employed and a parent, you qualify for a number of additional tax deductions and other benefits. Most of the benefits derive from deductions and tax credits on your income tax. Deductible expenses include health care, childcare, and education. As a parent, you may also qualify for special benefits. With this in mind, the following expenses could decrease your annual tax liability. Key Takeaways The child and dependent care tax credit allows you to deduct up to $1,050 in childcare expenses ($2,100 for two or more children) every year the child qualifies.Families can deduct most healthcare expenses over 7.5% of their adjusted gross income (AGI).Some deductions for education expenses can be filed retroactively for previous tax years, starting as far back as 2018.Self-employed parents can employ their children and pay them a small salary that is tax-free. Child/Dependent Tax Benefits Child Tax Credit and Other Dependent Credit With an estimated 16 million self-employed workers in the U.S., these deductions can impact millions of households. See which of them apply to you. You can claim a child tax credit of $2,000 for each child under the age of 17 and $500 for children 17 and older or other dependents. In order to claim the full credit, your modified adjusted gross income (MAGI) must have been $200,000 or less if you file single or $400,000 if you are married filing jointly. The maximum refundable portion of the credit in 2022 is $1,500 with this refundable portion increasing to $1,600 in 2023. Childcare Benefits Paying a daycare center, babysitter, or even summer camp fees for a child can be a lot cheaper with tax benefits. Taxpayers with a child under the age of 13 or a disabled dependent of any age is eligible for a non-refundable tax credit worth: Up to 35% of $3,000 in qualifying expenses (for a maximum benefit of $1,050) for one dependent, orUp to 35% of $6,000 in qualifying expenses (for a maximum benefit of $2,100) for two or more dependents. This tax credit is intended for both employed and self-employed parents and guardians who earn income regularly. Individuals and couples who have been unemployed for a part of the year can also use it. To qualify, all the following conditions must be met: You must have earned income in the past tax year (both your spouse and you if you are filing together). You must be the child’s (or dependent’s) custodial parent or caretaker. You must either work and earn an income, or actively be looking for employment. Your child or dependent must be under age 13—unless they have a physical or mental disability that makes them unable to care for themselves. The provider(s) of childcare must not be your dependent or spouse, nor the child’s parent. The IRS has a broad spectrum of expenses it considers childcare-related, which are not limited to daycare and babysitters. The full list of potentially eligible expenses includes the following: Babysitter or licensed childcare center Maid, housekeeper, or cook who cares for the child or dependent Summer camps, day camps, and even sports camps can qualify if they care for the child or dependent while the parents are working. Overnight camps are not included and do not qualify Before-school and after-school care for children under age 13 Nurse, or other care providers for disabled children or dependent. Medical Expenses Since Jan. 1, 2020, all qualified health expenses that exceed 7.5% of your AGI, including premiums, are tax-deductible. This applies to unreimbursed medical expenses and doesn’t cover cosmetic treatments. Qualified health expenses that apply to children and their parents are as follows:  Preventing, diagnosing, and treating mental or physical ailments Surgery and body modification strictly for health purposes (and not cosmetic) Transportation to a healthcare provider Health insurance premiums Prescribed medication The IRS revised its previous decision and lowered the minimum AGI requirement for medical expense deductions from 10% to 7.5%. Qualified self-employed individuals can write off 100% of their health insurance premiums. Taxpayers can apply this deduction on the first page of Form 1040—this is available to self-employed individuals regardless of whether they itemized or not. Education Expenses Since education is not considered a necessary expense in most cases, there are fewer avenues to decrease your annual tax liability through your child’s school and college fees. However, there are still several cases that could apply. College Tuition Fees and Expenses This deduction expired at the end of 2020. You could deduct expenses of up to $4,000 for 2020 and all years prior if your income was $65,000 or lower ($130,000 for married couples).  However, individuals with income between $65,001 and $80,000 ($130,001 and $160,000 for married couples) only qualified for a $2,000 deduction. If you didn’t claim the deduction for a prior year, you need to file an amended tax return with Form 1040X. College Tax Credits Taxpayers with a modified adjusted gross income (MAGI) of $90,000 or less (and married couples with a MAGI of $180,000 or less) are eligible for the American Opportunity tax credit. This credit can reduce your taxes by up to $2,500 per year for four years of college. If this option isn’t available, you can try the Lifetime Learning Credit. It can lower your tax by 20% of the first $10,000 you spend on enrollment and tuition fees with a cap of $2,000. Single taxpayers must have a MAGI of $90,000 or less to qualify ($180,000 for married couples). For 2022 and 2023, the Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns). Coverdell Education Savings Account (ESA) You can invest $2,000 per child each year into a Coverdell ESA. These contributions are not deductible, but all distributions you make through this savings account are tax-free to the beneficiary—as long as they are used to pay the costs of lower, middle, or higher education. The contributions can be made for children under 18. If your child does not go to college when the time comes, you can transfer the funds to another child or relative. High-income individuals and families are not eligible for an ESA. Student Loan Interest Deduction Interest on loans for college tuition or vocational school is also deductible. The deduction limit for qualified students is $2,500, but higher-income families are phased out. The tax deduction gets reduced and eventually phased out, depending on your income. For 2022 and 2023, individuals with an income of $70,000 or higher ($145,000 for married couples) will see a gradual reduction in the amount of interest that's deductible. You can't claim the deduction at all if your income is $85,000 or more ($175,000 for married couples filing a joint return). Child Support for Self-Employed Parents Income received from child support is not taxable according to the IRS. Child support payments are typically calculated based on the net income of the paying individual. If that individual is self-employed, a number of issues can arise. This is due to the subjectivity found in calculating net income for the self-employed. Generally speaking, self-employed income is calculated by deducting expenses required to operate the business from the total income generated by the business. Under such a scenario, the self-employed parent could potentially deflate income by claiming unnecessary business expenses, thereby reducing a child support obligation. Income used to calculate child support payments for self-employed parents varies widely by state. Certain courts do not permit the consideration of tax exemptions or expenses that would have been incurred irrespective of the business, such as utility bills. Due to the inherent subjectivity and potential for manipulation in claiming net income, the self-employed parent could be required to legally prove their income. The means to achieve this would vary depending on the applicable jurisdiction but is likely to require financial records, tax documents, and even bank statements to justify income. If the spouse of the self-employed parent suspects inaccurate income reporting, they may turn to a certified fraud examiner to uncover concealed assets or a forensic accountant to examine financial records for exclusions. Hiring Your Child Sole proprietors (or partners, if they're both the parent of that child) and self-employed individuals can hire their children if they are under 18 years of age. You can pay your child up to the standard deduction—$12,950 for 2022 or $13,850 for 2023 for single filers—and they will not owe income tax or most employment taxes. You can even deduct this wage as a business expense. Do Parents Pay Taxes on a Child's Income? Dependent child pay is considered earned income for that individual. The child is subject to its own income tax assessment at their own individual tax rate. Be mindful that state tax treatment may vary. Does My Child Need to File a Tax Return? If your child earned less than the standard deduction amount during the tax year, the child will not be subject to taxes and does not need to file. If they earned more than the standard deduction amount, they may have a tax liability or may be owed a refund. In addition, a child who earns more than $1,150 in 2022 in unearned income such as dividends or interest must file a tax return. How Much Can I Make Being Self-Employed Before Filing Taxes? The IRS requires if you have net earnings of $400 or more, you must file a federal income tax return. You may not owe much (or anything) in regards to income taxes, but the IRS sets this limit arbitrarily low to ensure self-employed individuals remit self-employment taxes subject at much lower income thresholds. The Bottom Line Self-employed parents have many avenues through which they can strategically approach their federal income taxes. If they have a child, the taxpayer is still eligible for many child or dependent tax credits. In addition, the taxpayer may receive favorable tax benefits when their child goes to higher education or incurs medical costs.

https://www.investopedia.com/terms/p/pressrelease.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-press-release"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Press Release? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A press release is a piece of news or information that companies send out to inform the public and the press about something noteworthy or of material significance. Press releases are usually handled by a company's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/public-relations-pr.asp">public relations (PR)</a> department. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Companies issue press releases, which may be spread to a wider audience through the use of a newswire service, to announce newsworthy topics, such as a new product, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earningsreport.asp">a quarterly earnings report</a>, an impending merger, the cast and creatives of a new Hollywood film project, or any other material information. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Press releases announce newsworthy events or disseminate material information to the public about a company.</li><li>A press release is written by the company’s public relations (PR) department, not by reporters or journalists, so it takes a subjective interpretation of the announcement, though it may also include objective facts, such as figures in an earnings report.</li><li>Among the larger distributors of press releases are PR Newswire (PRN), Press Association (PA), and Business Wire.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-press-release-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How a Press Release Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A press release is written and sent out by a firm; it is not the result of reporters conducting independent journalistic work, though it is often intended to alert journalists to a potential news story. As a result, press releases may contain bias or subjective interpretations that should be considered by its readers. The best way to identify that an article is a press release and not a news story is by its appearance. There is usually no byline, and the release should announce up top the press office that created it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Public relations professionals rely on newswires to deliver their press releases. Vitis PR, a business-to-business PR firm for technology companies, conducted a 2012 survey of journalists using 11 newswire services to see how they rate them. The number one firm was PR Newswire, rated valuable by 54% of the journalists surveyed.<span class="ql-inline-citation" data-cite="4"></span> Other top-rated companies were Press Association (PA) at 38% and Business Wire at 34%.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> So what is the reach of these companies? According to the newswire Agility PR Solutions, “Depending on the size and popularity of the wire, there can be tens of thousands of press releases posted a day.”<span class="ql-inline-citation" data-cite="3"></span> PR Newswire (PRN) says that today it reaches more than 440,000 newsrooms, direct feeds, and subscribers, including over 270,000 journalists and influencers and more than 9,000 websites and digital media outlets.<span class="ql-inline-citation" data-cite="1"></span> Press Association (PA) claims “over one million words of news and features copy created each week, plus 3,000 pictures, created by our journalists and photographers, [and] 30 million hours of live video streamed each year.”<span class="ql-inline-citation" data-cite="5"></span> Business Wire says it communicates with more than 100,000 media outlets in over 160 countries.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Press releases can be tailored for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investorrelations.asp">investor relations (IR)</a>, company news, and disclosure requirements. Areas of interest might include <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentvehicle.asp">investment vehicles</a>, accounting and compliance, regulatory news, earnings and dividends, and the banking industry, spanning financial services, science and technology, and public policy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-pros-and-cons-of-using-a-press-release"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Using a Press Release </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Writing a press release is a way to create buzz around products, partnerships, or any noteworthy news. It nudges journalists to cover the story. The Vitis PR survey found that 67% of journalists use newswires either daily or occasionally, with 78% of them using the newswires for news stories, 56% for article and feature ideas, and 56% to monitor industry trends.<span class="ql-inline-citation" data-cite="4"></span> Press releases help companies gain instant exposure, build trust with existing and prospective customers, garner positive press coverage, mitigate negative coverage, and increase traffic to their website or stores. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Press releases, however, can only do so much. They are no substitute for a marketing strategy, being limited in impact. Another problem is that they can come across as insincere or shallow because companies use them to accentuate the positive while eliminating the negative. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-example-of-a-press-release"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Example of a Press Release </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> A press release about earnings will highlight key financial <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/metrics.asp">metrics</a> for the recently completed quarter and commentary from management. It will include headline revenue, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp">earnings per share (EPS)</a> numbers, and growth from the previous year and quarter. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Usually, there is a narrative about why the numbers came in where they did and if they met or exceeded goals. Stocks tend to move wildly after an earnings release, because new financial information hitting the market causes a revaluing of the company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_27-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_28-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>In addition to financial figures, press releases list valuable contact information that can assist investors in their research, such as the company’s website url and contact and address information.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-what-is-a-press-release"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Press Release?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A press release is written by a company's public relations department to announce important news to the press and public.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-what-is-a-newswire"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Newswire?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A newswire is a company that for a fee disseminates a company's press releases to the widest possible audience of journalists, influencers, industry insiders, and other media outlets.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-what-are-the-elements-of-a-good-press-release"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Elements of a Good Press Release?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A good press release should strive to be brief and to the point, with an attention-grabbing subject line, newsworthy content, prose that is clear and concise, an easy-to-follow structure, and accurate information. It helps to include quotations from company executives and visual aids, such as appealing graphics and relevant photos. It should always contain contact information, so that journalists know where to turn to pursue a story based on the release.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Press releases have been around in one form or another since the days of Paul Revere and carrier pigeons. They are an essential means for companies to disseminate important news about themselves to the press and public. They can also be used to mitigate negative press. They are usually written by public relations departments or firms, and their reach is often magnified for a fee through the use of a newswire company. However, they do not have the same impact as a properly researched news article written by a journalist, as they are not objective, usually choosing to highlight good news and avoid any negative information.<br/> </p></div>

## What Is a Press Release? A press release is a piece of news or information that companies send out to inform the public and the press about something noteworthy or of material significance. Press releases are usually handled by a company's [public relations (PR)](https://www.investopedia.com/terms/p/public-relations-pr.asp) department. Companies issue press releases, which may be spread to a wider audience through the use of a newswire service, to announce newsworthy topics, such as a new product, [a quarterly earnings report](https://www.investopedia.com/terms/e/earningsreport.asp), an impending merger, the cast and creatives of a new Hollywood film project, or any other material information. ### Key Takeaways * Press releases announce newsworthy events or disseminate material information to the public about a company. * A press release is written by the company’s public relations (PR) department, not by reporters or journalists, so it takes a subjective interpretation of the announcement, though it may also include objective facts, such as figures in an earnings report. * Among the larger distributors of press releases are PR Newswire (PRN), Press Association (PA), and Business Wire. ## How a Press Release Works A press release is written and sent out by a firm; it is not the result of reporters conducting independent journalistic work, though it is often intended to alert journalists to a potential news story. As a result, press releases may contain bias or subjective interpretations that should be considered by its readers. The best way to identify that an article is a press release and not a news story is by its appearance. There is usually no byline, and the release should announce up top the press office that created it. Public relations professionals rely on newswires to deliver their press releases. Vitis PR, a business-to-business PR firm for technology companies, conducted a 2012 survey of journalists using 11 newswire services to see how they rate them. The number one firm was PR Newswire, rated valuable by 54% of the journalists surveyed. Other top-rated companies were Press Association (PA) at 38% and Business Wire at 34%. So what is the reach of these companies? According to the newswire Agility PR Solutions, “Depending on the size and popularity of the wire, there can be tens of thousands of press releases posted a day.” PR Newswire (PRN) says that today it reaches more than 440,000 newsrooms, direct feeds, and subscribers, including over 270,000 journalists and influencers and more than 9,000 websites and digital media outlets. Press Association (PA) claims “over one million words of news and features copy created each week, plus 3,000 pictures, created by our journalists and photographers, [and] 30 million hours of live video streamed each year.” Business Wire says it communicates with more than 100,000 media outlets in over 160 countries. Press releases can be tailored for [investor relations (IR)](https://www.investopedia.com/terms/i/investorrelations.asp), company news, and disclosure requirements. Areas of interest might include [investment vehicles](https://www.investopedia.com/terms/i/investmentvehicle.asp), accounting and compliance, regulatory news, earnings and dividends, and the banking industry, spanning financial services, science and technology, and public policy. ## Pros and Cons of Using a Press Release Writing a press release is a way to create buzz around products, partnerships, or any noteworthy news. It nudges journalists to cover the story. The Vitis PR survey found that 67% of journalists use newswires either daily or occasionally, with 78% of them using the newswires for news stories, 56% for article and feature ideas, and 56% to monitor industry trends. Press releases help companies gain instant exposure, build trust with existing and prospective customers, garner positive press coverage, mitigate negative coverage, and increase traffic to their website or stores. Press releases, however, can only do so much. They are no substitute for a marketing strategy, being limited in impact. Another problem is that they can come across as insincere or shallow because companies use them to accentuate the positive while eliminating the negative. ## Example of a Press Release A press release about earnings will highlight key financial [metrics](https://www.investopedia.com/terms/m/metrics.asp) for the recently completed quarter and commentary from management. It will include headline revenue, [earnings per share (EPS)](https://www.investopedia.com/terms/e/eps.asp) numbers, and growth from the previous year and quarter. Usually, there is a narrative about why the numbers came in where they did and if they met or exceeded goals. Stocks tend to move wildly after an earnings release, because new financial information hitting the market causes a revaluing of the company. ### In addition to financial figures, press releases list valuable contact information that can assist investors in their research, such as the company’s website url and contact and address information. ## What Is a Press Release? A press release is written by a company's public relations department to announce important news to the press and public. ## What Is a Newswire? A newswire is a company that for a fee disseminates a company's press releases to the widest possible audience of journalists, influencers, industry insiders, and other media outlets. ## What Are the Elements of a Good Press Release? A good press release should strive to be brief and to the point, with an attention-grabbing subject line, newsworthy content, prose that is clear and concise, an easy-to-follow structure, and accurate information. It helps to include quotations from company executives and visual aids, such as appealing graphics and relevant photos. It should always contain contact information, so that journalists know where to turn to pursue a story based on the release. ## The Bottom Line Press releases have been around in one form or another since the days of Paul Revere and carrier pigeons. They are an essential means for companies to disseminate important news about themselves to the press and public. They can also be used to mitigate negative press. They are usually written by public relations departments or firms, and their reach is often magnified for a fee through the use of a newswire company. However, they do not have the same impact as a properly researched news article written by a journalist, as they are not objective, usually choosing to highlight good news and avoid any negative information.

What Is a Press Release? A press release is a piece of news or information that companies send out to inform the public and the press about something noteworthy or of material significance. Press releases are usually handled by a company's public relations (PR) department. Companies issue press releases, which may be spread to a wider audience through the use of a newswire service, to announce newsworthy topics, such as a new product, a quarterly earnings report, an impending merger, the cast and creatives of a new Hollywood film project, or any other material information. Key Takeaways Press releases announce newsworthy events or disseminate material information to the public about a company.A press release is written by the company’s public relations (PR) department, not by reporters or journalists, so it takes a subjective interpretation of the announcement, though it may also include objective facts, such as figures in an earnings report.Among the larger distributors of press releases are PR Newswire (PRN), Press Association (PA), and Business Wire. How a Press Release Works A press release is written and sent out by a firm; it is not the result of reporters conducting independent journalistic work, though it is often intended to alert journalists to a potential news story. As a result, press releases may contain bias or subjective interpretations that should be considered by its readers. The best way to identify that an article is a press release and not a news story is by its appearance. There is usually no byline, and the release should announce up top the press office that created it. Public relations professionals rely on newswires to deliver their press releases. Vitis PR, a business-to-business PR firm for technology companies, conducted a 2012 survey of journalists using 11 newswire services to see how they rate them. The number one firm was PR Newswire, rated valuable by 54% of the journalists surveyed. Other top-rated companies were Press Association (PA) at 38% and Business Wire at 34%. So what is the reach of these companies? According to the newswire Agility PR Solutions, “Depending on the size and popularity of the wire, there can be tens of thousands of press releases posted a day.” PR Newswire (PRN) says that today it reaches more than 440,000 newsrooms, direct feeds, and subscribers, including over 270,000 journalists and influencers and more than 9,000 websites and digital media outlets. Press Association (PA) claims “over one million words of news and features copy created each week, plus 3,000 pictures, created by our journalists and photographers, [and] 30 million hours of live video streamed each year.” Business Wire says it communicates with more than 100,000 media outlets in over 160 countries. Press releases can be tailored for investor relations (IR), company news, and disclosure requirements. Areas of interest might include investment vehicles, accounting and compliance, regulatory news, earnings and dividends, and the banking industry, spanning financial services, science and technology, and public policy. Pros and Cons of Using a Press Release Writing a press release is a way to create buzz around products, partnerships, or any noteworthy news. It nudges journalists to cover the story. The Vitis PR survey found that 67% of journalists use newswires either daily or occasionally, with 78% of them using the newswires for news stories, 56% for article and feature ideas, and 56% to monitor industry trends. Press releases help companies gain instant exposure, build trust with existing and prospective customers, garner positive press coverage, mitigate negative coverage, and increase traffic to their website or stores. Press releases, however, can only do so much. They are no substitute for a marketing strategy, being limited in impact. Another problem is that they can come across as insincere or shallow because companies use them to accentuate the positive while eliminating the negative. Example of a Press Release A press release about earnings will highlight key financial metrics for the recently completed quarter and commentary from management. It will include headline revenue, earnings per share (EPS) numbers, and growth from the previous year and quarter. Usually, there is a narrative about why the numbers came in where they did and if they met or exceeded goals. Stocks tend to move wildly after an earnings release, because new financial information hitting the market causes a revaluing of the company. In addition to financial figures, press releases list valuable contact information that can assist investors in their research, such as the company’s website url and contact and address information. What Is a Press Release? A press release is written by a company's public relations department to announce important news to the press and public. What Is a Newswire? A newswire is a company that for a fee disseminates a company's press releases to the widest possible audience of journalists, influencers, industry insiders, and other media outlets. What Are the Elements of a Good Press Release? A good press release should strive to be brief and to the point, with an attention-grabbing subject line, newsworthy content, prose that is clear and concise, an easy-to-follow structure, and accurate information. It helps to include quotations from company executives and visual aids, such as appealing graphics and relevant photos. It should always contain contact information, so that journalists know where to turn to pursue a story based on the release. The Bottom Line Press releases have been around in one form or another since the days of Paul Revere and carrier pigeons. They are an essential means for companies to disseminate important news about themselves to the press and public. They can also be used to mitigate negative press. They are usually written by public relations departments or firms, and their reach is often magnified for a fee through the use of a newswire company. However, they do not have the same impact as a properly researched news article written by a journalist, as they are not objective, usually choosing to highlight good news and avoid any negative information.

https://www.investopedia.com/terms/t/third-party-transaction.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-third-party-transaction"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Third-Party Transaction? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A third-party <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transaction.asp">transaction</a> is a business deal that involves a person or entity other than the main participants. Typically, it would involve a buyer, a seller, and another party—the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financialcareers/08/third-party-marketing.asp">third party</a>. The involvement of the third party can vary, based on the type of business transaction. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> In some cases, the involvement is one-time, such as a third-party payment for an item purchased from a website. Sometimes the involvement is longer term, such as a third-party vendor always used by a certain company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A third-party transaction often involves a seller, a buyer, and an additional party not connected to the others.</li><li>Examples of third-party transactions are everywhere in daily life, including Insurance brokers, mortgage brokers, and online payment portals. </li><li>The number of people and businesses participating in third-party transactions has exploded in the digital era through online payment platforms.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-third-party-transactions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Third-Party Transactions </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> When a buyer and seller enter into a business deal, they may decide to use the services of an intermediary or third party that manages the transaction between both parties. The role of the third party can vary. It may include designing the particulars of the deal in question, providing a specific service for a company that is slightly outside its wheelhouse, serving as the middleman that connects two parties, or serving as the means of receiving payment from the buyer and forwarding that payment to the seller. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/forex/042215/bitcoin-transactions-vs-credit-card-transactions.asp">Third-party transactions</a> are important for various accounting policies and occur in a variety of situations. Importantly, the third party is not affiliated with the other two participants in the transaction. For example, if Firm A sells inventory to its subsidiary, Firm B, a third-party transaction occurs when Firm B sells those final goods to Firm C. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-example-of-a-third-party-transaction"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Example of a Third-Party Transaction </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Many kinds of transactions <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tri-party-agreement.asp">involve third parties</a>, and they take place on a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transaction-date.asp">day-to-day basis</a> across a variety of industries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For example, in the insurance industry, insurance brokers are third-party agents that market insurance products to insurance shoppers. The client goes through the broker to secure a good insurance contract that has reasonable rates and terms, while the insurance company works through the broker to bring in a new client. If the broker is successful in bringing a new client to an insurance provider, it is paid a commission by the insurer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In the same light, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgagebroker.asp">mortgage broker</a> is considered a facilitator in third-party transactions, as they will attempt to match the needs of a potential homebuyer with the loan programs offered by a lender. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_20-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_21-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/digital-transaction.asp">digital platforms</a>, a buyer can make a payment for the purchase of a good or service bought from a third party.</p></div></div></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> As technology evolves and changes the way interactions are handled in the digital era, more people and businesses are participating in third-party transactions through online payment platforms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/digital-transaction.asp">digital platforms</a>, a buyer can make a payment for the purchase of a good or service bought from another party. That third-party provider receives the payment from the buyer, verifies that the funds are available, and debits the buyer’s account. The money is then forwarded to the seller’s account—typically on the same online portal. The seller’s account may be credited in minutes or days, but the funds may be withdrawn to a bank account or used to conduct other transactions once the deposit has been made in the account. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/venmo-vs-paypal-5114030">PayPal</a> is one good example of an online payment portal that acts as a third party in a retail transaction. A seller offers a good or service, and a buyer uses a credit card entered through the PayPal payment service. The payment is run through PayPal and is thus a third-party transaction. </p></div>

## What Is a Third-Party Transaction? A third-party [transaction](https://www.investopedia.com/terms/t/transaction.asp) is a business deal that involves a person or entity other than the main participants. Typically, it would involve a buyer, a seller, and another party—the [third party](https://www.investopedia.com/articles/financialcareers/08/third-party-marketing.asp). The involvement of the third party can vary, based on the type of business transaction. In some cases, the involvement is one-time, such as a third-party payment for an item purchased from a website. Sometimes the involvement is longer term, such as a third-party vendor always used by a certain company. ### Key Takeaways * A third-party transaction often involves a seller, a buyer, and an additional party not connected to the others. * Examples of third-party transactions are everywhere in daily life, including Insurance brokers, mortgage brokers, and online payment portals. * The number of people and businesses participating in third-party transactions has exploded in the digital era through online payment platforms. ## Understanding Third-Party Transactions When a buyer and seller enter into a business deal, they may decide to use the services of an intermediary or third party that manages the transaction between both parties. The role of the third party can vary. It may include designing the particulars of the deal in question, providing a specific service for a company that is slightly outside its wheelhouse, serving as the middleman that connects two parties, or serving as the means of receiving payment from the buyer and forwarding that payment to the seller. [Third-party transactions](https://www.investopedia.com/articles/forex/042215/bitcoin-transactions-vs-credit-card-transactions.asp) are important for various accounting policies and occur in a variety of situations. Importantly, the third party is not affiliated with the other two participants in the transaction. For example, if Firm A sells inventory to its subsidiary, Firm B, a third-party transaction occurs when Firm B sells those final goods to Firm C. ## Example of a Third-Party Transaction Many kinds of transactions [involve third parties](https://www.investopedia.com/terms/t/tri-party-agreement.asp), and they take place on a [day-to-day basis](https://www.investopedia.com/terms/t/transaction-date.asp) across a variety of industries. For example, in the insurance industry, insurance brokers are third-party agents that market insurance products to insurance shoppers. The client goes through the broker to secure a good insurance contract that has reasonable rates and terms, while the insurance company works through the broker to bring in a new client. If the broker is successful in bringing a new client to an insurance provider, it is paid a commission by the insurer. In the same light, a [mortgage broker](https://www.investopedia.com/terms/m/mortgagebroker.asp) is considered a facilitator in third-party transactions, as they will attempt to match the needs of a potential homebuyer with the loan programs offered by a lender. ### Through [digital platforms](https://www.investopedia.com/terms/d/digital-transaction.asp), a buyer can make a payment for the purchase of a good or service bought from a third party. ## Special Considerations As technology evolves and changes the way interactions are handled in the digital era, more people and businesses are participating in third-party transactions through online payment platforms. Through [digital platforms](https://www.investopedia.com/terms/d/digital-transaction.asp), a buyer can make a payment for the purchase of a good or service bought from another party. That third-party provider receives the payment from the buyer, verifies that the funds are available, and debits the buyer’s account. The money is then forwarded to the seller’s account—typically on the same online portal. The seller’s account may be credited in minutes or days, but the funds may be withdrawn to a bank account or used to conduct other transactions once the deposit has been made in the account. [PayPal](https://www.investopedia.com/venmo-vs-paypal-5114030) is one good example of an online payment portal that acts as a third party in a retail transaction. A seller offers a good or service, and a buyer uses a credit card entered through the PayPal payment service. The payment is run through PayPal and is thus a third-party transaction.

What Is a Third-Party Transaction? A third-party transaction is a business deal that involves a person or entity other than the main participants. Typically, it would involve a buyer, a seller, and another party—the third party. The involvement of the third party can vary, based on the type of business transaction. In some cases, the involvement is one-time, such as a third-party payment for an item purchased from a website. Sometimes the involvement is longer term, such as a third-party vendor always used by a certain company. Key Takeaways A third-party transaction often involves a seller, a buyer, and an additional party not connected to the others.Examples of third-party transactions are everywhere in daily life, including Insurance brokers, mortgage brokers, and online payment portals. The number of people and businesses participating in third-party transactions has exploded in the digital era through online payment platforms. Understanding Third-Party Transactions When a buyer and seller enter into a business deal, they may decide to use the services of an intermediary or third party that manages the transaction between both parties. The role of the third party can vary. It may include designing the particulars of the deal in question, providing a specific service for a company that is slightly outside its wheelhouse, serving as the middleman that connects two parties, or serving as the means of receiving payment from the buyer and forwarding that payment to the seller. Third-party transactions are important for various accounting policies and occur in a variety of situations. Importantly, the third party is not affiliated with the other two participants in the transaction. For example, if Firm A sells inventory to its subsidiary, Firm B, a third-party transaction occurs when Firm B sells those final goods to Firm C. Example of a Third-Party Transaction Many kinds of transactions involve third parties, and they take place on a day-to-day basis across a variety of industries. For example, in the insurance industry, insurance brokers are third-party agents that market insurance products to insurance shoppers. The client goes through the broker to secure a good insurance contract that has reasonable rates and terms, while the insurance company works through the broker to bring in a new client. If the broker is successful in bringing a new client to an insurance provider, it is paid a commission by the insurer. In the same light, a mortgage broker is considered a facilitator in third-party transactions, as they will attempt to match the needs of a potential homebuyer with the loan programs offered by a lender. Through digital platforms, a buyer can make a payment for the purchase of a good or service bought from a third party. Special Considerations As technology evolves and changes the way interactions are handled in the digital era, more people and businesses are participating in third-party transactions through online payment platforms. Through digital platforms, a buyer can make a payment for the purchase of a good or service bought from another party. That third-party provider receives the payment from the buyer, verifies that the funds are available, and debits the buyer’s account. The money is then forwarded to the seller’s account—typically on the same online portal. The seller’s account may be credited in minutes or days, but the funds may be withdrawn to a bank account or used to conduct other transactions once the deposit has been made in the account. PayPal is one good example of an online payment portal that acts as a third party in a retail transaction. A seller offers a good or service, and a buyer uses a credit card entered through the PayPal payment service. The payment is run through PayPal and is thus a third-party transaction.

https://www.investopedia.com/how-to-apply-for-minority-business-grant-7853250

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Minority business grants are a type of funding for minority-owned businesses, usually small businesses. Unlike loans, grants do not have to be paid back, although they are generally considered by the Internal Revenue Service (IRS) to be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/are-business-grants-taxable-7814330">taxable</a> business income.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> In the United States, minority business grants are available from both public and private sources. While the federal government does not provide grant funding for the purposes of starting or growing a business, many private grantors do.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Minority business grants are a source of funding from private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies for small business entrepreneurs who identify as a member of a minority. These grants are usually very competitive.</li><li>Unlike loans, business grants generally do not have to be paid back, but they are considered taxable business income by the IRS.</li><li>Minority businesses must make sure that they are eligible for a grant and be ready to fill out forms and supply the necessary documentation to apply for a grant.</li><li>To help boost your chances of success, look for grant-writing assistance or examples of previous successful applications from the grantor, and give yourself plenty of time to complete the application process.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-minority-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Understanding Minority Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A minority business grant can be a great way for entrepreneurs who identify as a minority to access funding for their small businesses. In contrast to a loan, a grant does not need to be paid back (unless the terms of the grant are violated). However, this can often mean that the grant application process is a lot more in-depth than a typical small business loan application. Competition for grant funding tends to be a lot higher as well.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Typically, a business owner will need to meet the eligibility criteria laid out by the specific grant and then follow the application process, submitting any necessary information or documentation. Generally, the grant funding must also be used for a specified purpose.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Minority business grants are available from a range of sources, including private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies. There are no federal <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-grant.asp">government grants</a> that provide grant funding for the purposes of starting or growing a business, but the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a> does have grant categories for research and development, as well as management and technical assistance. Many private grantors, however, do offer startup <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grant.asp">grants for small businesses</a>.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="5"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-eligibility-criteria-for-minority-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Eligibility Criteria for Minority Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Because minority business grants are offered by a wide range of grantors for a diverse number of specific purposes, eligibility criteria vary widely.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> In general, minority business grant eligibility can depend on factors such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>The intended purpose of the funding (e.g., research and development)</li><li>The nature and industry of the grantee (e.g., a for-profit, minority-owned business working in the healthcare sector)</li><li>A specified range of annual business revenue (e.g., under $1 million)</li><li>Minority status of the founder, owner, and/or employees (e.g., 51% or more employees must self-identify as a specified minority)</li><li>Residency status of the applicant (e.g., resident of the United States)</li><li>Age of the applicant (e.g., 18 or older)</li><li>Age of the business (e.g., business must have been registered for at least one year)</li><li>Number of employees (e.g., 30 employees or fewer)</li><li>Location of the business (e.g., must be a Chicago-based business)<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="5"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-application-process-for-minority-business-grants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Application Process for Minority Business Grants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The application for a minority business grant can look a bit different depending on the specific grant. In particular, government grants tend to have a more involved application and evaluation process. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Generally, the application process for a minority business grant will look something like this: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li>The business owner provides information about themselves and their business to confirm eligibility (for government grants, this may also include some form of registration with the grant organization).</li><li>If there are many different grants to select from, the grant is chosen from a range of options (if this is the case, there may be additional steps to narrow down funding categories or specific grant projects).</li><li>The business owner makes an application and submits the required documentation for the grant.</li><li>The grantor reviews all applications and updates applicants on their success or status.<span class="ql-inline-citation" data-cite="6"></span><br/></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-documents-required-for-a-minority-business-grant"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Documents Required for a Minority Business Grant </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> As minority business grants range widely in purpose and eligibility criteria, the documentation required to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312">apply for one</a> will depend on the nature of the grant in question.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Documents that may be required as part of the application process for a minority business grant can include the following to confirm eligibility: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> <li>Financial documentation </li><li>Personal and/or business information and identification</li><li>Application forms</li><li>Detailed business plan, project proposals, or abstracts</li><li>Budget estimates</li><li>CVs or resumes</li><li>References </li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-key-tips-for-a-successful-application"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Key Tips for a Successful Application </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Because minority business grants are essentially free money, there is generally a lot of competition to secure this type of funding. As such, entrepreneurs considering any grant opportunity should ensure that they have adequate time to craft a detailed and well-thought-out application.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Before beginning the application process for a minority business grant, it’s essential to read the eligibility criteria carefully and ensure that they are met. It may also be helpful to gather all necessary information in advance, so that it is available and in one place when the application is made. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Many grants are awarded on a regular basis—whether quarterly, annually, or according to a project schedule—so it can be helpful to keep track and set reminders for the dates associated with grant applications to ensure you are able to take advantage of the opportunity.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Many resources are available to assist with grant writing. Often, especially for government grants, the granting agency may provide previous examples of successful grant applications for reference, or hold events or webinars to share more information about the grant and its requirements. Many public or nonprofit organizations also provide grant-writing assistance, often for free, so looking for programs like these in your area can be helpful.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-additional-resources-for-further-assistance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> Additional Resources for Further Assistance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> The following are good places to begin a search for minority business grant opportunities: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.grants.gov/">Grants.gov</a> is the federal government’s comprehensive database for all government grant funding opportunities.</li> <li>The <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/funding-programs/grants">Small Business Administration (SBA)</a> provides some small business grant programs for the purposes of research and development, or management and technical assistance.<span class="ql-inline-citation" data-cite="2"></span></li> <li>The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://aofund.org/" rel="nofollow">Accion Opportunity Fund</a> provides resources for minority-owned businesses, including compiling lists of privately funded minority business grant opportunities.<span class="ql-inline-citation" data-cite="3"></span></li> <li>The <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.mbda.gov/">Minority Business Development Agency</a>, run by the U.S. Department of Commerce, runs a national network of business centers and programs for minority business owners, including providing grant funding opportunities.<span class="ql-inline-citation" data-cite="9"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-what-is-a-minority-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Minority Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A minority business grant is a form of free funding designated for small businesses owned or run by people who identify as minorities. Unlike loans, grants do not need to be paid back (except perhaps in the event that the grant’s terms are violated).<span class="ql-inline-citation" data-cite="4"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-what-is-the-application-process-for-a-minority-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Application Process for a Minority Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287">Applying</a> for a minority business grant may look a bit different depending on the purpose or criteria of each grant. Government grants tend to be a bit more involved in terms of the application process, but most grants will require applicants to submit information about themselves and the business, compiling a proposal or filling out an application form for review.<span class="ql-inline-citation" data-cite="11"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-who-is-eligible-for-a-minority-business-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Is Eligible for a Minority Business Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Eligibility criteria for minority business grants will vary depending on the grant in question, but will generally require that the applicant identify as a minority, or that the business be owned or run by a certain number of employees who identify as minorities.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_55-0"><span class="heading-toc" id="toc-does-the-government-provide-grant-funding-for-minority-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does the Government Provide Grant Funding for Minority Businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Grant funding for minority-owned businesses is available at the local, state, and federal levels. The federal government does not provide grants for the purposes of starting or growing a business; however, many private companies and organizations do.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Minority business grants are one way for minority entrepreneurs to secure funding for their businesses without having to take out a loan. Many companies and government agencies have increased their offerings of grant funding to minorities in recent years to address inequities in their industry or field. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> However, these funding opportunities remain highly competitive, so it’s important to check eligibility criteria carefully and write a strong application to have the best chance for success. </p></div>

Minority business grants are a type of funding for minority-owned businesses, usually small businesses. Unlike loans, grants do not have to be paid back, although they are generally considered by the Internal Revenue Service (IRS) to be [taxable](https://www.investopedia.com/are-business-grants-taxable-7814330) business income. In the United States, minority business grants are available from both public and private sources. While the federal government does not provide grant funding for the purposes of starting or growing a business, many private grantors do. ### Key Takeaways * Minority business grants are a source of funding from private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies for small business entrepreneurs who identify as a member of a minority. These grants are usually very competitive. * Unlike loans, business grants generally do not have to be paid back, but they are considered taxable business income by the IRS. * Minority businesses must make sure that they are eligible for a grant and be ready to fill out forms and supply the necessary documentation to apply for a grant. * To help boost your chances of success, look for grant-writing assistance or examples of previous successful applications from the grantor, and give yourself plenty of time to complete the application process. ## Understanding Minority Business Grants A minority business grant can be a great way for entrepreneurs who identify as a minority to access funding for their small businesses. In contrast to a loan, a grant does not need to be paid back (unless the terms of the grant are violated). However, this can often mean that the grant application process is a lot more in-depth than a typical small business loan application. Competition for grant funding tends to be a lot higher as well. Typically, a business owner will need to meet the eligibility criteria laid out by the specific grant and then follow the application process, submitting any necessary information or documentation. Generally, the grant funding must also be used for a specified purpose.  Minority business grants are available from a range of sources, including private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies. There are no federal [government grants](https://www.investopedia.com/terms/g/government-grant.asp) that provide grant funding for the purposes of starting or growing a business, but the [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp) does have grant categories for research and development, as well as management and technical assistance. Many private grantors, however, do offer startup [grants for small businesses](https://www.investopedia.com/terms/g/grant.asp). ## Eligibility Criteria for Minority Business Grants Because minority business grants are offered by a wide range of grantors for a diverse number of specific purposes, eligibility criteria vary widely.  In general, minority business grant eligibility can depend on factors such as: * The intended purpose of the funding (e.g., research and development) * The nature and industry of the grantee (e.g., a for-profit, minority-owned business working in the healthcare sector) * A specified range of annual business revenue (e.g., under $1 million) * Minority status of the founder, owner, and/or employees (e.g., 51% or more employees must self-identify as a specified minority) * Residency status of the applicant (e.g., resident of the United States) * Age of the applicant (e.g., 18 or older) * Age of the business (e.g., business must have been registered for at least one year) * Number of employees (e.g., 30 employees or fewer) * Location of the business (e.g., must be a Chicago-based business) ## Application Process for Minority Business Grants The application for a minority business grant can look a bit different depending on the specific grant. In particular, government grants tend to have a more involved application and evaluation process. Generally, the application process for a minority business grant will look something like this: 1. The business owner provides information about themselves and their business to confirm eligibility (for government grants, this may also include some form of registration with the grant organization). 2. If there are many different grants to select from, the grant is chosen from a range of options (if this is the case, there may be additional steps to narrow down funding categories or specific grant projects). 3. The business owner makes an application and submits the required documentation for the grant. 4. The grantor reviews all applications and updates applicants on their success or status. ## Documents Required for a Minority Business Grant As minority business grants range widely in purpose and eligibility criteria, the documentation required to [apply for one](https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312) will depend on the nature of the grant in question.  Documents that may be required as part of the application process for a minority business grant can include the following to confirm eligibility: * Financial documentation * Personal and/or business information and identification * Application forms * Detailed business plan, project proposals, or abstracts * Budget estimates * CVs or resumes * References ## Key Tips for a Successful Application Because minority business grants are essentially free money, there is generally a lot of competition to secure this type of funding. As such, entrepreneurs considering any grant opportunity should ensure that they have adequate time to craft a detailed and well-thought-out application.  Before beginning the application process for a minority business grant, it’s essential to read the eligibility criteria carefully and ensure that they are met. It may also be helpful to gather all necessary information in advance, so that it is available and in one place when the application is made. Many grants are awarded on a regular basis—whether quarterly, annually, or according to a project schedule—so it can be helpful to keep track and set reminders for the dates associated with grant applications to ensure you are able to take advantage of the opportunity.  Many resources are available to assist with grant writing. Often, especially for government grants, the granting agency may provide previous examples of successful grant applications for reference, or hold events or webinars to share more information about the grant and its requirements. Many public or nonprofit organizations also provide grant-writing assistance, often for free, so looking for programs like these in your area can be helpful. ## Additional Resources for Further Assistance The following are good places to begin a search for minority business grant opportunities: * [Grants.gov](https://www.grants.gov/) is the federal government’s comprehensive database for all government grant funding opportunities. * The [Small Business Administration (SBA)](https://www.sba.gov/funding-programs/grants) provides some small business grant programs for the purposes of research and development, or management and technical assistance. * The [Accion Opportunity Fund](https://aofund.org/) provides resources for minority-owned businesses, including compiling lists of privately funded minority business grant opportunities. * The [Minority Business Development Agency](https://www.mbda.gov/), run by the U.S. Department of Commerce, runs a national network of business centers and programs for minority business owners, including providing grant funding opportunities. ## What Is a Minority Business Grant? A minority business grant is a form of free funding designated for small businesses owned or run by people who identify as minorities. Unlike loans, grants do not need to be paid back (except perhaps in the event that the grant’s terms are violated). ## What Is the Application Process for a Minority Business Grant? [Applying](https://www.investopedia.com/how-to-apply-for-a-small-business-grant-7644287) for a minority business grant may look a bit different depending on the purpose or criteria of each grant. Government grants tend to be a bit more involved in terms of the application process, but most grants will require applicants to submit information about themselves and the business, compiling a proposal or filling out an application form for review. ## Who Is Eligible for a Minority Business Grant? Eligibility criteria for minority business grants will vary depending on the grant in question, but will generally require that the applicant identify as a minority, or that the business be owned or run by a certain number of employees who identify as minorities. ## Does the Government Provide Grant Funding for Minority Businesses? Yes. Grant funding for minority-owned businesses is available at the local, state, and federal levels. The federal government does not provide grants for the purposes of starting or growing a business; however, many private companies and organizations do. ## The Bottom Line Minority business grants are one way for minority entrepreneurs to secure funding for their businesses without having to take out a loan. Many companies and government agencies have increased their offerings of grant funding to minorities in recent years to address inequities in their industry or field. However, these funding opportunities remain highly competitive, so it’s important to check eligibility criteria carefully and write a strong application to have the best chance for success.

Minority business grants are a type of funding for minority-owned businesses, usually small businesses. Unlike loans, grants do not have to be paid back, although they are generally considered by the Internal Revenue Service (IRS) to be taxable business income. In the United States, minority business grants are available from both public and private sources. While the federal government does not provide grant funding for the purposes of starting or growing a business, many private grantors do. Key Takeaways Minority business grants are a source of funding from private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies for small business entrepreneurs who identify as a member of a minority. These grants are usually very competitive.Unlike loans, business grants generally do not have to be paid back, but they are considered taxable business income by the IRS.Minority businesses must make sure that they are eligible for a grant and be ready to fill out forms and supply the necessary documentation to apply for a grant.To help boost your chances of success, look for grant-writing assistance or examples of previous successful applications from the grantor, and give yourself plenty of time to complete the application process. Understanding Minority Business Grants A minority business grant can be a great way for entrepreneurs who identify as a minority to access funding for their small businesses. In contrast to a loan, a grant does not need to be paid back (unless the terms of the grant are violated). However, this can often mean that the grant application process is a lot more in-depth than a typical small business loan application. Competition for grant funding tends to be a lot higher as well. Typically, a business owner will need to meet the eligibility criteria laid out by the specific grant and then follow the application process, submitting any necessary information or documentation. Generally, the grant funding must also be used for a specified purpose.  Minority business grants are available from a range of sources, including private companies, educational institutions, nonprofit organizations, and state, local, and federal governments and agencies. There are no federal government grants that provide grant funding for the purposes of starting or growing a business, but the Small Business Administration (SBA) does have grant categories for research and development, as well as management and technical assistance. Many private grantors, however, do offer startup grants for small businesses. Eligibility Criteria for Minority Business Grants Because minority business grants are offered by a wide range of grantors for a diverse number of specific purposes, eligibility criteria vary widely.  In general, minority business grant eligibility can depend on factors such as: The intended purpose of the funding (e.g., research and development)The nature and industry of the grantee (e.g., a for-profit, minority-owned business working in the healthcare sector)A specified range of annual business revenue (e.g., under $1 million)Minority status of the founder, owner, and/or employees (e.g., 51% or more employees must self-identify as a specified minority)Residency status of the applicant (e.g., resident of the United States)Age of the applicant (e.g., 18 or older)Age of the business (e.g., business must have been registered for at least one year)Number of employees (e.g., 30 employees or fewer)Location of the business (e.g., must be a Chicago-based business) Application Process for Minority Business Grants The application for a minority business grant can look a bit different depending on the specific grant. In particular, government grants tend to have a more involved application and evaluation process. Generally, the application process for a minority business grant will look something like this: The business owner provides information about themselves and their business to confirm eligibility (for government grants, this may also include some form of registration with the grant organization).If there are many different grants to select from, the grant is chosen from a range of options (if this is the case, there may be additional steps to narrow down funding categories or specific grant projects).The business owner makes an application and submits the required documentation for the grant.The grantor reviews all applications and updates applicants on their success or status. Documents Required for a Minority Business Grant As minority business grants range widely in purpose and eligibility criteria, the documentation required to apply for one will depend on the nature of the grant in question.  Documents that may be required as part of the application process for a minority business grant can include the following to confirm eligibility: Financial documentation Personal and/or business information and identificationApplication formsDetailed business plan, project proposals, or abstractsBudget estimatesCVs or resumesReferences  Key Tips for a Successful Application Because minority business grants are essentially free money, there is generally a lot of competition to secure this type of funding. As such, entrepreneurs considering any grant opportunity should ensure that they have adequate time to craft a detailed and well-thought-out application.  Before beginning the application process for a minority business grant, it’s essential to read the eligibility criteria carefully and ensure that they are met. It may also be helpful to gather all necessary information in advance, so that it is available and in one place when the application is made. Many grants are awarded on a regular basis—whether quarterly, annually, or according to a project schedule—so it can be helpful to keep track and set reminders for the dates associated with grant applications to ensure you are able to take advantage of the opportunity.  Many resources are available to assist with grant writing. Often, especially for government grants, the granting agency may provide previous examples of successful grant applications for reference, or hold events or webinars to share more information about the grant and its requirements. Many public or nonprofit organizations also provide grant-writing assistance, often for free, so looking for programs like these in your area can be helpful. Additional Resources for Further Assistance The following are good places to begin a search for minority business grant opportunities: Grants.gov is the federal government’s comprehensive database for all government grant funding opportunities. The Small Business Administration (SBA) provides some small business grant programs for the purposes of research and development, or management and technical assistance. The Accion Opportunity Fund provides resources for minority-owned businesses, including compiling lists of privately funded minority business grant opportunities. The Minority Business Development Agency, run by the U.S. Department of Commerce, runs a national network of business centers and programs for minority business owners, including providing grant funding opportunities. What Is a Minority Business Grant? A minority business grant is a form of free funding designated for small businesses owned or run by people who identify as minorities. Unlike loans, grants do not need to be paid back (except perhaps in the event that the grant’s terms are violated). What Is the Application Process for a Minority Business Grant? Applying for a minority business grant may look a bit different depending on the purpose or criteria of each grant. Government grants tend to be a bit more involved in terms of the application process, but most grants will require applicants to submit information about themselves and the business, compiling a proposal or filling out an application form for review. Who Is Eligible for a Minority Business Grant? Eligibility criteria for minority business grants will vary depending on the grant in question, but will generally require that the applicant identify as a minority, or that the business be owned or run by a certain number of employees who identify as minorities. Does the Government Provide Grant Funding for Minority Businesses? Yes. Grant funding for minority-owned businesses is available at the local, state, and federal levels. The federal government does not provide grants for the purposes of starting or growing a business; however, many private companies and organizations do. The Bottom Line Minority business grants are one way for minority entrepreneurs to secure funding for their businesses without having to take out a loan. Many companies and government agencies have increased their offerings of grant funding to minorities in recent years to address inequities in their industry or field. However, these funding opportunities remain highly competitive, so it’s important to check eligibility criteria carefully and write a strong application to have the best chance for success.

https://www.investopedia.com/articles/pf/09/keep-small-business-afloat.asp

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/120815/4-most-common-reasons-small-business-fails.asp">Keeping a small business afloat</a> in difficult economic times is challenging. Unfortunately, there is no set playbook to follow to ride out the storm. Every small business is different, and each carries its own risks and rewards. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> These differences make copying another company’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/turnaround.asp">turnaround</a> strategy to the letter unrealistic. However, there are some general strategies business owners can follow to steady the ship and boost the chances of survival. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Every business is different, which means there is no set playbook to follow for survival.</li><li>Rules that apply to all include keeping a cool head and paying extra attention to detail.</li><li>Look at the big picture, inventory staff, make sure the business has ready access to cash, sweat the small stuff, and avoid sacrificing quality.</li><li>Small business owners must make sure they audit themselves.</li><li>When times are hard, businesses may need to shift their focus from profits to survival.</li></ul></div></div></div> <span class="heading-toc" id="toc-look-at-the-big-picture"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Look at the Big Picture </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> People have a tendency to attack the most obvious immediate problems with vigor and without hesitation. That’s understandable and might make good business sense in some situations. However, it is also advisable to step back and look at the big picture to see what is still working and what might need changing. It’s an opportunity to better comprehend the size and scope of existing problems as well as further understand your company’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businessmodel.asp">business model</a>—and determine how its strengths and weaknesses come into play. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-subheading__text"> Example 1: Train Rather Than Fire </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> For example, suppose a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be overstocked or understocked. While an initial reaction might be to fire those employees, it could be wiser to examine whether the manager who hired and supervises them has properly trained them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> If the manager is to blame, that person could be fired, but this might not be the best approach. If the manager’s relationships with existing clientele brings in repeat business and substantial revenue, that person is likely someone you'd want to keep. Retraining might be a better alternative than termination. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> By thoroughly scrutinizing the strengths and weaknesses of the employees, an owner looks at the issue from a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/topdowninvesting.asp">top-down perspective</a>, reducing or eliminating the chance that the problems will recur while avoiding a change that could adversely impact future sales. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> Example 2: Is the Business Model Still Up to Scratch? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Fix a similar kind of lens on analyzing how your product or service fits into the marketplace now, how the economic crisis has affected your customers and suppliers, and all the other key aspects of your business. You need to know how well your business model fits the current environment and forecast what various alternative future scenarios might mean for it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-inventory-your-staff"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Inventory Your Staff </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Spending money wisely is key to running a successful business. However, that doesn't necessarily mean that spending the least amount possible is always the best option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Employees are a good example. Every now and then business owners should conduct a thorough review of the staff—both when a problem arises and during the normal course of business—to make sure the right people are on board and doing their jobs effectively. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Both small business owners and large corporations tend to be penny wise and pound foolish when they hire the least expensive workers. Sometimes the productivity of those workers may be suspect. Hiring one worker who costs 20% more than the average worker but works 40% more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews with new people, business owners can make changes to staff when needed to increase efficiency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_27-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_28-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Low salaries can be counterproductive if they result in indifferent productivity.</p></div></div></div> <span class="heading-toc" id="toc-ensure-access-to-cash"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Ensure Access to Cash </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what’s required to obtain a loan is a good first step, as is opening a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lineofcredit.asp">line of credit</a> in advance to fund possible short-term <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashflow.asp">cash-flow</a> problems. Establishing a good relationship with a banker is always useful for a small business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/peer-to-peer-lending.asp">a creative way to obtain funds</a> to make it through tough times. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <span class="heading-toc" id="toc-start-sweating-the-small-stuff"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Start Sweating the Small Stuff </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Although it is important to keep an eye on the big picture, a small business owner should not overlook smaller things that may have an adverse impact on the business. A large tree obstructing the public’s view of the business or the company’s signage, inadequate parking, lack of road/traffic access, and ineffective advertising are examples of small problems that can put a big dent in a business’ <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bottomline.asp">bottom line</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line by line may also help. Owners should not be checking for one-time expenses here, as those items were most likely necessary charges. Instead, they should look for recurring small items that seem innocent but are actually draining the accounts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> For example, the cost of office supplies can quickly get out of hand if they are ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier. If that isn't possible, you may need to consider raising your own prices to cover your extra costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-dont-sacrifice-quality"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Don’t Sacrifice Quality </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Keeping a handle on costs is crucial in tough times. Owners need to stay on the offensive and get employees on board with changes that are being made. However, be careful not to sacrifice quality when making these changes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/fundamental/04/042804.asp">Business owners seeking to improve profit margins</a> should be wary of making dramatic changes to key components. For example, a pizzeria could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients. Note that this strategy could backfire if customers become dissatisfied with the taste of the pizza and sales decrease. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Alternatively, a business could seek to boost its bottom line by spending less on customer service. Initially, this move may result in higher profits. However, over time, poorer customer service could lead customers to shop elsewhere. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> The key is to ensure that cost cuts don’t compromise the quality of the finished product and/or service offered. In the case of the pizzeria, perhaps there is a way to cut the price of takeout boxes or paper napkins instead. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_50-0"><span class="heading-toc" id="toc-how-does-a-bad-economy-affect-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does a Bad Economy Affect Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A bad economy can hurt a business in a number of ways. Adjustments to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> could affect a business's ability to borrow necessary funds. People saving their money during a period of economic uncertainty could mean they are spending less and therefore the business has fewer customers. Some <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sector.asp">sectors</a> may come to a relative standstill if the market falls enough.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_52-0"><span class="heading-toc" id="toc-can-a-small-business-thrive-in-a-bad-economy"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can a Small Business Thrive in a Bad Economy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A small business can thrive in a bad economy but it depends on the business and how it is structured, which line of business it is in, and if that business has the ability to make necessary adjustments in order to retain profit or simply stay open.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_54-0"><span class="heading-toc" id="toc-how-do-you-survive-hard-times-in-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Survive Hard Times in Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Companies can cut costs, which is a common thing to do when facing hard times. This could mean laying off non-essential staff or executives taking a temporary pay cut. Companies making a physical product can change their suppliers, while others may opt to use less expensive materials. Businesses can also issue equity or take on additional debt.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> When times become difficult for your small business, it is important to retain a cool head. Sometimes, there is a simple solution that may help you keep the business running that you wouldn't have noticed if you were too stressed or bogged down in tiny details. Being aware of the big picture and making sure you—as the number one employee—are performing well are the primary priorities during a period of hardship. </p></div>

[Keeping a small business afloat](https://www.investopedia.com/articles/personal-finance/120815/4-most-common-reasons-small-business-fails.asp) in difficult economic times is challenging. Unfortunately, there is no set playbook to follow to ride out the storm. Every small business is different, and each carries its own risks and rewards. These differences make copying another company’s [turnaround](https://www.investopedia.com/terms/t/turnaround.asp) strategy to the letter unrealistic. However, there are some general strategies business owners can follow to steady the ship and boost the chances of survival. ### Key Takeaways * Every business is different, which means there is no set playbook to follow for survival. * Rules that apply to all include keeping a cool head and paying extra attention to detail. * Look at the big picture, inventory staff, make sure the business has ready access to cash, sweat the small stuff, and avoid sacrificing quality. * Small business owners must make sure they audit themselves. * When times are hard, businesses may need to shift their focus from profits to survival. ## Look at the Big Picture People have a tendency to attack the most obvious immediate problems with vigor and without hesitation. That’s understandable and might make good business sense in some situations. However, it is also advisable to step back and look at the big picture to see what is still working and what might need changing. It’s an opportunity to better comprehend the size and scope of existing problems as well as further understand your company’s [business model](https://www.investopedia.com/terms/b/businessmodel.asp)—and determine how its strengths and weaknesses come into play. ### Example 1: Train Rather Than Fire For example, suppose a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be overstocked or understocked. While an initial reaction might be to fire those employees, it could be wiser to examine whether the manager who hired and supervises them has properly trained them. If the manager is to blame, that person could be fired, but this might not be the best approach. If the manager’s relationships with existing clientele brings in repeat business and substantial revenue, that person is likely someone you'd want to keep. Retraining might be a better alternative than termination. By thoroughly scrutinizing the strengths and weaknesses of the employees, an owner looks at the issue from a [top-down perspective](https://www.investopedia.com/terms/t/topdowninvesting.asp), reducing or eliminating the chance that the problems will recur while avoiding a change that could adversely impact future sales. ### Example 2: Is the Business Model Still Up to Scratch? Fix a similar kind of lens on analyzing how your product or service fits into the marketplace now, how the economic crisis has affected your customers and suppliers, and all the other key aspects of your business. You need to know how well your business model fits the current environment and forecast what various alternative future scenarios might mean for it. ## Inventory Your Staff Spending money wisely is key to running a successful business. However, that doesn't necessarily mean that spending the least amount possible is always the best option. Employees are a good example. Every now and then business owners should conduct a thorough review of the staff—both when a problem arises and during the normal course of business—to make sure the right people are on board and doing their jobs effectively. Both small business owners and large corporations tend to be penny wise and pound foolish when they hire the least expensive workers. Sometimes the productivity of those workers may be suspect. Hiring one worker who costs 20% more than the average worker but works 40% more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews with new people, business owners can make changes to staff when needed to increase efficiency. ### Low salaries can be counterproductive if they result in indifferent productivity. ## Ensure Access to Cash Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what’s required to obtain a loan is a good first step, as is opening a [line of credit](https://www.investopedia.com/terms/l/lineofcredit.asp) in advance to fund possible short-term [cash-flow](https://www.investopedia.com/terms/c/cashflow.asp) problems. Establishing a good relationship with a banker is always useful for a small business. Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have [a creative way to obtain funds](https://www.investopedia.com/terms/p/peer-to-peer-lending.asp) to make it through tough times. ## Start Sweating the Small Stuff Although it is important to keep an eye on the big picture, a small business owner should not overlook smaller things that may have an adverse impact on the business. A large tree obstructing the public’s view of the business or the company’s signage, inadequate parking, lack of road/traffic access, and ineffective advertising are examples of small problems that can put a big dent in a business’ [bottom line](https://www.investopedia.com/terms/b/bottomline.asp). Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line by line may also help. Owners should not be checking for one-time expenses here, as those items were most likely necessary charges. Instead, they should look for recurring small items that seem innocent but are actually draining the accounts. For example, the cost of office supplies can quickly get out of hand if they are ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier. If that isn't possible, you may need to consider raising your own prices to cover your extra costs. ## Don’t Sacrifice Quality Keeping a handle on costs is crucial in tough times. Owners need to stay on the offensive and get employees on board with changes that are being made. However, be careful not to sacrifice quality when making these changes. [Business owners seeking to improve profit margins](https://www.investopedia.com/articles/fundamental/04/042804.asp) should be wary of making dramatic changes to key components. For example, a pizzeria could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients. Note that this strategy could backfire if customers become dissatisfied with the taste of the pizza and sales decrease. Alternatively, a business could seek to boost its bottom line by spending less on customer service. Initially, this move may result in higher profits. However, over time, poorer customer service could lead customers to shop elsewhere. The key is to ensure that cost cuts don’t compromise the quality of the finished product and/or service offered. In the case of the pizzeria, perhaps there is a way to cut the price of takeout boxes or paper napkins instead. ## How Does a Bad Economy Affect Business? A bad economy can hurt a business in a number of ways. Adjustments to [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) could affect a business's ability to borrow necessary funds. People saving their money during a period of economic uncertainty could mean they are spending less and therefore the business has fewer customers. Some [sectors](https://www.investopedia.com/terms/s/sector.asp) may come to a relative standstill if the market falls enough. ## Can a Small Business Thrive in a Bad Economy? A small business can thrive in a bad economy but it depends on the business and how it is structured, which line of business it is in, and if that business has the ability to make necessary adjustments in order to retain profit or simply stay open. ## How Do You Survive Hard Times in Business? Companies can cut costs, which is a common thing to do when facing hard times. This could mean laying off non-essential staff or executives taking a temporary pay cut. Companies making a physical product can change their suppliers, while others may opt to use less expensive materials. Businesses can also issue equity or take on additional debt. ## The Bottom Line When times become difficult for your small business, it is important to retain a cool head. Sometimes, there is a simple solution that may help you keep the business running that you wouldn't have noticed if you were too stressed or bogged down in tiny details. Being aware of the big picture and making sure you—as the number one employee—are performing well are the primary priorities during a period of hardship.

Keeping a small business afloat in difficult economic times is challenging. Unfortunately, there is no set playbook to follow to ride out the storm. Every small business is different, and each carries its own risks and rewards. These differences make copying another company’s turnaround strategy to the letter unrealistic. However, there are some general strategies business owners can follow to steady the ship and boost the chances of survival. Key Takeaways Every business is different, which means there is no set playbook to follow for survival.Rules that apply to all include keeping a cool head and paying extra attention to detail.Look at the big picture, inventory staff, make sure the business has ready access to cash, sweat the small stuff, and avoid sacrificing quality.Small business owners must make sure they audit themselves.When times are hard, businesses may need to shift their focus from profits to survival. Look at the Big Picture People have a tendency to attack the most obvious immediate problems with vigor and without hesitation. That’s understandable and might make good business sense in some situations. However, it is also advisable to step back and look at the big picture to see what is still working and what might need changing. It’s an opportunity to better comprehend the size and scope of existing problems as well as further understand your company’s business model—and determine how its strengths and weaknesses come into play. Example 1: Train Rather Than Fire For example, suppose a small business owner discovers that two employees are consistently making mistakes with inventory that cause certain supplies to be overstocked or understocked. While an initial reaction might be to fire those employees, it could be wiser to examine whether the manager who hired and supervises them has properly trained them. If the manager is to blame, that person could be fired, but this might not be the best approach. If the manager’s relationships with existing clientele brings in repeat business and substantial revenue, that person is likely someone you'd want to keep. Retraining might be a better alternative than termination. By thoroughly scrutinizing the strengths and weaknesses of the employees, an owner looks at the issue from a top-down perspective, reducing or eliminating the chance that the problems will recur while avoiding a change that could adversely impact future sales. Example 2: Is the Business Model Still Up to Scratch? Fix a similar kind of lens on analyzing how your product or service fits into the marketplace now, how the economic crisis has affected your customers and suppliers, and all the other key aspects of your business. You need to know how well your business model fits the current environment and forecast what various alternative future scenarios might mean for it. Inventory Your Staff Spending money wisely is key to running a successful business. However, that doesn't necessarily mean that spending the least amount possible is always the best option. Employees are a good example. Every now and then business owners should conduct a thorough review of the staff—both when a problem arises and during the normal course of business—to make sure the right people are on board and doing their jobs effectively. Both small business owners and large corporations tend to be penny wise and pound foolish when they hire the least expensive workers. Sometimes the productivity of those workers may be suspect. Hiring one worker who costs 20% more than the average worker but works 40% more effectively makes sense, particularly during periods of crisis. By constantly seeking resumes and interviews with new people, business owners can make changes to staff when needed to increase efficiency. Low salaries can be counterproductive if they result in indifferent productivity. Ensure Access to Cash Small business owners should take steps to ensure that the company has access to cash, particularly in periods of crisis. Visiting a bank loan officer and understanding what’s required to obtain a loan is a good first step, as is opening a line of credit in advance to fund possible short-term cash-flow problems. Establishing a good relationship with a banker is always useful for a small business. Small business owners should have other potential sources of capital lined up as well. This might include tapping into savings, liquidating stock holdings, or borrowing from family members. A small business owner must have access to capital or have a creative way to obtain funds to make it through tough times. Start Sweating the Small Stuff Although it is important to keep an eye on the big picture, a small business owner should not overlook smaller things that may have an adverse impact on the business. A large tree obstructing the public’s view of the business or the company’s signage, inadequate parking, lack of road/traffic access, and ineffective advertising are examples of small problems that can put a big dent in a business’ bottom line. Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line by line may also help. Owners should not be checking for one-time expenses here, as those items were most likely necessary charges. Instead, they should look for recurring small items that seem innocent but are actually draining the accounts. For example, the cost of office supplies can quickly get out of hand if they are ordered improperly. Similarly, if your supplier increases product prices, you should consider looking around for a cheaper supplier. If that isn't possible, you may need to consider raising your own prices to cover your extra costs. Don’t Sacrifice Quality Keeping a handle on costs is crucial in tough times. Owners need to stay on the offensive and get employees on board with changes that are being made. However, be careful not to sacrifice quality when making these changes. Business owners seeking to improve profit margins should be wary of making dramatic changes to key components. For example, a pizzeria could seek to expand margins per pie by purchasing cheaper cheese or sauce ingredients. Note that this strategy could backfire if customers become dissatisfied with the taste of the pizza and sales decrease. Alternatively, a business could seek to boost its bottom line by spending less on customer service. Initially, this move may result in higher profits. However, over time, poorer customer service could lead customers to shop elsewhere. The key is to ensure that cost cuts don’t compromise the quality of the finished product and/or service offered. In the case of the pizzeria, perhaps there is a way to cut the price of takeout boxes or paper napkins instead. How Does a Bad Economy Affect Business? A bad economy can hurt a business in a number of ways. Adjustments to interest rates could affect a business's ability to borrow necessary funds. People saving their money during a period of economic uncertainty could mean they are spending less and therefore the business has fewer customers. Some sectors may come to a relative standstill if the market falls enough. Can a Small Business Thrive in a Bad Economy? A small business can thrive in a bad economy but it depends on the business and how it is structured, which line of business it is in, and if that business has the ability to make necessary adjustments in order to retain profit or simply stay open. How Do You Survive Hard Times in Business? Companies can cut costs, which is a common thing to do when facing hard times. This could mean laying off non-essential staff or executives taking a temporary pay cut. Companies making a physical product can change their suppliers, while others may opt to use less expensive materials. Businesses can also issue equity or take on additional debt. The Bottom Line When times become difficult for your small business, it is important to retain a cool head. Sometimes, there is a simple solution that may help you keep the business running that you wouldn't have noticed if you were too stressed or bogged down in tiny details. Being aware of the big picture and making sure you—as the number one employee—are performing well are the primary priorities during a period of hardship.

https://www.investopedia.com/small-business-8611031

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-definition-of-a-small-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Definition of a Small Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A small business is a company of relatively limited size, as measured by its revenue, number of employees, or both. Often described as the backbone of the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economy.asp">economy</a>, small businesses range from sole proprietorships to partnerships and corporations with multiple owners and sometimes hundreds of workers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> According to the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a>, there are more than 33 million small businesses in the country today, employing close to 62 million Americans.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small businesses are generally defined in terms of their revenue or number of employees.</li><li>The criteria for what’s considered small can vary from one industry to another.</li><li>The U.S. Small Business Administration (SBA) sets the revenue and employee limits for specific types of business.</li><li>Qualifying as a small business can make a company eligible for government contracts and other financial benefits.</li><li>Small businesses can structure themselves in a variety of ways for tax and legal purposes, including insulating their owners from financial liability.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Small businesses are typically defined by metrics such as their number of employees and their annual revenues. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> For simplicity’s sake, the SBA’s Office of Advocacy generally defines one as “an independent business having fewer than 500 employees.”<span class="ql-inline-citation" data-cite="1"></span> But, as explained in the next section of this article, under the SBA’s official standards, a small business can have as many as 1,500 employees, depending on the industry, and its annual <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> can range as high as $40 million.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Most small businesses, however, are truly small. In 2023, according to SBA data, close to 82% of small businesses in the United States were one-person operations, with no employees aside from the owner.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-what-are-naics-codes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> What Are NAICS Codes? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The federal government established the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/naics.asp">North American Industry Classification System (NAICS)</a> in 1997. Its purpose, according to the U.S. Census Bureau, was to create a standard that federal statistical agencies could use in “classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.”<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The NAICS assigns six-digit codes to businesses. The first two digits refer to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sector.asp">sector</a> of the economy in which they operate, the next two to their particular subsector and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/industry.asp">industry</a>. The remaining digits further narrow the type of business it is, to the point that NAICS codes can be highly specific. For example, an orange grove is a 111310, while an apple orchard is a 111331, and an advertising agency is a 541810, while a public relations agency is a 541820.<span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The NAICS codes do not differentiate between small and large businesses. For example, both a single-person ad agency and one with thousands of employees and offices all over the world would have the same six-digit number.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> However, the Small Business Administration uses the codes and applies its own “size standards,” either in terms of annual receipts or number of employees, to determine what constitutes a small business within a particular field. The SBA defines annual receipts as the company’s total <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/income.asp">income</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grossincome.asp">gross income</a> plus <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cogs.asp">cost of goods sold (COGS)</a>.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> For example, an orange grove qualifies as a small business if it takes in no more than $4 million annually, while an apple orchard can take in up to $4.5 million. An ad agency is small if its revenue is under $25.5 million, while a PR agency can only have revenue of up to $19 million and remain small by definition. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> When the SBA divides businesses into small and large by the number of employees, the maximums can vary widely across industries. For example, a fruit and vegetable wholesaler can have no more than 100 employees and be considered small, while an aircraft manufacturer can have as many as 1,500. Generally speaking, 1,500 is about the maximum for any enterprise under current rules.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The SBA size standards are especially important for businesses competing for government programs or contracts, as explained below. The SBA website has a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.sba.gov/size-standards/index.html">Size Standards Tool</a> that businesses can use to see if they qualify as small under its criteria. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_30-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_31-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Most small businesses will have a primary NAICS code, but they may also have additional codes if they offer multiple products and services.<span class="ql-inline-citation" data-cite="20"></span></p></div></div></div> <span class="heading-toc" id="toc-importance-of-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Importance of Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Small businesses are vital to the U.S. economy. In fact, by its definition, the SBA’s Office of Advocacy says small businesses constitute 99.9% of U.S. businesses overall. Together, they account for 43.5% of the country’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gdp.asp">gross domestic product (GDP)</a> and 39.4% of private-sector payrolls. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Small businesses also accounted for 62.7% of net new job creation from 1995 to 2023, the SBA says.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-small-business-resources"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Small Business Resources </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Small businesses that qualify are eligible for funding and other forms of assistance through the federal government, state and local governments, and private and nonprofit sources. Among the major ones: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-subheading__text"> SBA Loans </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The SBA doesn’t offer loans itself but provides guarantees to approved lenders, making it easier for small businesses to borrow money. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp">SBA loans</a> range from $500 to $5.5 million and can be used for working capital or to finance the purchase of fixed assets, such as machinery. The SBA also has a loan program for exporters.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> Grants </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312">Small-business grants</a>, which normally do not have to be paid back, are harder to obtain than loans. The SBA doesn’t provide grants for starting or expanding small businesses, but the federal government has several grant programs for specific types of businesses. Two of them are the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> The U.S. Treasury Department, through its State Small Business Credit Initiative, also provides money to states, U.S. territories, and tribal governments, which they can then use to support small businesses in their area.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> In addition, some state and local governments and a number of private corporations have their own<br/>grant-making initiatives aimed at encouraging small business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-subheading__text"> Government Contracting </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> As the SBA points out, “The U.S. government is the largest customer in the world. It buys all types of products and services—in both large and small quantities—and it’s required by law to consider buying from small businesses.”<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> To facilitate that, the SBA offers programs to help small businesses compete for federal contracts, some targeting specific types of business owners, such as women, Native Americans, or military veterans.<span class="ql-inline-citation" data-cite="14"></span> It also administers Small Business Development Centers in every U.S. state and territory, in conjunction with the private sector, educational institutions, and state and local governments. Their goal is to provide resources to current and would-be small business owners.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-types-of-small-business-structures"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> Types of Small Business Structures </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Small businesses can choose to structure themselves in a variety of ways for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/120915/which-type-organization-best-your-business.asp">tax and legal purposes</a>. Here are the common types, listed in relative order of complexity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-subheading__text"> Sole Proprietorship </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> The simplest and most common type of small business, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp">sole proprietorships</a> can have only one owner. The owner doesn’t have to file a separate tax return but reports their business income (or losses) on a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp">Schedule C form</a> attached to their regular <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/1040.asp">1040</a> tax return.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> Partnership </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> If two or more people want to own a business together, they can form a partnership. Partnerships come in two basic types: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/limitedpartnership.asp">limited partnerships (LPs)</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/090214/limited-liability-partnership-llp-basics.asp">limited liability partnerships (LLPs)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> In a limited partnership, one person serves as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/generalpartner.asp">general partner</a> and takes on most of the liability, or risk, for the company, while the other partner or partners have more limited exposure. In a limited liability partnership, all partners have limited liability. In both cases, the income from the business <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/flow-through.asp">passes through</a> to the owners, who report it on their individual tax returns.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-subheading__text"> Limited Liability Company </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/llc.asp">limited liability company (LLC)</a> can have one or more owners. As with the two types of partnerships, it is set up to reduce the owner’s or owners’ personal liability in the event of a lawsuit or other financial difficulty. LLC income can be reported on either an individual tax return or a business tax return.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="24"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_69-0"> <span class="mntl-sc-block-subheading__text"> Corporation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporation.asp">Corporations</a> can also shield their owners from financial liability resulting from the actions of the business. There are two basic types: <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subchapters.asp">S corps</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/c-corporation.asp">C corps</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> S corps can have from one to 100 owners, who report their share of the company’s profits or losses on their individual tax returns. C corps, which are probably what most people think of as a corporation, can have a single owner or many thousands of them, in the form of shareholders. C corps file <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporatetax.asp">corporate tax</a> returns, and any <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividends</a> they pay out are also taxable on the recipients’ individual tax returns, a situation sometimes referred to as <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/double_taxation.asp">double taxation</a>.<span class="ql-inline-citation" data-cite="26"></span><span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <span class="heading-toc" id="toc-benefits-of-a-small-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-heading__text"> Benefits of a Small Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Small businesses can benefit their owners in a range of ways. The business is likely to be less bureaucratic than a large company, allowing its owner or owners a greater degree of autonomy. If the business is profitable, its owners also stand to benefit more directly than they would as employees of a larger enterprise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Owning a business can also entitle a person to a long list of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businessexpenses.asp">tax deductions</a> for which might not otherwise be eligible. For example, if they work from home and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/home-office-tax-deduction.asp">maintain an office</a> there, they may be able to write off a portion of their housing costs.<span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <span class="heading-toc" id="toc-challenges-facing-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-heading__text"> Challenges Facing Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Running a small business isn’t for everyone. Just as owners stand to profit more if the business succeeds, they may suffer more financially if it fails. Many times, they will have put their life savings on the line. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> Small businesses can face other challenges based on their size. They may find it harder to raise capital for expansion or other purposes. They may also have more trouble hiring employees in a tight labor market if they’re unable to offer wage and benefit packages that are competitive with their larger counterparts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> However, many small businesses manage to overcome the obstacles. Looking at the pre-COVID years of 1994 to 2000, the SBA reports that an average of 67.7% of new businesses survived at least two years. In other words, about a third of new businesses failed, but two-thirds made it that far. The five-year survival rate for that period was 48.9%.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_86-0"><span class="heading-toc" id="toc-how-many-employees-does-a-small-business-have"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Employees Does a Small Business Have?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Depending on its industry, a small business can have as few as one employee to as many as 1,500 or so and still meet the U.S. Small Business Administration (SBA) size criteria. According to the most recent SBA figures, among small firms with paid employees (as opposed to sole proprietorships where the owner is the lone employee), the average number was 11.7.<span class="ql-inline-citation" data-cite="18"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-what-are-the-most-common-types-of-small-businesses"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Most Common Types of Small Businesses?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most common type of small business by far is a sole proprietorship, with a single owner. Among the least common would be a C corporation, which is far more costly to set up and administer.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-what-criteria-define-a-small-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Criteria Define a Small Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The SBA defines small businesses based on their revenues and numbers of employees, in accordance with their particular industry. They must also meet these general criteria, reprinted here verbatim:<span class="ql-inline-citation" data-cite="8"></span></p><ul><li>Be a for-profit business of any legal structure</li><li>Be independently owned and operated</li><li>Not be nationally dominant in its field</li><li>Be physically located and operate in the U.S. or its territories</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_92-0"><span class="heading-toc" id="toc-why-are-small-businesses-important-to-the-economy"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Are Small Businesses Important to the Economy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Small businesses are of critical importance to the economy in large measure because of the jobs they provide. According to the latest SBA figures, small businesses employ nearly half of all <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/private-sector.asp">private-sector</a> workers (46.4%), or close to 62 million people.<span class="ql-inline-citation" data-cite="3"></span> In addition, small businesses are often seen as more nimble than their larger counterparts, making them a major source of new innovations.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_94-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Small businesses play a big role in the U.S. economy. While they can be risky for their owners, they also hold the potential for significant financial rewards. In addition, studies have shown that small business owners are often happier in their jobs than people who work for others. A 2023 Pew Research Center study, for example, reported that “Most self-employed workers (62%) say they are extremely or very satisfied with their job, compared with 51% of those who are not self-employed.”<span class="ql-inline-citation" data-cite="19"></span><br/> </p></div>

## Definition of a Small Business A small business is a company of relatively limited size, as measured by its revenue, number of employees, or both. Often described as the backbone of the U.S. [economy](https://www.investopedia.com/terms/e/economy.asp), small businesses range from sole proprietorships to partnerships and corporations with multiple owners and sometimes hundreds of workers. According to the U.S. [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp), there are more than 33 million small businesses in the country today, employing close to 62 million Americans. ### Key Takeaways * Small businesses are generally defined in terms of their revenue or number of employees. * The criteria for what’s considered small can vary from one industry to another. * The U.S. Small Business Administration (SBA) sets the revenue and employee limits for specific types of business. * Qualifying as a small business can make a company eligible for government contracts and other financial benefits. * Small businesses can structure themselves in a variety of ways for tax and legal purposes, including insulating their owners from financial liability. ## Understanding Small Businesses Small businesses are typically defined by metrics such as their number of employees and their annual revenues. For simplicity’s sake, the SBA’s Office of Advocacy generally defines one as “an independent business having fewer than 500 employees.” But, as explained in the next section of this article, under the SBA’s official standards, a small business can have as many as 1,500 employees, depending on the industry, and its annual [revenue](https://www.investopedia.com/terms/r/revenue.asp) can range as high as $40 million. Most small businesses, however, are truly small. In 2023, according to SBA data, close to 82% of small businesses in the United States were one-person operations, with no employees aside from the owner. ## What Are NAICS Codes? The federal government established the [North American Industry Classification System (NAICS)](https://www.investopedia.com/terms/n/naics.asp) in 1997. Its purpose, according to the U.S. Census Bureau, was to create a standard that federal statistical agencies could use in “classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.” The NAICS assigns six-digit codes to businesses. The first two digits refer to the [sector](https://www.investopedia.com/terms/s/sector.asp) of the economy in which they operate, the next two to their particular subsector and [industry](https://www.investopedia.com/terms/i/industry.asp). The remaining digits further narrow the type of business it is, to the point that NAICS codes can be highly specific. For example, an orange grove is a 111310, while an apple orchard is a 111331, and an advertising agency is a 541810, while a public relations agency is a 541820. The NAICS codes do not differentiate between small and large businesses. For example, both a single-person ad agency and one with thousands of employees and offices all over the world would have the same six-digit number. However, the Small Business Administration uses the codes and applies its own “size standards,” either in terms of annual receipts or number of employees, to determine what constitutes a small business within a particular field. The SBA defines annual receipts as the company’s total [income](https://www.investopedia.com/terms/i/income.asp) or [gross income](https://www.investopedia.com/terms/g/grossincome.asp) plus [cost of goods sold (COGS)](https://www.investopedia.com/terms/c/cogs.asp). For example, an orange grove qualifies as a small business if it takes in no more than $4 million annually, while an apple orchard can take in up to $4.5 million. An ad agency is small if its revenue is under $25.5 million, while a PR agency can only have revenue of up to $19 million and remain small by definition. When the SBA divides businesses into small and large by the number of employees, the maximums can vary widely across industries. For example, a fruit and vegetable wholesaler can have no more than 100 employees and be considered small, while an aircraft manufacturer can have as many as 1,500. Generally speaking, 1,500 is about the maximum for any enterprise under current rules. The SBA size standards are especially important for businesses competing for government programs or contracts, as explained below. The SBA website has a [Size Standards Tool](https://www.sba.gov/size-standards/index.html) that businesses can use to see if they qualify as small under its criteria. ### Most small businesses will have a primary NAICS code, but they may also have additional codes if they offer multiple products and services. ## Importance of Small Businesses Small businesses are vital to the U.S. economy. In fact, by its definition, the SBA’s Office of Advocacy says small businesses constitute 99.9% of U.S. businesses overall. Together, they account for 43.5% of the country’s [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp) and 39.4% of private-sector payrolls. Small businesses also accounted for 62.7% of net new job creation from 1995 to 2023, the SBA says. ## Small Business Resources Small businesses that qualify are eligible for funding and other forms of assistance through the federal government, state and local governments, and private and nonprofit sources. Among the major ones: ### SBA Loans The SBA doesn’t offer loans itself but provides guarantees to approved lenders, making it easier for small businesses to borrow money. [SBA loans](https://www.investopedia.com/articles/personal-finance/091514/expanding-your-small-business-sba-loan.asp) range from $500 to $5.5 million and can be used for working capital or to finance the purchase of fixed assets, such as machinery. The SBA also has a loan program for exporters. ### Grants [Small-business grants](https://www.investopedia.com/how-get-approved-for-small-business-grant-7814312), which normally do not have to be paid back, are harder to obtain than loans. The SBA doesn’t provide grants for starting or expanding small businesses, but the federal government has several grant programs for specific types of businesses. Two of them are the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. The U.S. Treasury Department, through its State Small Business Credit Initiative, also provides money to states, U.S. territories, and tribal governments, which they can then use to support small businesses in their area. In addition, some state and local governments and a number of private corporations have their own grant-making initiatives aimed at encouraging small business. ### Government Contracting As the SBA points out, “The U.S. government is the largest customer in the world. It buys all types of products and services—in both large and small quantities—and it’s required by law to consider buying from small businesses.” To facilitate that, the SBA offers programs to help small businesses compete for federal contracts, some targeting specific types of business owners, such as women, Native Americans, or military veterans. It also administers Small Business Development Centers in every U.S. state and territory, in conjunction with the private sector, educational institutions, and state and local governments. Their goal is to provide resources to current and would-be small business owners. ## Types of Small Business Structures Small businesses can choose to structure themselves in a variety of ways for [tax and legal purposes](https://www.investopedia.com/articles/personal-finance/120915/which-type-organization-best-your-business.asp). Here are the common types, listed in relative order of complexity. ### Sole Proprietorship The simplest and most common type of small business, [sole proprietorships](https://www.investopedia.com/terms/s/soleproprietorship.asp) can have only one owner. The owner doesn’t have to file a separate tax return but reports their business income (or losses) on a [Schedule C form](https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp) attached to their regular [1040](https://www.investopedia.com/terms/1/1040.asp) tax return. ### Partnership If two or more people want to own a business together, they can form a partnership. Partnerships come in two basic types: [limited partnerships (LPs)](https://www.investopedia.com/terms/l/limitedpartnership.asp) and [limited liability partnerships (LLPs)](https://www.investopedia.com/articles/investing/090214/limited-liability-partnership-llp-basics.asp). In a limited partnership, one person serves as the [general partner](https://www.investopedia.com/terms/g/generalpartner.asp) and takes on most of the liability, or risk, for the company, while the other partner or partners have more limited exposure. In a limited liability partnership, all partners have limited liability. In both cases, the income from the business [passes through](https://www.investopedia.com/terms/f/flow-through.asp) to the owners, who report it on their individual tax returns. ### Limited Liability Company A [limited liability company (LLC)](https://www.investopedia.com/terms/l/llc.asp) can have one or more owners. As with the two types of partnerships, it is set up to reduce the owner’s or owners’ personal liability in the event of a lawsuit or other financial difficulty. LLC income can be reported on either an individual tax return or a business tax return. ### Corporation [Corporations](https://www.investopedia.com/terms/c/corporation.asp) can also shield their owners from financial liability resulting from the actions of the business. There are two basic types: [S corps](https://www.investopedia.com/terms/s/subchapters.asp) and [C corps](https://www.investopedia.com/terms/c/c-corporation.asp). S corps can have from one to 100 owners, who report their share of the company’s profits or losses on their individual tax returns. C corps, which are probably what most people think of as a corporation, can have a single owner or many thousands of them, in the form of shareholders. C corps file [corporate tax](https://www.investopedia.com/terms/c/corporatetax.asp) returns, and any [dividends](https://www.investopedia.com/terms/d/dividend.asp) they pay out are also taxable on the recipients’ individual tax returns, a situation sometimes referred to as [double taxation](https://www.investopedia.com/terms/d/double_taxation.asp). ## Benefits of a Small Business Small businesses can benefit their owners in a range of ways. The business is likely to be less bureaucratic than a large company, allowing its owner or owners a greater degree of autonomy. If the business is profitable, its owners also stand to benefit more directly than they would as employees of a larger enterprise. Owning a business can also entitle a person to a long list of [tax deductions](https://www.investopedia.com/terms/b/businessexpenses.asp) for which might not otherwise be eligible. For example, if they work from home and [maintain an office](https://www.investopedia.com/articles/pf/08/home-office-tax-deduction.asp) there, they may be able to write off a portion of their housing costs. ## Challenges Facing Small Businesses Running a small business isn’t for everyone. Just as owners stand to profit more if the business succeeds, they may suffer more financially if it fails. Many times, they will have put their life savings on the line. Small businesses can face other challenges based on their size. They may find it harder to raise capital for expansion or other purposes. They may also have more trouble hiring employees in a tight labor market if they’re unable to offer wage and benefit packages that are competitive with their larger counterparts. However, many small businesses manage to overcome the obstacles. Looking at the pre-COVID years of 1994 to 2000, the SBA reports that an average of 67.7% of new businesses survived at least two years. In other words, about a third of new businesses failed, but two-thirds made it that far. The five-year survival rate for that period was 48.9%. ## How Many Employees Does a Small Business Have? Depending on its industry, a small business can have as few as one employee to as many as 1,500 or so and still meet the U.S. Small Business Administration (SBA) size criteria. According to the most recent SBA figures, among small firms with paid employees (as opposed to sole proprietorships where the owner is the lone employee), the average number was 11.7. ## What Are the Most Common Types of Small Businesses? The most common type of small business by far is a sole proprietorship, with a single owner. Among the least common would be a C corporation, which is far more costly to set up and administer. ## What Criteria Define a Small Business? The SBA defines small businesses based on their revenues and numbers of employees, in accordance with their particular industry. They must also meet these general criteria, reprinted here verbatim: * Be a for-profit business of any legal structure * Be independently owned and operated * Not be nationally dominant in its field * Be physically located and operate in the U.S. or its territories ## Why Are Small Businesses Important to the Economy? Small businesses are of critical importance to the economy in large measure because of the jobs they provide. According to the latest SBA figures, small businesses employ nearly half of all [private-sector](https://www.investopedia.com/terms/p/private-sector.asp) workers (46.4%), or close to 62 million people. In addition, small businesses are often seen as more nimble than their larger counterparts, making them a major source of new innovations. ## The Bottom Line Small businesses play a big role in the U.S. economy. While they can be risky for their owners, they also hold the potential for significant financial rewards. In addition, studies have shown that small business owners are often happier in their jobs than people who work for others. A 2023 Pew Research Center study, for example, reported that “Most self-employed workers (62%) say they are extremely or very satisfied with their job, compared with 51% of those who are not self-employed.”

Definition of a Small Business A small business is a company of relatively limited size, as measured by its revenue, number of employees, or both. Often described as the backbone of the U.S. economy, small businesses range from sole proprietorships to partnerships and corporations with multiple owners and sometimes hundreds of workers. According to the U.S. Small Business Administration (SBA), there are more than 33 million small businesses in the country today, employing close to 62 million Americans. Key Takeaways Small businesses are generally defined in terms of their revenue or number of employees.The criteria for what’s considered small can vary from one industry to another.The U.S. Small Business Administration (SBA) sets the revenue and employee limits for specific types of business.Qualifying as a small business can make a company eligible for government contracts and other financial benefits.Small businesses can structure themselves in a variety of ways for tax and legal purposes, including insulating their owners from financial liability. Understanding Small Businesses Small businesses are typically defined by metrics such as their number of employees and their annual revenues. For simplicity’s sake, the SBA’s Office of Advocacy generally defines one as “an independent business having fewer than 500 employees.” But, as explained in the next section of this article, under the SBA’s official standards, a small business can have as many as 1,500 employees, depending on the industry, and its annual revenue can range as high as $40 million. Most small businesses, however, are truly small. In 2023, according to SBA data, close to 82% of small businesses in the United States were one-person operations, with no employees aside from the owner. What Are NAICS Codes? The federal government established the North American Industry Classification System (NAICS) in 1997. Its purpose, according to the U.S. Census Bureau, was to create a standard that federal statistical agencies could use in “classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.” The NAICS assigns six-digit codes to businesses. The first two digits refer to the sector of the economy in which they operate, the next two to their particular subsector and industry. The remaining digits further narrow the type of business it is, to the point that NAICS codes can be highly specific. For example, an orange grove is a 111310, while an apple orchard is a 111331, and an advertising agency is a 541810, while a public relations agency is a 541820. The NAICS codes do not differentiate between small and large businesses. For example, both a single-person ad agency and one with thousands of employees and offices all over the world would have the same six-digit number. However, the Small Business Administration uses the codes and applies its own “size standards,” either in terms of annual receipts or number of employees, to determine what constitutes a small business within a particular field. The SBA defines annual receipts as the company’s total income or gross income plus cost of goods sold (COGS). For example, an orange grove qualifies as a small business if it takes in no more than $4 million annually, while an apple orchard can take in up to $4.5 million. An ad agency is small if its revenue is under $25.5 million, while a PR agency can only have revenue of up to $19 million and remain small by definition. When the SBA divides businesses into small and large by the number of employees, the maximums can vary widely across industries. For example, a fruit and vegetable wholesaler can have no more than 100 employees and be considered small, while an aircraft manufacturer can have as many as 1,500. Generally speaking, 1,500 is about the maximum for any enterprise under current rules. The SBA size standards are especially important for businesses competing for government programs or contracts, as explained below. The SBA website has a Size Standards Tool that businesses can use to see if they qualify as small under its criteria. Most small businesses will have a primary NAICS code, but they may also have additional codes if they offer multiple products and services. Importance of Small Businesses Small businesses are vital to the U.S. economy. In fact, by its definition, the SBA’s Office of Advocacy says small businesses constitute 99.9% of U.S. businesses overall. Together, they account for 43.5% of the country’s gross domestic product (GDP) and 39.4% of private-sector payrolls. Small businesses also accounted for 62.7% of net new job creation from 1995 to 2023, the SBA says. Small Business Resources Small businesses that qualify are eligible for funding and other forms of assistance through the federal government, state and local governments, and private and nonprofit sources. Among the major ones: SBA Loans The SBA doesn’t offer loans itself but provides guarantees to approved lenders, making it easier for small businesses to borrow money. SBA loans range from $500 to $5.5 million and can be used for working capital or to finance the purchase of fixed assets, such as machinery. The SBA also has a loan program for exporters. Grants Small-business grants, which normally do not have to be paid back, are harder to obtain than loans. The SBA doesn’t provide grants for starting or expanding small businesses, but the federal government has several grant programs for specific types of businesses. Two of them are the Small Business Innovation Research (SBIR) program and the Small Business Technology Transfer (STTR) program. The U.S. Treasury Department, through its State Small Business Credit Initiative, also provides money to states, U.S. territories, and tribal governments, which they can then use to support small businesses in their area. In addition, some state and local governments and a number of private corporations have their owngrant-making initiatives aimed at encouraging small business. Government Contracting As the SBA points out, “The U.S. government is the largest customer in the world. It buys all types of products and services—in both large and small quantities—and it’s required by law to consider buying from small businesses.” To facilitate that, the SBA offers programs to help small businesses compete for federal contracts, some targeting specific types of business owners, such as women, Native Americans, or military veterans. It also administers Small Business Development Centers in every U.S. state and territory, in conjunction with the private sector, educational institutions, and state and local governments. Their goal is to provide resources to current and would-be small business owners. Types of Small Business Structures Small businesses can choose to structure themselves in a variety of ways for tax and legal purposes. Here are the common types, listed in relative order of complexity. Sole Proprietorship The simplest and most common type of small business, sole proprietorships can have only one owner. The owner doesn’t have to file a separate tax return but reports their business income (or losses) on a Schedule C form attached to their regular 1040 tax return. Partnership If two or more people want to own a business together, they can form a partnership. Partnerships come in two basic types: limited partnerships (LPs) and limited liability partnerships (LLPs). In a limited partnership, one person serves as the general partner and takes on most of the liability, or risk, for the company, while the other partner or partners have more limited exposure. In a limited liability partnership, all partners have limited liability. In both cases, the income from the business passes through to the owners, who report it on their individual tax returns. Limited Liability Company A limited liability company (LLC) can have one or more owners. As with the two types of partnerships, it is set up to reduce the owner’s or owners’ personal liability in the event of a lawsuit or other financial difficulty. LLC income can be reported on either an individual tax return or a business tax return. Corporation Corporations can also shield their owners from financial liability resulting from the actions of the business. There are two basic types: S corps and C corps. S corps can have from one to 100 owners, who report their share of the company’s profits or losses on their individual tax returns. C corps, which are probably what most people think of as a corporation, can have a single owner or many thousands of them, in the form of shareholders. C corps file corporate tax returns, and any dividends they pay out are also taxable on the recipients’ individual tax returns, a situation sometimes referred to as double taxation. Benefits of a Small Business Small businesses can benefit their owners in a range of ways. The business is likely to be less bureaucratic than a large company, allowing its owner or owners a greater degree of autonomy. If the business is profitable, its owners also stand to benefit more directly than they would as employees of a larger enterprise. Owning a business can also entitle a person to a long list of tax deductions for which might not otherwise be eligible. For example, if they work from home and maintain an office there, they may be able to write off a portion of their housing costs. Challenges Facing Small Businesses Running a small business isn’t for everyone. Just as owners stand to profit more if the business succeeds, they may suffer more financially if it fails. Many times, they will have put their life savings on the line. Small businesses can face other challenges based on their size. They may find it harder to raise capital for expansion or other purposes. They may also have more trouble hiring employees in a tight labor market if they’re unable to offer wage and benefit packages that are competitive with their larger counterparts. However, many small businesses manage to overcome the obstacles. Looking at the pre-COVID years of 1994 to 2000, the SBA reports that an average of 67.7% of new businesses survived at least two years. In other words, about a third of new businesses failed, but two-thirds made it that far. The five-year survival rate for that period was 48.9%. How Many Employees Does a Small Business Have? Depending on its industry, a small business can have as few as one employee to as many as 1,500 or so and still meet the U.S. Small Business Administration (SBA) size criteria. According to the most recent SBA figures, among small firms with paid employees (as opposed to sole proprietorships where the owner is the lone employee), the average number was 11.7. What Are the Most Common Types of Small Businesses? The most common type of small business by far is a sole proprietorship, with a single owner. Among the least common would be a C corporation, which is far more costly to set up and administer. What Criteria Define a Small Business? The SBA defines small businesses based on their revenues and numbers of employees, in accordance with their particular industry. They must also meet these general criteria, reprinted here verbatim:Be a for-profit business of any legal structureBe independently owned and operatedNot be nationally dominant in its fieldBe physically located and operate in the U.S. or its territories Why Are Small Businesses Important to the Economy? Small businesses are of critical importance to the economy in large measure because of the jobs they provide. According to the latest SBA figures, small businesses employ nearly half of all private-sector workers (46.4%), or close to 62 million people. In addition, small businesses are often seen as more nimble than their larger counterparts, making them a major source of new innovations. The Bottom Line Small businesses play a big role in the U.S. economy. While they can be risky for their owners, they also hold the potential for significant financial rewards. In addition, studies have shown that small business owners are often happier in their jobs than people who work for others. A 2023 Pew Research Center study, for example, reported that “Most self-employed workers (62%) say they are extremely or very satisfied with their job, compared with 51% of those who are not self-employed.”

https://www.investopedia.com/best-payment-apps-5180406

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Payment apps allow business owners to make payments directly from a smartphone without using traditional payroll methods. You can also connect your credit cards or bank accounts to a payment app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> The best payment apps offer compatibility with a wide range of credit and debit cards, quick transfer speed, and support for a wide variety of devices. We compared ease of use, lack of payment limitations, fund transfers, and even incentives for consumers. Learn more so you can choose the right option for your device. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> The Best Payment Apps for 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Ease of Use and Convenience:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> PayPal</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for International Payments:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://wise.com/us" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Wise</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Freelancers:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://stripe.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Stripe</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Invoicing:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=593723&amp;u=2366409&amp;m=52946&amp;urllink=www%2Efreshbooks%2Ecom%2F" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> FreshBooks</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Small Businesses:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> QuickBooks Online Mobile</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Peer-to-Peer App:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://venmo.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Venmo</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"></div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Payment Apps</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Payment Apps" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Payment Apps</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-PayPal" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-PayPal" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-ease-of-use-and-convenience-paypal" rel="nocaes"> <span class="link__wrapper">PayPal</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Wise" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Wise" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-international-payments-wise" rel="nocaes"> <span class="link__wrapper">Wise</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Stripe" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Stripe" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-freelancers-stripe" rel="nocaes"> <span class="link__wrapper">Stripe</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-FreshBooks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FreshBooks" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-invoicing-freshbooks" rel="nocaes"> <span class="link__wrapper">FreshBooks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-QuickBooks Online Mobile" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-QuickBooks Online Mobile" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-small-businesses-quickbooks-online-mobile" rel="nocaes"> <span class="link__wrapper">QuickBooks Online Mobile</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Venmo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Venmo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-peer-to-peer-app-venmo" rel="nocaes"> <span class="link__wrapper">Venmo</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (3)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-payment-apps" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Providers</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How Do Payment Apps Work?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-do-payment-apps-work" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">How Do Payment Apps Work?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Are Payment Apps Safe to Use?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-are-payment-apps-safe-to-use" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Are Payment Apps Safe to Use?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Types of Payments Can Be Processed With an App?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-types-of-payments-can-be-processed-with-an-app" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">What Types of Payments Can Be Processed With an App?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-for-ease-of-use-and-convenience-paypal"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Ease of Use and Convenience</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> PayPal</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 181px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="PayPal" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="PayPal" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> PayPal</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at PayPal" data-retailer-type="other" data-tracking-container="true" href="https://paypal.prf.hn/click/camref:1101loGcQ" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> We chose PayPal due to its convenient payment options, powerful brand-name recognition, and robust tools. In addition, you can send up to $60,000, depending on the currency, and can use PayPal Balance, which offers more features. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Easy to use</p></li> <li><p>Offers safe encryption and monitoring</p></li> <li><p>Free to pay friends and family</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fees apply for business accounts</p></li> <li><p>Confusing array of packaging and services for merchants</p></li> <li><p>Some banks charge a transaction fee</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> The PayPal app also made our list based on its seamless payment options between parties. Register your credit card or bank account with your PayPal account. You can then swiftly send payments by tapping "Send" or request money by tapping "Request Money." You can use PayPal Instant Transfer for a 2.5% fee (up to $25) or tap into its standard service, though it will take a couple of days to funnel into your bank account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> Users pay 2.90% to send money via a credit card or debit card. PayPal charges 5% to send international personal transactions using a PayPal balance, bank account, cards, or through an Amex Send account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> You'll feel secure with PayPal's encryption standards and 24/7 monitoring. The PayPal Security Key will also send you a temporary security code through SMS when you log in. If you accidentally send money to the wrong person, request a refund. If the individual doesn't respond, dispute the transaction with PayPal directly. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Read our full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/paypal.asp">PayPal review</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-international-payments-wise"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for International Payments</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Wise</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-8" style="--imgWidth: 142px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Wise" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/G6MkIm6yLGGBqliHodcSx-TZS-k=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wise-40ea7000bb8f4436be56367d608531ea.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Wise" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/G6MkIm6yLGGBqliHodcSx-TZS-k=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wise-40ea7000bb8f4436be56367d608531ea.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Wise</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-9"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Wise" data-retailer-type="other" data-tracking-container="true" href="https://wise.com/us" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Wise earned our top spot because it uses the standard exchange rate instead of bank rates. Anyone who transfers money internationally can use Wise. Its multi-currency account offers a cheaper alternative to the fixed fees and exchange-rate markups often charged by banks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-11"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lets you avoid bank exchange rate markups and high foreign transaction fees</p></li> <li><p>Can always pay in the local currency</p></li> <li><p>Instant notifications</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Recipients cannot track the status of transfers</p></li> <li><p>Not as fast as other payment apps</p></li> <li><p>No protection by a financial protection scheme</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> Wise took the top spot for best international payments because it doesn't charge overly large international transaction fees or exchange rates. You can send money to over 80 countries. However, you may send money to a country not on Wise's list if the recipient's account uses U.S. dollars, euros, or pounds. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> Wise offers mobile apps for Apple and Android devices and enables robust security and encryption so you can protect your personal information. You can also choose two-factor authentication for extra security. Wise doesn't offer the same protection that the Financial Services Compensation Scheme (FSCS), the U.K.'s statutory deposit insurance and investors compensation organization, offers with a bank account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> Converting money can take a maximum of two working days, but often takes less time. It also depends on how quickly the recipient's bank can process deposits and the ways in which you can send money in that particular country. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> For the personal accounts, the daily limit to receive funds is $1,000,000 and the annual limit is $5,000,000. For business accounts, the limits are $3,000,000 daily and $15,000,000 annually. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> You can spend the money you keep with the Wise card. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> If you accidentally send the wrong payment to the wrong person, try canceling the transfer yourself and set up a new transfer using the correct bank details. However, sometimes it’s too late to cancel. Once marked "complete," the money goes into the banking system. In that case, get in touch with the person you paid and ask them to contact their bank and find out whether their bank can send the money back to Wise. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-freelancers-stripe"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Freelancers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Stripe</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-18" style="--imgWidth: 665px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Stripe Logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/qcZM2ST7CBYb7HBnI-rVdj2qbiU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Stripe-325238c6cb034e01ad793ad02d501df2.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Stripe Logo" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/qcZM2ST7CBYb7HBnI-rVdj2qbiU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Stripe-325238c6cb034e01ad793ad02d501df2.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>Stripe Logo</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-19"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Stripe" data-retailer-type="other" data-tracking-container="true" href="https://stripe.com/" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> Stripe, which incorporates software and APIs to help small businesses (including freelancers) get paid, takes our top spot because of its robust payment processing platform. Its powerful products also accept payments and send payouts. Customers can send money from their bank account through a credit or debit card transaction directly to your freelancers' business account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-21"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Easy-to-navigate user interface</p></li> <li><p>Supports invoicing and regular billing, a must-have for freelancers</p></li> <li><p>Can take customer data with you when you move to a different payment system</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>First payout can take up to 14 days</p></li> <li><p>Not as familiar to some people as PayPal</p></li> <li><p>Simple payment features can look scammy</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> We chose Stripe because it's easy for freelancers to take on its suite of payment products, including the ability to accept payments and send payouts globally. Stripe accepts all major debit and credit cards from customers in every country, so you don't need to limit your clients to the U.S.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> Stripe’s products also prevent fraud, issue virtual and physical cards, and help freelancers manage how much they spend in their business. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> Stripe offers mobile apps for iPhone and Android devices. You can gain access to its comprehensive dashboard from your mobile device. It also offers transparent, pay-as-you-go pricing. Stripe costs 2.9% plus 30 cents for each successful card charge. You can do what you need to from there without extra set-up fees, monthly fees, and other hidden fees. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> As a freelancer, you'll feel secure knowing that Stripe meets PCI Service Provider Level 1 certification requirements, the highest level possible in the payments industry.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Freelancers often need to get paid quickly, and you can tap into Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card within minutes. Daily payout limits may apply but this feature works 24/7 year-round. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> Be aware that the first payout for every new Stripe account takes seven days after the first payment but can take up to 14 days for businesses in certain industries.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> As long as you own or administer the Stripe account, you can invite anyone to access the account under Business Settings. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-invoicing-freshbooks"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Invoicing</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> FreshBooks</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-29" style="--imgWidth: 24px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="FreshBooks" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/NDesGlZh0rhrd2e7x4QzEEtEovc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/FreshBooks-6825baed274b4ca7915aec101d19a819.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="FreshBooks" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/NDesGlZh0rhrd2e7x4QzEEtEovc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/FreshBooks-6825baed274b4ca7915aec101d19a819.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p> FreshBooks</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-30"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at FreshBooks" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=593723&amp;u=2366409&amp;m=52946&amp;urllink=www%2Efreshbooks%2Ecom%2F" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> FreshBooks, a cloud-based small business accounting software, won our top spot for its comprehensive time-tracking and receipt and expense management options. It also creates, edits, delivers, tracks, and successfully follows up on invoices efficiently through FreshBooks Payments, powered by WePay. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-32"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Offers a free 30-day trial</p></li> <li><p>Great for freelancers and small businesses</p></li> <li><p>Actively supports invoices</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Holds client limits</p></li> <li><p>Cannot hold money</p></li> <li><p>No payroll services</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> FreshBooks wins for best for invoicing because it automatically sends payment reminders and offers invoicing functionality. You can accept credit card payments right away and clients can pay online so the money goes into your pockets faster. That way, you can focus on your business instead of having to bug customers to pay their invoices. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> We also liked it due to its simple pricing. It charges 2.9% plus 30 cents on most credit card transactions (American Express costs more, at 3.5% plus 30 cents). Bank transfers (ACH) cost 1%. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> FreshBooks' app on the Apple App Store and Google Play runs its mobile accounting app from any iPhone or iPad running iOS 13.0 or higher and any Android device running Android 7.0 or higher. Once you have the app up, go to online payments and add your bank information.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> The app lets users either log time worked or use a timer to log work for a client or project. You can also track time for non-client work, and you can pair the timer with the invoices on the app. FreshBooks also allows you to respond to questions and seek feedback right from the app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> FreshBooks connects with banks through ACH payments and credit cards, so it can handle seamless invoice options and process transactions in approximately two business days. Freshbooks' firewalls safeguard your banking information traveling between your browser and FreshBooks with 256-bit SSL encryption. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-small-businesses-quickbooks-online-mobile"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Small Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> QuickBooks Online Mobile</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-38" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="QuickBooks Online" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/rmQmKjCHe4F6xOa5yD-c7NE2Q4Q=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Quickbooks-cf3d43abe1a24f92984c1ccc3839767e.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="QuickBooks Online" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/rmQmKjCHe4F6xOa5yD-c7NE2Q4Q=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Quickbooks-cf3d43abe1a24f92984c1ccc3839767e.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p>QuickBooks Online</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-39"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at QuickBooks" data-retailer-type="other" data-tracking-container="true" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> The QuickBooks Online Mobile app swept the best for small businesses category due to the app's touch interaction and intuitive interface. The app lets small business owners pay invoices, accept credit cards, and make debit card payments online with low effort. It can also set recurring invoices and instantly pay online. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-41"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Automatically categorizes business expense deductions</p></li> <li><p>Pays employees and contractors automatically</p></li> <li><p>Automatic tax tracking</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>User interface could use some improvements</p></li> <li><p>Expensive advanced options</p></li> <li><p>Mobile apps not comprehensive</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> QuickBooks' Online Payments app took over this category because business owners can easily accept credit card payments and get paid quickly. QuickBooks stores customers' credit card information online and automatically processes it on the due date with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-recurring-billing-software-5114532">recurring billing</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> The app can also invoice, manage cash, catalog tax deductions, track travel miles, run reports, send estimates, manage bills, check expenses, and pay employees and 1099 contractors. The app also allows for real-time alerts and connects all bookkeeping. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> You can also use GoPayment, a free mobile point-of-sale app that allows you to take payments on the go. All devices can connect to QuickBooks Online on the web with the QuickBooks Online mobile app. Funds arrive in your bank as soon as the next business day with the GoPayment app. In addition to the fees for QuickBooks online, costs include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> <li>ACH bank transfers: 1% (max $10)</li><li>Card (Swiped): 2.4% plus $0.25</li><li>Card (Invoiced): 2.9% plus $0.25</li><li>Card (Keyed): 3.4% plus $0.25</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> QuickBooks Online embraces high-tech encryption and authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> For QuickBooks Online Payments users, payments are typically deposited in two to three days while credit card payments made before 3 P.M. PT should be in the account the next business day. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> QuickBooks makes it easy to correct errors if you accidentally send a payment to the wrong person or vendor. You must delete your payment and recreate it if you send payments to the wrong account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-peer-to-peer-app-venmo"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Peer-to-Peer App</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Venmo</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-49" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Venmo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Venmo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Venmo</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Venmo" data-retailer-type="other" data-tracking-container="true" href="https://venmo.com/" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51"> We awarded Venmo our top peer-to-peer app designation for its instant transfer to a bank account or debit card, which arrives in about 30 minutes (for a 1.75% fee). Venmo works with all U.S.-based banks. You can send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-52"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Can get your money within 30 minutes</p></li> <li><p>Works with all U.S. banks</p></li> <li><p>Simple and easy to use</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Past safety and security concerns</p></li> <li><p>Fee for instant cash-out transfers to your bank account</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> We chose <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/venmo-vs-paypal-5114030">PayPal's Venmo</a> as the best peer-to-peer app for your cash because you can spend, send, or transfer money to your bank account or to a friend's with ease. You can even personalize your communication with emojis or share animated stickers with friends and family. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> You can send money using your iPhone or Android-based smartphone by choosing a sign-up method and creating a secure password. Venmo asks you to verify your phone number, email address, and bank account. In addition, you must also verify your bank account when accessing funds. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can keep money in Venmo or your bank account. Venmo requires a person-to-person spending limit of $299.99, but users can increase the weekly rolling limit up to $60,000 by verifying their identity.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> If you accidentally send money to the wrong person, you can request a return for the money. If you don’t hear back or need help sending a charge request, contact Venmo's support team, though they don't offer a recovery guarantee.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> Read our full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp">Venmo review</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict  </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> Ultimately, the best payment app depends on your needs and preferences. For example, if you freelance full-time, you may want to gravitate toward Stripe for its additional business services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> For ease of use and convenience, along with robust offerings, you can't beat PayPal. Its high standards, quick turnaround time, and encryption make it a great choice for just about any solopreneur, small business, or large company. It also fits the bill for people who need to pay each other or send other money requests. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-payment-apps"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Compare the Best Payment Apps </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-4"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Company</b></th> <th><b>Operating System</b></th> <th><b>Payment Methods</b></th> <th><b>Fees</b></th> <th><b>Transfer Speed</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="sponsored nofollow">PayPal</a> <b>Best for Ease of Use and Convenience</b></td> <td>iOS and Android</td> <td>Send payments by tapping "Send" or you can request money by tapping "Request Money."</td> <td>Free to send to friend sand family in the U.S. Users pay 2.90% plus a fixed fee to send money via a credit card. Charges 5% to send international personal transactions</td> <td>Instant transfer (paid option) or could take a few business days</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" rel="sponsored nofollow">QuickBooks Online Mobile</a> <b>Best for Small Business</b></td> <td>iOS and Android</td> <td>You can easily accept credit card payments with QuickBooks' Online Payments app. Send customers a "Pay Now" link.</td> <td>ACH bank transfers: 1% (max $10); Card (Swiped): 2.4% plus 25 cents; Card (Invoiced): 2.9% plus 25 cents; Card (Keyed): 3.4% plus 25 cents</td> <td>Funds arrive in your bank account the next business day with the GoPayment app.</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://wise.com/us" rel="sponsored nofollow">Wise</a> <b>Best for International Payments</b></td> <td>iOS and Android</td> <td>Wise Batch Payment tool for payroll allows employers to pay in more than 45 currencies</td> <td>See its website for more info. Fees vary with country and currency</td> <td>Zero to two business days</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://stripe.com/" rel="sponsored nofollow">Stripe</a> <b>Best for Freelancers</b></td> <td>iOS and Android </td> <td>Comprehensive dashboard offers many payment methods from your mobile device</td> <td>Costs 2.9% plus 30 cents for each successful card charge</td> <td>Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card or bank account within minutes; subject to daily payout limits.</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=593723&amp;u=2366409&amp;m=52946&amp;urllink=www%2Efreshbooks%2Ecom%2F" rel="sponsored nofollow">FreshBooks</a> <b>Best for Invoicing</b></td> <td>iOS and Android </td> <td>Edit, deliver, track, and successfully follow up on invoices more efficiently through FreshBooks Payments, powered by WePay</td> <td>Charges 2.9% plus 30 cents on all credit card transactions (American Express costs more, at 3.5% plus 30 cents) and bank transfers (ACH) at 1%</td> <td>Two business days</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://venmo.com/" rel="sponsored nofollow">Venmo</a> <b>Best Peer-to-Peer App</b></td> <td>iOS and Android </td> <td>Standard bank transfer through the ACH network or can keep money in Venmo or your bank account</td> <td>Send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. Instant pay feature costs 1.75% of the total cost.</td> <td>Instant transfer option available for the fastest transfer method; standard bank transfer method takes between one and three business days.</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-5"> <span class="heading-toc" id="toc-how-do-payment-apps-work"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Payment Apps Work?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Payment apps offer convenience for business owners, contractors, and individuals who want to send money from person to person. Payment apps work by allowing you to make payments directly from your smartphone. You can make payments through your app without needing to have your credit card or debit card handy at all. The app may allow you to bypass a bank altogether and may offer other features, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/invoice-financing.asp">business invoicing</a>, timers to track work, and more.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-6"> <span class="heading-toc" id="toc-are-payment-apps-safe-to-use"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Payment Apps Safe to Use?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The payment apps on our list were specifically tested for their safety features. You can usually find protection against unauthorized transactions with a payment app but may not get the same type of financial protection you might get through FDIC-protected <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/banking-101/">banks</a> or other financial institutions.<span class="ql-inline-citation" data-cite="1"></span> Many apps offer authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-7"> <span class="heading-toc" id="toc-what-types-of-payments-can-be-processed-with-an-app"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Types of Payments Can Be Processed With an App?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>From making customer billing payments to paying a friend for drinks or dinner, payment apps will <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-money-transfer-apps-5180183">transfer payments</a> between two parties through individual banking accounts or credit cards. You can register your business or personal credit, debit, or ACH information once. Then, in just a few taps, you can pay employees, purchase goods, pay a bill, and even keep track of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/invoice.asp#:~:text=What%20Is%20an%20Invoice%3F,the%20available%20methods%20of%20payment.">invoices</a> and business expenses.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-8"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> We analyzed a dozen apps offered by the top companies for the best user experience and assessed app pricing, features, user reviews, and ratings. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> We considered apps that primarily focus on payments, that come with low (or no) cost to sign up, offer an easy-to-use interface, and that provide multiple device accessibility. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-11"> We also looked into security features, products, educational tools, security, and how each app accesses your financial data. Finally, the apps on the list have thousands of reviews and high ratings in the App Store and on Google Play. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Closeup of two people managing payment with smart phone app" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/GKGb0Za3QzVmbZ1O5Luzck1_w7Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg" srcset="https://www.investopedia.com/thmb/NQXX5MgNnDImQeDlyrm6YfhxQ7I=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="Closeup of two people managing payment with smart phone app" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/GKGb0Za3QzVmbZ1O5Luzck1_w7Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg" srcset="https://www.investopedia.com/thmb/NQXX5MgNnDImQeDlyrm6YfhxQ7I=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Oscar Wong / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. 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You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>Federal Deposit Insurance Corporation. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.fdic.gov/resources/deposit-insurance/faq/">Deposit Insurance</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5180183" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-money-transfer-apps-5180183" id="mntl-card-list-items_1-0"> <div class="card__media" data-tag="Banking"> <img alt="Best-money-transfer-apps-5180183" class="lazyload card__img" data-dim-ratio="1.5" data-src="https://www.investopedia.com/thmb/7PeQw5TEAA2CiB_-w_IWyF4rIVs=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg" height="300" width="400"/> <noscript> <img alt="Best-money-transfer-apps-5180183" class="img--noscript card__img" height="300" src="https://www.investopedia.com/thmb/7PeQw5TEAA2CiB_-w_IWyF4rIVs=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg" width="400"/> </noscript> </div> <div class="card__content" data-tag="Banking"> <div class="card__header"></div> <span class="card__title"><span class="card__title-text">The Best Money Transfer Apps for 2024</span></span> <div class="card__byline mntl-card__byline" data-byline="By Melissa Brock"></div> </div> </a> <a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="8399586" data-ordinal="2" data-tax-levels="" href="https://www.investopedia.com/venmo-teen-debit-card-review-8399586" id="mntl-card-list-items_2-0"> <div class="card__media" data-tag="Checking Accounts"> <img alt="A cheerful mother and daughter hold a debit card while looking at a tablet computer." class="lazyload card__img" data-dim-ratio="1.5" data-src="https://www.investopedia.com/thmb/18jTGGsVbNn3-9GtkMZnJgEA4o4=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/Momanddaughterwithdebitcard-adbb458ebc024b029df9696f82a62248.jpeg" height="300" width="400"/> <noscript> <img alt="A cheerful mother and daughter hold a debit card while looking at a tablet computer." class="img--noscript card__img" height="300" src="https://www.investopedia.com/thmb/18jTGGsVbNn3-9GtkMZnJgEA4o4=/400x300/filters:no_upscale():max_bytes(150000):strip_icc()/Momanddaughterwithdebitcard-adbb458ebc024b029df9696f82a62248.jpeg" width="400"/> </noscript> </div> <div class="card__content" data-tag="Checking Accounts"> <div class="card__header"></div> <span class="card__title"><span class="card__title-text">Venmo Teen Debit Card Review 2024</span></span> <div class="card__byline mntl-card__byline" data-byline="By Ben Luthi"></div> </div> </a> <a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="5069679" data-ordinal="3" data-tax-levels="" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679" id="mntl-card-list-items_3-0"> <div class="card__media" data-tag="Small Business"> <img alt="A man with a close-cropped beard seated at a desk writes on a notepad. 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Payment apps allow business owners to make payments directly from a smartphone without using traditional payroll methods. You can also connect your credit cards or bank accounts to a payment app. The best payment apps offer compatibility with a wide range of credit and debit cards, quick transfer speed, and support for a wide variety of devices. We compared ease of use, lack of payment limitations, fund transfers, and even incentives for consumers. Learn more so you can choose the right option for your device. ## The Best Payment Apps for 2024 * **Best for Ease of Use and Convenience:** [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) * **Best for International Payments:** [Wise](https://wise.com/us) * **Best for Freelancers:** [Stripe](https://stripe.com/) * **Best for Invoicing:** [FreshBooks](https://shareasale.com/r.cfm?b=593723&u=2366409&m=52946&urllink=www%2Efreshbooks%2Ecom%2F) * **Best for Small Businesses:** [QuickBooks Online Mobile](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) * **Best Peer-to-Peer App:** [Venmo](https://venmo.com/) Best Payment Apps Expand Best Payment Apps * [Our Top Picks](#summary-list) * [PayPal](#toc-best-for-ease-of-use-and-convenience-paypal) * [Wise](#toc-best-for-international-payments-wise) * [Stripe](#toc-best-for-freelancers-stripe) * [FreshBooks](#toc-best-for-invoicing-freshbooks) * [QuickBooks Online Mobile](#toc-best-for-small-businesses-quickbooks-online-mobile) * [Venmo](#toc-best-peer-to-peer-app-venmo) * See More (3) * [Final Verdict](#toc-final-verdict) * [Compare Providers](#toc-compare-the-best-payment-apps) * [How Do Payment Apps Work?](#toc-how-do-payment-apps-work) * [Are Payment Apps Safe to Use?](#toc-are-payment-apps-safe-to-use) * [What Types of Payments Can Be Processed With an App?](#toc-what-types-of-payments-can-be-processed-with-an-app) * [Methodology](#toc-methodology) ### Best for Ease of Use and Convenience : PayPal --- ![PayPal]() :fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg)  PayPal [Learn More](https://paypal.prf.hn/click/camref:1101loGcQ) We chose PayPal due to its convenient payment options, powerful brand-name recognition, and robust tools. In addition, you can send up to $60,000, depending on the currency, and can use PayPal Balance, which offers more features. Pros * Easy to use * Offers safe encryption and monitoring * Free to pay friends and family Cons * Fees apply for business accounts * Confusing array of packaging and services for merchants * Some banks charge a transaction fee The PayPal app also made our list based on its seamless payment options between parties. Register your credit card or bank account with your PayPal account. You can then swiftly send payments by tapping "Send" or request money by tapping "Request Money." You can use PayPal Instant Transfer for a 2.5% fee (up to $25) or tap into its standard service, though it will take a couple of days to funnel into your bank account. Users pay 2.90% to send money via a credit card or debit card. PayPal charges 5% to send international personal transactions using a PayPal balance, bank account, cards, or through an Amex Send account. You'll feel secure with PayPal's encryption standards and 24/7 monitoring. The PayPal Security Key will also send you a temporary security code through SMS when you log in. If you accidentally send money to the wrong person, request a refund. If the individual doesn't respond, dispute the transaction with PayPal directly. Read our full [PayPal review](https://www.investopedia.com/terms/p/paypal.asp). ### Best for International Payments : Wise --- ![Wise]() :fill(white):max_bytes(150000):strip_icc()/Wise-40ea7000bb8f4436be56367d608531ea.jpg) Wise [Learn More](https://wise.com/us) Wise earned our top spot because it uses the standard exchange rate instead of bank rates. Anyone who transfers money internationally can use Wise. Its multi-currency account offers a cheaper alternative to the fixed fees and exchange-rate markups often charged by banks. Pros * Lets you avoid bank exchange rate markups and high foreign transaction fees * Can always pay in the local currency * Instant notifications Cons * Recipients cannot track the status of transfers * Not as fast as other payment apps * No protection by a financial protection scheme Wise took the top spot for best international payments because it doesn't charge overly large international transaction fees or exchange rates. You can send money to over 80 countries. However, you may send money to a country not on Wise's list if the recipient's account uses U.S. dollars, euros, or pounds. Wise offers mobile apps for Apple and Android devices and enables robust security and encryption so you can protect your personal information. You can also choose two-factor authentication for extra security. Wise doesn't offer the same protection that the Financial Services Compensation Scheme (FSCS), the U.K.'s statutory deposit insurance and investors compensation organization, offers with a bank account. Converting money can take a maximum of two working days, but often takes less time. It also depends on how quickly the recipient's bank can process deposits and the ways in which you can send money in that particular country. For the personal accounts, the daily limit to receive funds is $1,000,000 and the annual limit is $5,000,000. For business accounts, the limits are $3,000,000 daily and $15,000,000 annually. You can spend the money you keep with the Wise card. If you accidentally send the wrong payment to the wrong person, try canceling the transfer yourself and set up a new transfer using the correct bank details. However, sometimes it’s too late to cancel. Once marked "complete," the money goes into the banking system. In that case, get in touch with the person you paid and ask them to contact their bank and find out whether their bank can send the money back to Wise. ### Best for Freelancers : Stripe --- ![Stripe Logo]() :fill(white):max_bytes(150000):strip_icc()/Stripe-325238c6cb034e01ad793ad02d501df2.jpg) Stripe Logo [Learn More](https://stripe.com/) Stripe, which incorporates software and APIs to help small businesses (including freelancers) get paid, takes our top spot because of its robust payment processing platform. Its powerful products also accept payments and send payouts. Customers can send money from their bank account through a credit or debit card transaction directly to your freelancers' business account. Pros * Easy-to-navigate user interface * Supports invoicing and regular billing, a must-have for freelancers * Can take customer data with you when you move to a different payment system Cons * First payout can take up to 14 days * Not as familiar to some people as PayPal * Simple payment features can look scammy We chose Stripe because it's easy for freelancers to take on its suite of payment products, including the ability to accept payments and send payouts globally. Stripe accepts all major debit and credit cards from customers in every country, so you don't need to limit your clients to the U.S.  Stripe’s products also prevent fraud, issue virtual and physical cards, and help freelancers manage how much they spend in their business. Stripe offers mobile apps for iPhone and Android devices. You can gain access to its comprehensive dashboard from your mobile device. It also offers transparent, pay-as-you-go pricing. Stripe costs 2.9% plus 30 cents for each successful card charge. You can do what you need to from there without extra set-up fees, monthly fees, and other hidden fees. As a freelancer, you'll feel secure knowing that Stripe meets PCI Service Provider Level 1 certification requirements, the highest level possible in the payments industry.  Freelancers often need to get paid quickly, and you can tap into Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card within minutes. Daily payout limits may apply but this feature works 24/7 year-round. Be aware that the first payout for every new Stripe account takes seven days after the first payment but can take up to 14 days for businesses in certain industries.  As long as you own or administer the Stripe account, you can invite anyone to access the account under Business Settings. ### Best for Invoicing : FreshBooks --- ![FreshBooks]() :fill(white):max_bytes(150000):strip_icc()/FreshBooks-6825baed274b4ca7915aec101d19a819.jpg)  FreshBooks [Learn More](https://shareasale.com/r.cfm?b=593723&u=2366409&m=52946&urllink=www%2Efreshbooks%2Ecom%2F) FreshBooks, a cloud-based small business accounting software, won our top spot for its comprehensive time-tracking and receipt and expense management options. It also creates, edits, delivers, tracks, and successfully follows up on invoices efficiently through FreshBooks Payments, powered by WePay. Pros * Offers a free 30-day trial * Great for freelancers and small businesses * Actively supports invoices Cons * Holds client limits * Cannot hold money * No payroll services FreshBooks wins for best for invoicing because it automatically sends payment reminders and offers invoicing functionality. You can accept credit card payments right away and clients can pay online so the money goes into your pockets faster. That way, you can focus on your business instead of having to bug customers to pay their invoices. We also liked it due to its simple pricing. It charges 2.9% plus 30 cents on most credit card transactions (American Express costs more, at 3.5% plus 30 cents). Bank transfers (ACH) cost 1%. FreshBooks' app on the Apple App Store and Google Play runs its mobile accounting app from any iPhone or iPad running iOS 13.0 or higher and any Android device running Android 7.0 or higher. Once you have the app up, go to online payments and add your bank information.  The app lets users either log time worked or use a timer to log work for a client or project. You can also track time for non-client work, and you can pair the timer with the invoices on the app. FreshBooks also allows you to respond to questions and seek feedback right from the app. FreshBooks connects with banks through ACH payments and credit cards, so it can handle seamless invoice options and process transactions in approximately two business days. Freshbooks' firewalls safeguard your banking information traveling between your browser and FreshBooks with 256-bit SSL encryption. ### Best for Small Businesses : QuickBooks Online Mobile --- ![QuickBooks Online]() :fill(white):max_bytes(150000):strip_icc()/Quickbooks-cf3d43abe1a24f92984c1ccc3839767e.jpg) QuickBooks Online [Learn More](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) The QuickBooks Online Mobile app swept the best for small businesses category due to the app's touch interaction and intuitive interface. The app lets small business owners pay invoices, accept credit cards, and make debit card payments online with low effort. It can also set recurring invoices and instantly pay online. Pros * Automatically categorizes business expense deductions * Pays employees and contractors automatically * Automatic tax tracking Cons * User interface could use some improvements * Expensive advanced options * Mobile apps not comprehensive QuickBooks' Online Payments app took over this category because business owners can easily accept credit card payments and get paid quickly. QuickBooks stores customers' credit card information online and automatically processes it on the due date with [recurring billing](https://www.investopedia.com/best-recurring-billing-software-5114532). The app can also invoice, manage cash, catalog tax deductions, track travel miles, run reports, send estimates, manage bills, check expenses, and pay employees and 1099 contractors. The app also allows for real-time alerts and connects all bookkeeping. You can also use GoPayment, a free mobile point-of-sale app that allows you to take payments on the go. All devices can connect to QuickBooks Online on the web with the QuickBooks Online mobile app. Funds arrive in your bank as soon as the next business day with the GoPayment app. In addition to the fees for QuickBooks online, costs include: * ACH bank transfers: 1% (max $10) * Card (Swiped): 2.4% plus $0.25 * Card (Invoiced): 2.9% plus $0.25 * Card (Keyed): 3.4% plus $0.25 QuickBooks Online embraces high-tech encryption and authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information. For QuickBooks Online Payments users, payments are typically deposited in two to three days while credit card payments made before 3 P.M. PT should be in the account the next business day. QuickBooks makes it easy to correct errors if you accidentally send a payment to the wrong person or vendor. You must delete your payment and recreate it if you send payments to the wrong account. ### Best Peer-to-Peer App : Venmo --- ![Venmo]() :fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg)  Venmo [Learn More](https://venmo.com/) We awarded Venmo our top peer-to-peer app designation for its instant transfer to a bank account or debit card, which arrives in about 30 minutes (for a 1.75% fee). Venmo works with all U.S.-based banks. You can send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. Pros * Can get your money within 30 minutes * Works with all U.S. banks * Simple and easy to use Cons * Past safety and security concerns * Fee for instant cash-out transfers to your bank account We chose [PayPal's Venmo](https://www.investopedia.com/venmo-vs-paypal-5114030) as the best peer-to-peer app for your cash because you can spend, send, or transfer money to your bank account or to a friend's with ease. You can even personalize your communication with emojis or share animated stickers with friends and family. You can send money using your iPhone or Android-based smartphone by choosing a sign-up method and creating a secure password. Venmo asks you to verify your phone number, email address, and bank account. In addition, you must also verify your bank account when accessing funds. The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can keep money in Venmo or your bank account. Venmo requires a person-to-person spending limit of $299.99, but users can increase the weekly rolling limit up to $60,000 by verifying their identity.  You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN.  If you accidentally send money to the wrong person, you can request a return for the money. If you don’t hear back or need help sending a charge request, contact Venmo's support team, though they don't offer a recovery guarantee.  Read our full [Venmo review](https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp). ## Final Verdict Ultimately, the best payment app depends on your needs and preferences. For example, if you freelance full-time, you may want to gravitate toward Stripe for its additional business services. For ease of use and convenience, along with robust offerings, you can't beat PayPal. Its high standards, quick turnaround time, and encryption make it a great choice for just about any solopreneur, small business, or large company. It also fits the bill for people who need to pay each other or send other money requests. ## Compare the Best Payment Apps | **Company** | **Operating System** | **Payment Methods** | **Fees** | **Transfer Speed** | | --- | --- | --- | --- | --- | | [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) **Best for Ease of Use and Convenience** | iOS and Android | Send payments by tapping "Send" or you can request money by tapping "Request Money." | Free to send to friend sand family in the U.S. Users pay 2.90% plus a fixed fee to send money via a credit card. Charges 5% to send international personal transactions | Instant transfer (paid option) or could take a few business days | | [QuickBooks Online Mobile](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) **Best for Small Business** | iOS and Android | You can easily accept credit card payments with QuickBooks' Online Payments app. Send customers a "Pay Now" link. | ACH bank transfers: 1% (max $10); Card (Swiped): 2.4% plus 25 cents; Card (Invoiced): 2.9% plus 25 cents; Card (Keyed): 3.4% plus 25 cents | Funds arrive in your bank account the next business day with the GoPayment app. | | [Wise](https://wise.com/us) **Best for International Payments** | iOS and Android | Wise Batch Payment tool for payroll allows employers to pay in more than 45 currencies | See its website for more info. Fees vary with country and currency | Zero to two business days | | [Stripe](https://stripe.com/) **Best for Freelancers** | iOS and Android | Comprehensive dashboard offers many payment methods from your mobile device | Costs 2.9% plus 30 cents for each successful card charge | Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card or bank account within minutes; subject to daily payout limits. | | [FreshBooks](https://shareasale.com/r.cfm?b=593723&u=2366409&m=52946&urllink=www%2Efreshbooks%2Ecom%2F) **Best for Invoicing** | iOS and Android | Edit, deliver, track, and successfully follow up on invoices more efficiently through FreshBooks Payments, powered by WePay | Charges 2.9% plus 30 cents on all credit card transactions (American Express costs more, at 3.5% plus 30 cents) and bank transfers (ACH) at 1% | Two business days | | [Venmo](https://venmo.com/) **Best Peer-to-Peer App** | iOS and Android | Standard bank transfer through the ACH network or can keep money in Venmo or your bank account | Send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. Instant pay feature costs 1.75% of the total cost. | Instant transfer option available for the fastest transfer method; standard bank transfer method takes between one and three business days. | ## How Do Payment Apps Work? Payment apps offer convenience for business owners, contractors, and individuals who want to send money from person to person. Payment apps work by allowing you to make payments directly from your smartphone. You can make payments through your app without needing to have your credit card or debit card handy at all. The app may allow you to bypass a bank altogether and may offer other features, such as [business invoicing](https://www.investopedia.com/terms/i/invoice-financing.asp), timers to track work, and more. ## Are Payment Apps Safe to Use? The payment apps on our list were specifically tested for their safety features. You can usually find protection against unauthorized transactions with a payment app but may not get the same type of financial protection you might get through FDIC-protected [banks](https://www.investopedia.com/personal-finance/banking-101/) or other financial institutions. Many apps offer authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information. ## What Types of Payments Can Be Processed With an App? From making customer billing payments to paying a friend for drinks or dinner, payment apps will [transfer payments](https://www.investopedia.com/best-money-transfer-apps-5180183) between two parties through individual banking accounts or credit cards. You can register your business or personal credit, debit, or ACH information once. Then, in just a few taps, you can pay employees, purchase goods, pay a bill, and even keep track of [invoices](https://www.investopedia.com/terms/i/invoice.asp#:~:text=What%20Is%20an%20Invoice%3F,the%20available%20methods%20of%20payment.) and business expenses. ## Methodology We analyzed a dozen apps offered by the top companies for the best user experience and assessed app pricing, features, user reviews, and ratings. We considered apps that primarily focus on payments, that come with low (or no) cost to sign up, offer an easy-to-use interface, and that provide multiple device accessibility. We also looked into security features, products, educational tools, security, and how each app accesses your financial data. Finally, the apps on the list have thousands of reviews and high ratings in the App Store and on Google Play. :max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-payment-apps-5180406-1cf06edf7e9b4522a8c58cb7fc9c60f4.jpg) Oscar Wong / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Federal Deposit Insurance Corporation. “[Deposit Insurance](https://www.fdic.gov/resources/deposit-insurance/faq/)." 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Meanwhile a laptop screen and a desktop monitor display an invoice and a spreadsheet, respectively.]() :max_bytes(150000):strip_icc()/GettyImages-1442731807-de72b6667831444298d539e63d58693f.jpg) Best Accounting Software for Small Businesses for May 2024](https://www.investopedia.com/best-accounting-software-for-small-business-5069679) [![PayPal]() :max_bytes(150000):strip_icc()/paypal.asp-final-1101556384f049bf9f24d7ad7a59494c.jpg) What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) [![Young Adult Uses Mobile Device]() :max_bytes(150000):strip_icc()/teenwphone-e6f22e15d52a416c9b60ce2310a9f3f5.jpg) Best Ways to Send Money as a Teen](https://www.investopedia.com/best-ways-to-send-money-as-a-teen-7152565) [![Accounting Software]() :max_bytes(150000):strip_icc()/roundup_primary_INV_personalloans-1b5e39dcc5cb44f58e26fa56b5cba60e.jpg) Best Accounting Software](https://www.investopedia.com/best-accounting-software-5069131) Related Terms [What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. [more](https://www.investopedia.com/terms/p/paypal.asp) [Merchant Services: Their Role in Business, How They Work, and Benefits](https://www.investopedia.com/merchant-service-8624263) Merchant services help businesses accept and process electronic payments from customers. They can include point-of-sale systems, credit card readers, payment gateways, and online transaction processing. [more](https://www.investopedia.com/merchant-service-8624263) [What Is a Mobile Wallet?](https://www.investopedia.com/terms/m/mobile-wallet.asp) A mobile wallet is an app that stores payment card information and other on a mobile device. [more](https://www.investopedia.com/terms/m/mobile-wallet.asp) [Remittance: What It Is and How to Send One](https://www.investopedia.com/terms/r/remittance.asp) A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. [more](https://www.investopedia.com/terms/r/remittance.asp) [What Is a Digital Wallet?](https://www.investopedia.com/terms/d/digital-wallet.asp) A digital wallet is an application on an electronic device that stores payment information and allows you to securely make purchases without carrying cash or cards. [more](https://www.investopedia.com/terms/d/digital-wallet.asp) [Unified Payments Interface (UPI): Definition and How It Works](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp) A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. [more](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp)

Payment apps allow business owners to make payments directly from a smartphone without using traditional payroll methods. You can also connect your credit cards or bank accounts to a payment app. The best payment apps offer compatibility with a wide range of credit and debit cards, quick transfer speed, and support for a wide variety of devices. We compared ease of use, lack of payment limitations, fund transfers, and even incentives for consumers. Learn more so you can choose the right option for your device. The Best Payment Apps for 2024 Best for Ease of Use and Convenience: PayPal Best for International Payments: Wise Best for Freelancers: Stripe Best for Invoicing: FreshBooks Best for Small Businesses: QuickBooks Online Mobile Best Peer-to-Peer App: Venmo Best Payment Apps Expand Best Payment Apps Our Top Picks PayPal Wise Stripe FreshBooks QuickBooks Online Mobile Venmo See More (3) Final Verdict Compare Providers How Do Payment Apps Work? Are Payment Apps Safe to Use? What Types of Payments Can Be Processed With an App? Methodology Best for Ease of Use and Convenience : PayPal  PayPal Learn More We chose PayPal due to its convenient payment options, powerful brand-name recognition, and robust tools. In addition, you can send up to $60,000, depending on the currency, and can use PayPal Balance, which offers more features. Pros Easy to use Offers safe encryption and monitoring Free to pay friends and family Cons Fees apply for business accounts Confusing array of packaging and services for merchants Some banks charge a transaction fee The PayPal app also made our list based on its seamless payment options between parties. Register your credit card or bank account with your PayPal account. You can then swiftly send payments by tapping "Send" or request money by tapping "Request Money." You can use PayPal Instant Transfer for a 2.5% fee (up to $25) or tap into its standard service, though it will take a couple of days to funnel into your bank account. Users pay 2.90% to send money via a credit card or debit card. PayPal charges 5% to send international personal transactions using a PayPal balance, bank account, cards, or through an Amex Send account. You'll feel secure with PayPal's encryption standards and 24/7 monitoring. The PayPal Security Key will also send you a temporary security code through SMS when you log in. If you accidentally send money to the wrong person, request a refund. If the individual doesn't respond, dispute the transaction with PayPal directly. Read our full PayPal review. Best for International Payments : Wise Wise Learn More Wise earned our top spot because it uses the standard exchange rate instead of bank rates. Anyone who transfers money internationally can use Wise. Its multi-currency account offers a cheaper alternative to the fixed fees and exchange-rate markups often charged by banks. Pros Lets you avoid bank exchange rate markups and high foreign transaction fees Can always pay in the local currency Instant notifications Cons Recipients cannot track the status of transfers Not as fast as other payment apps No protection by a financial protection scheme Wise took the top spot for best international payments because it doesn't charge overly large international transaction fees or exchange rates. You can send money to over 80 countries. However, you may send money to a country not on Wise's list if the recipient's account uses U.S. dollars, euros, or pounds. Wise offers mobile apps for Apple and Android devices and enables robust security and encryption so you can protect your personal information. You can also choose two-factor authentication for extra security. Wise doesn't offer the same protection that the Financial Services Compensation Scheme (FSCS), the U.K.'s statutory deposit insurance and investors compensation organization, offers with a bank account. Converting money can take a maximum of two working days, but often takes less time. It also depends on how quickly the recipient's bank can process deposits and the ways in which you can send money in that particular country. For the personal accounts, the daily limit to receive funds is $1,000,000 and the annual limit is $5,000,000. For business accounts, the limits are $3,000,000 daily and $15,000,000 annually. You can spend the money you keep with the Wise card. If you accidentally send the wrong payment to the wrong person, try canceling the transfer yourself and set up a new transfer using the correct bank details. However, sometimes it’s too late to cancel. Once marked "complete," the money goes into the banking system. In that case, get in touch with the person you paid and ask them to contact their bank and find out whether their bank can send the money back to Wise. Best for Freelancers : Stripe Stripe Logo Learn More Stripe, which incorporates software and APIs to help small businesses (including freelancers) get paid, takes our top spot because of its robust payment processing platform. Its powerful products also accept payments and send payouts. Customers can send money from their bank account through a credit or debit card transaction directly to your freelancers' business account. Pros Easy-to-navigate user interface Supports invoicing and regular billing, a must-have for freelancers Can take customer data with you when you move to a different payment system Cons First payout can take up to 14 days Not as familiar to some people as PayPal Simple payment features can look scammy We chose Stripe because it's easy for freelancers to take on its suite of payment products, including the ability to accept payments and send payouts globally. Stripe accepts all major debit and credit cards from customers in every country, so you don't need to limit your clients to the U.S.  Stripe’s products also prevent fraud, issue virtual and physical cards, and help freelancers manage how much they spend in their business. Stripe offers mobile apps for iPhone and Android devices. You can gain access to its comprehensive dashboard from your mobile device. It also offers transparent, pay-as-you-go pricing. Stripe costs 2.9% plus 30 cents for each successful card charge. You can do what you need to from there without extra set-up fees, monthly fees, and other hidden fees. As a freelancer, you'll feel secure knowing that Stripe meets PCI Service Provider Level 1 certification requirements, the highest level possible in the payments industry.  Freelancers often need to get paid quickly, and you can tap into Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card within minutes. Daily payout limits may apply but this feature works 24/7 year-round. Be aware that the first payout for every new Stripe account takes seven days after the first payment but can take up to 14 days for businesses in certain industries.  As long as you own or administer the Stripe account, you can invite anyone to access the account under Business Settings. Best for Invoicing : FreshBooks  FreshBooks Learn More FreshBooks, a cloud-based small business accounting software, won our top spot for its comprehensive time-tracking and receipt and expense management options. It also creates, edits, delivers, tracks, and successfully follows up on invoices efficiently through FreshBooks Payments, powered by WePay. Pros Offers a free 30-day trial Great for freelancers and small businesses Actively supports invoices Cons Holds client limits Cannot hold money No payroll services FreshBooks wins for best for invoicing because it automatically sends payment reminders and offers invoicing functionality. You can accept credit card payments right away and clients can pay online so the money goes into your pockets faster. That way, you can focus on your business instead of having to bug customers to pay their invoices. We also liked it due to its simple pricing. It charges 2.9% plus 30 cents on most credit card transactions (American Express costs more, at 3.5% plus 30 cents). Bank transfers (ACH) cost 1%. FreshBooks' app on the Apple App Store and Google Play runs its mobile accounting app from any iPhone or iPad running iOS 13.0 or higher and any Android device running Android 7.0 or higher. Once you have the app up, go to online payments and add your bank information.  The app lets users either log time worked or use a timer to log work for a client or project. You can also track time for non-client work, and you can pair the timer with the invoices on the app. FreshBooks also allows you to respond to questions and seek feedback right from the app. FreshBooks connects with banks through ACH payments and credit cards, so it can handle seamless invoice options and process transactions in approximately two business days. Freshbooks' firewalls safeguard your banking information traveling between your browser and FreshBooks with 256-bit SSL encryption. Best for Small Businesses : QuickBooks Online Mobile QuickBooks Online Learn More The QuickBooks Online Mobile app swept the best for small businesses category due to the app's touch interaction and intuitive interface. The app lets small business owners pay invoices, accept credit cards, and make debit card payments online with low effort. It can also set recurring invoices and instantly pay online. Pros Automatically categorizes business expense deductions Pays employees and contractors automatically Automatic tax tracking Cons User interface could use some improvements Expensive advanced options Mobile apps not comprehensive QuickBooks' Online Payments app took over this category because business owners can easily accept credit card payments and get paid quickly. QuickBooks stores customers' credit card information online and automatically processes it on the due date with recurring billing. The app can also invoice, manage cash, catalog tax deductions, track travel miles, run reports, send estimates, manage bills, check expenses, and pay employees and 1099 contractors. The app also allows for real-time alerts and connects all bookkeeping. You can also use GoPayment, a free mobile point-of-sale app that allows you to take payments on the go. All devices can connect to QuickBooks Online on the web with the QuickBooks Online mobile app. Funds arrive in your bank as soon as the next business day with the GoPayment app. In addition to the fees for QuickBooks online, costs include: ACH bank transfers: 1% (max $10)Card (Swiped): 2.4% plus $0.25Card (Invoiced): 2.9% plus $0.25Card (Keyed): 3.4% plus $0.25 QuickBooks Online embraces high-tech encryption and authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information. For QuickBooks Online Payments users, payments are typically deposited in two to three days while credit card payments made before 3 P.M. PT should be in the account the next business day. QuickBooks makes it easy to correct errors if you accidentally send a payment to the wrong person or vendor. You must delete your payment and recreate it if you send payments to the wrong account. Best Peer-to-Peer App : Venmo  Venmo Learn More We awarded Venmo our top peer-to-peer app designation for its instant transfer to a bank account or debit card, which arrives in about 30 minutes (for a 1.75% fee). Venmo works with all U.S.-based banks. You can send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. Pros Can get your money within 30 minutes Works with all U.S. banks Simple and easy to use Cons Past safety and security concerns Fee for instant cash-out transfers to your bank account We chose PayPal's Venmo as the best peer-to-peer app for your cash because you can spend, send, or transfer money to your bank account or to a friend's with ease. You can even personalize your communication with emojis or share animated stickers with friends and family. You can send money using your iPhone or Android-based smartphone by choosing a sign-up method and creating a secure password. Venmo asks you to verify your phone number, email address, and bank account. In addition, you must also verify your bank account when accessing funds. The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can keep money in Venmo or your bank account. Venmo requires a person-to-person spending limit of $299.99, but users can increase the weekly rolling limit up to $60,000 by verifying their identity.  You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN.  If you accidentally send money to the wrong person, you can request a return for the money. If you don’t hear back or need help sending a charge request, contact Venmo's support team, though they don't offer a recovery guarantee.  Read our full Venmo review. Final Verdict  Ultimately, the best payment app depends on your needs and preferences. For example, if you freelance full-time, you may want to gravitate toward Stripe for its additional business services. For ease of use and convenience, along with robust offerings, you can't beat PayPal. Its high standards, quick turnaround time, and encryption make it a great choice for just about any solopreneur, small business, or large company. It also fits the bill for people who need to pay each other or send other money requests. Compare the Best Payment Apps Company Operating System Payment Methods Fees Transfer Speed PayPal Best for Ease of Use and Convenience iOS and Android Send payments by tapping "Send" or you can request money by tapping "Request Money." Free to send to friend sand family in the U.S. Users pay 2.90% plus a fixed fee to send money via a credit card. Charges 5% to send international personal transactions Instant transfer (paid option) or could take a few business days QuickBooks Online Mobile Best for Small Business iOS and Android You can easily accept credit card payments with QuickBooks' Online Payments app. Send customers a "Pay Now" link. ACH bank transfers: 1% (max $10); Card (Swiped): 2.4% plus 25 cents; Card (Invoiced): 2.9% plus 25 cents; Card (Keyed): 3.4% plus 25 cents Funds arrive in your bank account the next business day with the GoPayment app. Wise Best for International Payments iOS and Android Wise Batch Payment tool for payroll allows employers to pay in more than 45 currencies See its website for more info. Fees vary with country and currency Zero to two business days Stripe Best for Freelancers iOS and Android  Comprehensive dashboard offers many payment methods from your mobile device Costs 2.9% plus 30 cents for each successful card charge Instant Payouts (for a 1% fee of the payout amount) to send earnings to a debit card or bank account within minutes; subject to daily payout limits. FreshBooks Best for Invoicing iOS and Android  Edit, deliver, track, and successfully follow up on invoices more efficiently through FreshBooks Payments, powered by WePay Charges 2.9% plus 30 cents on all credit card transactions (American Express costs more, at 3.5% plus 30 cents) and bank transfers (ACH) at 1% Two business days Venmo Best Peer-to-Peer App iOS and Android  Standard bank transfer through the ACH network or can keep money in Venmo or your bank account Send money for free through the app, although you'll pay 3% of the transfer total to send money via credit card. Instant pay feature costs 1.75% of the total cost. Instant transfer option available for the fastest transfer method; standard bank transfer method takes between one and three business days. How Do Payment Apps Work? Payment apps offer convenience for business owners, contractors, and individuals who want to send money from person to person. Payment apps work by allowing you to make payments directly from your smartphone. You can make payments through your app without needing to have your credit card or debit card handy at all. The app may allow you to bypass a bank altogether and may offer other features, such as business invoicing, timers to track work, and more. Are Payment Apps Safe to Use? The payment apps on our list were specifically tested for their safety features. You can usually find protection against unauthorized transactions with a payment app but may not get the same type of financial protection you might get through FDIC-protected banks or other financial institutions. Many apps offer authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect your business's valuable information. What Types of Payments Can Be Processed With an App? From making customer billing payments to paying a friend for drinks or dinner, payment apps will transfer payments between two parties through individual banking accounts or credit cards. You can register your business or personal credit, debit, or ACH information once. Then, in just a few taps, you can pay employees, purchase goods, pay a bill, and even keep track of invoices and business expenses. Methodology We analyzed a dozen apps offered by the top companies for the best user experience and assessed app pricing, features, user reviews, and ratings. We considered apps that primarily focus on payments, that come with low (or no) cost to sign up, offer an easy-to-use interface, and that provide multiple device accessibility. We also looked into security features, products, educational tools, security, and how each app accesses your financial data. Finally, the apps on the list have thousands of reviews and high ratings in the App Store and on Google Play. Oscar Wong / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Federal Deposit Insurance Corporation. “Deposit Insurance." Related Articles The Best Money Transfer Apps for 2024 Venmo Teen Debit Card Review 2024 Best Accounting Software for Small Businesses for May 2024 What Is PayPal and How Does it Work? Best Ways to Send Money as a Teen Best Accounting Software Related Terms What Is PayPal and How Does it Work? PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. more Merchant Services: Their Role in Business, How They Work, and Benefits Merchant services help businesses accept and process electronic payments from customers. They can include point-of-sale systems, credit card readers, payment gateways, and online transaction processing. more What Is a Mobile Wallet? A mobile wallet is an app that stores payment card information and other on a mobile device. more Remittance: What It Is and How to Send One A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. more What Is a Digital Wallet? A digital wallet is an application on an electronic device that stores payment information and allows you to securely make purchases without carrying cash or cards. more Unified Payments Interface (UPI): Definition and How It Works A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. more

https://www.investopedia.com/how-to-apply-for-a-shuttered-venue-operators-grant-5121150

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The $16.25 billion Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was part of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226">Consolidated Appropriations Act, 2021</a>, signed into law on Dec. 27, 2020. Administration of the program falls to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-business-administration.asp">Small Business Administration (SBA)</a>.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p>Effective Aug. 20, 2021, the SBA stopped accepting new SVOG applications. The SVOG portal , however, remains open for previous applicants and grantees.<span class="ql-inline-citation" data-cite="11"></span></p><p><br/></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The SVOG was amended by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-rescue-plan-definition-5095694">American Rescue Plan Act</a> to offer grants equal to 45% of an eligible venue’s gross earned revenue, with the maximum amount available for a single grant award set at $10 million. Eligible applicants with up to 50 full-time employees were able to draw from a reserve pot of $2 billion. After several delays, the SVOG program began accepting applications April 26, 2021. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The SVOG program got off to a slow start and by June 3, 2021, had awarded just 50 grants representing less than 1% of the 10,262 applications received by that date.<span class="ql-inline-citation" data-cite="12"></span> As of Feb. 14, 2022, however, $14.12 billion in Shuttered Venue Operators Grants had been awarded with $14.06 billion of that total disbursed to the grantees.<span class="ql-inline-citation" data-cite="14"></span> This represents 12,856 initial and reconsidered regular grants along with 9,142 supplemental grants for a total of 21,998 Shuttered Venue Operators Grants awarded by Feb. 14.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><ul><li>The Shuttered Venue Operators Grant (SVOG) program, established as part of the Consolidated Appropriations Act, 2021, and administered by the Small Business Administration (SBA) to provide economic relief to shuttered live venues, began accepting grant applications on April 26, 2021, and stopped accepting applications on Aug. 20, 2021.</li><li>The SVOG portal remains open for grantees to manage their grants and for existing applicants to await a decision.</li><li>The program was designed to distribute more than $16 billion in grants of up to $10 million each, equal to 45% of an eligible venue’s gross earned revenue.</li><li>Eligible applicants with up to 50 employees can draw from a special $2 billion reserve fund.</li><li>Applications were sorted into three priority periods for venues that suffered COVID-related economic loss ranging from 25% to 90% or greater.</li><li>As of June 3, 2021, the SBA reported that 50 grants, representing less than 1% of applicants had been awarded.</li><li>Grant funds may be used for specific listed expenses only.</li></ul></div></div></div> <span class="heading-toc" id="toc-eligibility-for-an-svog"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Eligibility for an SVOG </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> During the open application process, in order to be considered for an SVOG the applicant had to represent one of the following types of venue, as specified by the Economic Aid Act:<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <li>Live venue operator or promoter</li><li>Theatrical producer</li><li>Live performing arts organization operator</li><li>Museum operator</li><li>Motion picture theater operator</li><li>Talent representative</li><li>Any subsidiary of an eligible entity that also meets eligibility requirements</li><li>Any of the above operated by a state or local government solely as a venue</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">Feb. 29, 2020</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>To be eligible for an SVOG, the venue must have been in operation as of this date.</p></div></div></div> <span class="heading-toc" id="toc-ineligible-entities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Ineligible Entities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Even if the venue would be otherwise eligible, it would not be considered for a grant if any of the following apply:<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <li>It does not have a place of business located in the United States, does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor.</li><li>It was not in operation as of Feb. 29, 2020.</li><li>It is a publicly traded corporation or is majority-owned and controlled by a publicly traded corporation.</li><li>It presents live performances or sells products or services of a prurient sexual nature.</li><li>More than 10% of its 2019 gross revenue came from the federal government (not counting disaster assistance).</li><li>It owns or operates venues, theaters, museums, or talent agencies in more than one country; owns or operates venues, theaters, museums, or talent agencies in more than 10 states; AND had more than 500 employees as of Feb. 29, 2020.</li><li>Five other firms with which it is affiliated have already received SVOG awards.</li><li>It is a museum and other museums with which it is affiliated have already received $10 million in SVOG funding.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-the-application-process"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> The Application Process </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Potential applicants first were required to gather documents, register for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dunsnumber.asp">DUNS</a> number, and register in the System for Award Management (SAM.gov). Instructions for the application process are found in the SBA Shuttered Venue Operators Grant Applicant User Guide.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Once registered, applicants were directed to the Main Shuttered Venue Operators Grant Page to apply. In addition to gross revenue loss from 2019 to 2020 to determine eligibility, applicants provided floor plans, contract copies, and additional information listed in the SVOG Preliminary Application Checklist.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> At the end of the application process, applicants had to “submit” their application. Once done, they received notices by email regarding status and changes. Applicants were required to document the average number of qualifying employees they had over the previous 12 months.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-priority-periods-for-grant-awards"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Priority Periods for Grant Awards </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The SVOG program established priority periods for the disbursement of grant awards, based on the percent of economic loss suffered by the shuttered venue. Those priority periods are discussed here and listed in the table below. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Within each priority period the SBA accepted applications on a first-in, first-out basis. Awards were granted beginning in May, 2021. The first 14 days were dedicated to entities that suffered a 90% or greater revenue loss between April and December of 2020 due to the COVID-19 pandemic. The second 14 days (days 15–28) included entities that suffered a 70% or greater revenue loss between April and December of 2020. The final period included entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> At that point supplemental grants were awarded to eligible recipients of first-, second-, and third-round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_37-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Day</th> <th> <b>Priority Period</b></th> <th><b>Entity Type</b> </th> </tr> </thead> <tbody data-check="0"> <tr> <td>1</td> <td>First</td> <td>Entities that suffered a <b>90% or greater</b> revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic.</td> </tr> <tr> <td>15</td> <td>Second</td> <td>Entities that suffered a <b>70% or greater</b> revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic.</td> </tr> <tr> <td>29</td> <td>Third </td> <td>Entities that suffered a <b>25% or greater</b> earned revenue loss between one quarter of 2019 and the corresponding quarter of 2020.</td> </tr> <tr> <td></td> <td>Supplemental</td> <td>After all priority periods have passed, recipients of first, second, and third priority round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021, or later).</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Source: Small Business Administration<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Priority grantees do not need to satisfy the small employer set-aside rule (no more than 50 employees). Grantees that do will receive funds first from the $2 billion set aside.<span class="ql-inline-citation" data-cite="9"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-options-following-a-decision"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Options Following a Decision </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Applicants have three options after receiving a decision on their grant application—appeal, amount reconsideration, or supplemental award.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Appeal </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> If the application was declined, applicants receive an email and an update in the SVOG portal indicating they are eligible to submit an appeal. The initial appeal window lasts two weeks, during which time funding will be preserved. There is no guarantee that funding will remain available for applicants who appeal after the close of the initial two-week window.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> Award Amount Reconsideration </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> If the award is at least $100 less than the Adjusted Proposed Grant Amount on the initial application, the grantee will receive an email indicating eligibility to apply for award amount reconsideration. This process also has a two-week window. Award amount reconsideration may adjust the amount of the initial award, so this process must be completed prior to evaluation for a Supplemental Award.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-subheading__text"> Supplemental Award </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> If an initial SVOG is awarded, the grantee will be asked to update their 2021 earned revenue in order to be considered for a Supplemental Award. To do this, grantees should log in to the portal and update through that action item within two weeks.<span class="ql-inline-citation" data-cite="19"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_55-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_56-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Reconsideration 2.0 is not available to declined applicants.</p></div></div></div> <span class="heading-toc" id="toc-reconsideration-20"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-heading__text"> Reconsideration 2.0 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Once Supplemental eligibility has been processed, Grantees will be invited to request one final opportunity to apply for Reconsideration of their Award Amount. Grantees will receive an email notification of a new Action Item available through their applicant portal inviting them to ‘Apply for Reconsideration of your SVOG Award Amount’. This Action Item allows a grantee to correct any potential errors on their initial SVOG application which may have decreased their expected award amount.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <span class="heading-toc" id="toc-how-svog-funds-may-be-used"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_60-0"> <span class="mntl-sc-block-heading__text"> How SVOG Funds May Be Used </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> SVOG funds may only be used for the specific purposes listed below. Grantees are required to maintain documentation demonstrating that they have complied with these uses. Further, grantees must retain employment records for four years following receipt of funds and must retain all other records for three years.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> <li>Payroll</li><li>Rent</li><li>Utilities</li><li>Mortgage payments (not including prepayment of principal)</li><li>Debt payments (not including prepayment of principal on any indebtedness incurred in the ordinary course of business prior to Feb. 15, 2020)</li><li>Worker protection expenses</li><li>Payments to independent contractors ($100,000 or less per contractor per year)</li><li>Other ordinary and necessary business expenses, including maintenance</li><li>Administrative costs (including fees and licensing)</li><li>State and local taxes and fees</li><li>Operating leases in effect as of Feb. 15, 2020</li><li>Insurance payments</li><li>Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (This may not be the primary use of funds.)</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <span class="heading-toc" id="toc-how-svog-funds-may-not-be-used"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-heading__text"> How SVOG Funds May Not Be Used </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Grantees may not use SVOG funds for any of the following, including any other use prohibited by the SBA:<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> <li>Purchase of real estate</li><li>Payments on loans originated after Feb. 15, 2020</li><li>Investments or loans</li><li>Contributions or other payments to—or on behalf of—political parties, political committees, or candidates for election</li><li>Any other use prohibited by the administrator</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_70-0"><span class="heading-toc" id="toc-are-shuttered-venue-operator-grants-still-available"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Shuttered Venue Operator Grants still available?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>As of Aug. 20, 2021, SVOG applications are no longer being received. Previous applicants who have not yet received a decision are still under consideration and current grantees can manage their grants through the SVOG portal.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_72-0"><span class="heading-toc" id="toc-can-you-use-a-shuttered-venue-operators-grant-to-make-a-loan-to-an-artist"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can you use a Shuttered Venue Operators Grant to make a loan to an artist?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>SVOG funds cannot be used to make loans.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_74-0"><span class="heading-toc" id="toc-how-long-must-i-retain-employment-records-if-i-receive-a-shuttered-venue-operators-grant"></span> <h2 class="mntl-sc-block-questionandanswer__question">How long must I retain employment records if I receive a Shuttered Venue Operators Grant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You must retain employment records for four years after initial receipt of funds. All other records must be retained for three years.</p></div> </div></div>

The $16.25 billion Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was part of the [Consolidated Appropriations Act, 2021](https://www.investopedia.com/congress-agrees-on-second-stimulus-here-s-what-s-in-it-and-what-s-not-5093226), signed into law on Dec. 27, 2020. Administration of the program falls to the [Small Business Administration (SBA)](https://www.investopedia.com/terms/s/small-business-administration.asp). ### Effective Aug. 20, 2021, the SBA stopped accepting new SVOG applications. The SVOG portal , however, remains open for previous applicants and grantees. The SVOG was amended by the [American Rescue Plan Act](https://www.investopedia.com/american-rescue-plan-definition-5095694) to offer grants equal to 45% of an eligible venue’s gross earned revenue, with the maximum amount available for a single grant award set at $10 million. Eligible applicants with up to 50 full-time employees were able to draw from a reserve pot of $2 billion. After several delays, the SVOG program began accepting applications April 26, 2021. The SVOG program got off to a slow start and by June 3, 2021, had awarded just 50 grants representing less than 1% of the 10,262 applications received by that date. As of Feb. 14, 2022, however, $14.12 billion in Shuttered Venue Operators Grants had been awarded with $14.06 billion of that total disbursed to the grantees. This represents 12,856 initial and reconsidered regular grants along with 9,142 supplemental grants for a total of 21,998 Shuttered Venue Operators Grants awarded by Feb. 14. ### Key Takeaways * The Shuttered Venue Operators Grant (SVOG) program, established as part of the Consolidated Appropriations Act, 2021, and administered by the Small Business Administration (SBA) to provide economic relief to shuttered live venues, began accepting grant applications on April 26, 2021, and stopped accepting applications on Aug. 20, 2021. * The SVOG portal remains open for grantees to manage their grants and for existing applicants to await a decision. * The program was designed to distribute more than $16 billion in grants of up to $10 million each, equal to 45% of an eligible venue’s gross earned revenue. * Eligible applicants with up to 50 employees can draw from a special $2 billion reserve fund. * Applications were sorted into three priority periods for venues that suffered COVID-related economic loss ranging from 25% to 90% or greater. * As of June 3, 2021, the SBA reported that 50 grants, representing less than 1% of applicants had been awarded. * Grant funds may be used for specific listed expenses only. ## Eligibility for an SVOG During the open application process, in order to be considered for an SVOG the applicant had to represent one of the following types of venue, as specified by the Economic Aid Act: * Live venue operator or promoter * Theatrical producer * Live performing arts organization operator * Museum operator * Motion picture theater operator * Talent representative * Any subsidiary of an eligible entity that also meets eligibility requirements * Any of the above operated by a state or local government solely as a venue ### Feb. 29, 2020 To be eligible for an SVOG, the venue must have been in operation as of this date. ## Ineligible Entities Even if the venue would be otherwise eligible, it would not be considered for a grant if any of the following apply: * It does not have a place of business located in the United States, does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor. * It was not in operation as of Feb. 29, 2020. * It is a publicly traded corporation or is majority-owned and controlled by a publicly traded corporation. * It presents live performances or sells products or services of a prurient sexual nature. * More than 10% of its 2019 gross revenue came from the federal government (not counting disaster assistance). * It owns or operates venues, theaters, museums, or talent agencies in more than one country; owns or operates venues, theaters, museums, or talent agencies in more than 10 states; AND had more than 500 employees as of Feb. 29, 2020. * Five other firms with which it is affiliated have already received SVOG awards. * It is a museum and other museums with which it is affiliated have already received $10 million in SVOG funding. ## The Application Process Potential applicants first were required to gather documents, register for a [DUNS](https://www.investopedia.com/terms/d/dunsnumber.asp) number, and register in the System for Award Management (SAM.gov). Instructions for the application process are found in the SBA Shuttered Venue Operators Grant Applicant User Guide. Once registered, applicants were directed to the Main Shuttered Venue Operators Grant Page to apply. In addition to gross revenue loss from 2019 to 2020 to determine eligibility, applicants provided floor plans, contract copies, and additional information listed in the SVOG Preliminary Application Checklist. At the end of the application process, applicants had to “submit” their application. Once done, they received notices by email regarding status and changes. Applicants were required to document the average number of qualifying employees they had over the previous 12 months. ## Priority Periods for Grant Awards The SVOG program established priority periods for the disbursement of grant awards, based on the percent of economic loss suffered by the shuttered venue. Those priority periods are discussed here and listed in the table below. Within each priority period the SBA accepted applications on a first-in, first-out basis. Awards were granted beginning in May, 2021. The first 14 days were dedicated to entities that suffered a 90% or greater revenue loss between April and December of 2020 due to the COVID-19 pandemic. The second 14 days (days 15–28) included entities that suffered a 70% or greater revenue loss between April and December of 2020. The final period included entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020. At that point supplemental grants were awarded to eligible recipients of first-, second-, and third-round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter. | Day | **Priority Period** | **Entity Type** | | --- | --- | --- | | 1 | First | Entities that suffered a **90% or greater** revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic. | | 15 | Second | Entities that suffered a **70% or greater** revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic. | | 29 | Third | Entities that suffered a **25% or greater** earned revenue loss between one quarter of 2019 and the corresponding quarter of 2020. | | | Supplemental | After all priority periods have passed, recipients of first, second, and third priority round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021, or later). | Source: Small Business Administration Priority grantees do not need to satisfy the small employer set-aside rule (no more than 50 employees). Grantees that do will receive funds first from the $2 billion set aside. ## Options Following a Decision Applicants have three options after receiving a decision on their grant application—appeal, amount reconsideration, or supplemental award. ### Appeal If the application was declined, applicants receive an email and an update in the SVOG portal indicating they are eligible to submit an appeal. The initial appeal window lasts two weeks, during which time funding will be preserved. There is no guarantee that funding will remain available for applicants who appeal after the close of the initial two-week window. ### Award Amount Reconsideration If the award is at least $100 less than the Adjusted Proposed Grant Amount on the initial application, the grantee will receive an email indicating eligibility to apply for award amount reconsideration. This process also has a two-week window. Award amount reconsideration may adjust the amount of the initial award, so this process must be completed prior to evaluation for a Supplemental Award. ### Supplemental Award If an initial SVOG is awarded, the grantee will be asked to update their 2021 earned revenue in order to be considered for a Supplemental Award. To do this, grantees should log in to the portal and update through that action item within two weeks. ### Reconsideration 2.0 is not available to declined applicants. ## Reconsideration 2.0 Once Supplemental eligibility has been processed, Grantees will be invited to request one final opportunity to apply for Reconsideration of their Award Amount. Grantees will receive an email notification of a new Action Item available through their applicant portal inviting them to ‘Apply for Reconsideration of your SVOG Award Amount’. This Action Item allows a grantee to correct any potential errors on their initial SVOG application which may have decreased their expected award amount. ## How SVOG Funds May Be Used SVOG funds may only be used for the specific purposes listed below. Grantees are required to maintain documentation demonstrating that they have complied with these uses. Further, grantees must retain employment records for four years following receipt of funds and must retain all other records for three years. * Payroll * Rent * Utilities * Mortgage payments (not including prepayment of principal) * Debt payments (not including prepayment of principal on any indebtedness incurred in the ordinary course of business prior to Feb. 15, 2020) * Worker protection expenses * Payments to independent contractors ($100,000 or less per contractor per year) * Other ordinary and necessary business expenses, including maintenance * Administrative costs (including fees and licensing) * State and local taxes and fees * Operating leases in effect as of Feb. 15, 2020 * Insurance payments * Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (This may not be the primary use of funds.) ## How SVOG Funds May Not Be Used Grantees may not use SVOG funds for any of the following, including any other use prohibited by the SBA: * Purchase of real estate * Payments on loans originated after Feb. 15, 2020 * Investments or loans * Contributions or other payments to—or on behalf of—political parties, political committees, or candidates for election * Any other use prohibited by the administrator ## Are Shuttered Venue Operator Grants still available? As of Aug. 20, 2021, SVOG applications are no longer being received. Previous applicants who have not yet received a decision are still under consideration and current grantees can manage their grants through the SVOG portal. ## Can you use a Shuttered Venue Operators Grant to make a loan to an artist? SVOG funds cannot be used to make loans. ## How long must I retain employment records if I receive a Shuttered Venue Operators Grant? You must retain employment records for four years after initial receipt of funds. All other records must be retained for three years.

The $16.25 billion Shuttered Venue Operators Grant (SVOG) program was established by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which was part of the Consolidated Appropriations Act, 2021, signed into law on Dec. 27, 2020. Administration of the program falls to the Small Business Administration (SBA). Effective Aug. 20, 2021, the SBA stopped accepting new SVOG applications. The SVOG portal , however, remains open for previous applicants and grantees. The SVOG was amended by the American Rescue Plan Act to offer grants equal to 45% of an eligible venue’s gross earned revenue, with the maximum amount available for a single grant award set at $10 million. Eligible applicants with up to 50 full-time employees were able to draw from a reserve pot of $2 billion. After several delays, the SVOG program began accepting applications April 26, 2021. The SVOG program got off to a slow start and by June 3, 2021, had awarded just 50 grants representing less than 1% of the 10,262 applications received by that date. As of Feb. 14, 2022, however, $14.12 billion in Shuttered Venue Operators Grants had been awarded with $14.06 billion of that total disbursed to the grantees. This represents 12,856 initial and reconsidered regular grants along with 9,142 supplemental grants for a total of 21,998 Shuttered Venue Operators Grants awarded by Feb. 14. Key Takeaways The Shuttered Venue Operators Grant (SVOG) program, established as part of the Consolidated Appropriations Act, 2021, and administered by the Small Business Administration (SBA) to provide economic relief to shuttered live venues, began accepting grant applications on April 26, 2021, and stopped accepting applications on Aug. 20, 2021.The SVOG portal remains open for grantees to manage their grants and for existing applicants to await a decision.The program was designed to distribute more than $16 billion in grants of up to $10 million each, equal to 45% of an eligible venue’s gross earned revenue.Eligible applicants with up to 50 employees can draw from a special $2 billion reserve fund.Applications were sorted into three priority periods for venues that suffered COVID-related economic loss ranging from 25% to 90% or greater.As of June 3, 2021, the SBA reported that 50 grants, representing less than 1% of applicants had been awarded.Grant funds may be used for specific listed expenses only. Eligibility for an SVOG During the open application process, in order to be considered for an SVOG the applicant had to represent one of the following types of venue, as specified by the Economic Aid Act: Live venue operator or promoterTheatrical producerLive performing arts organization operatorMuseum operatorMotion picture theater operatorTalent representativeAny subsidiary of an eligible entity that also meets eligibility requirementsAny of the above operated by a state or local government solely as a venue Feb. 29, 2020 To be eligible for an SVOG, the venue must have been in operation as of this date. Ineligible Entities Even if the venue would be otherwise eligible, it would not be considered for a grant if any of the following apply: It does not have a place of business located in the United States, does not operate primarily within the U.S., and does not make a significant contribution to the U.S. economy through payment of taxes or use of American products, materials, or labor.It was not in operation as of Feb. 29, 2020.It is a publicly traded corporation or is majority-owned and controlled by a publicly traded corporation.It presents live performances or sells products or services of a prurient sexual nature.More than 10% of its 2019 gross revenue came from the federal government (not counting disaster assistance).It owns or operates venues, theaters, museums, or talent agencies in more than one country; owns or operates venues, theaters, museums, or talent agencies in more than 10 states; AND had more than 500 employees as of Feb. 29, 2020.Five other firms with which it is affiliated have already received SVOG awards.It is a museum and other museums with which it is affiliated have already received $10 million in SVOG funding. The Application Process Potential applicants first were required to gather documents, register for a DUNS number, and register in the System for Award Management (SAM.gov). Instructions for the application process are found in the SBA Shuttered Venue Operators Grant Applicant User Guide. Once registered, applicants were directed to the Main Shuttered Venue Operators Grant Page to apply. In addition to gross revenue loss from 2019 to 2020 to determine eligibility, applicants provided floor plans, contract copies, and additional information listed in the SVOG Preliminary Application Checklist. At the end of the application process, applicants had to “submit” their application. Once done, they received notices by email regarding status and changes. Applicants were required to document the average number of qualifying employees they had over the previous 12 months. Priority Periods for Grant Awards The SVOG program established priority periods for the disbursement of grant awards, based on the percent of economic loss suffered by the shuttered venue. Those priority periods are discussed here and listed in the table below. Within each priority period the SBA accepted applications on a first-in, first-out basis. Awards were granted beginning in May, 2021. The first 14 days were dedicated to entities that suffered a 90% or greater revenue loss between April and December of 2020 due to the COVID-19 pandemic. The second 14 days (days 15–28) included entities that suffered a 70% or greater revenue loss between April and December of 2020. The final period included entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020. At that point supplemental grants were awarded to eligible recipients of first-, second-, and third-round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter. Day  Priority Period Entity Type  1 First Entities that suffered a 90% or greater revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic. 15 Second Entities that suffered a 70% or greater revenue loss between April 2020 and December 2020 due to the COVID-19 pandemic. 29 Third  Entities that suffered a 25% or greater earned revenue loss between one quarter of 2019 and the corresponding quarter of 2020. Supplemental After all priority periods have passed, recipients of first, second, and third priority round awards that suffered a 70% or greater revenue loss for the most recent calendar quarter (as of April 1, 2021, or later). Source: Small Business Administration Priority grantees do not need to satisfy the small employer set-aside rule (no more than 50 employees). Grantees that do will receive funds first from the $2 billion set aside. Options Following a Decision Applicants have three options after receiving a decision on their grant application—appeal, amount reconsideration, or supplemental award. Appeal If the application was declined, applicants receive an email and an update in the SVOG portal indicating they are eligible to submit an appeal. The initial appeal window lasts two weeks, during which time funding will be preserved. There is no guarantee that funding will remain available for applicants who appeal after the close of the initial two-week window. Award Amount Reconsideration If the award is at least $100 less than the Adjusted Proposed Grant Amount on the initial application, the grantee will receive an email indicating eligibility to apply for award amount reconsideration. This process also has a two-week window. Award amount reconsideration may adjust the amount of the initial award, so this process must be completed prior to evaluation for a Supplemental Award. Supplemental Award If an initial SVOG is awarded, the grantee will be asked to update their 2021 earned revenue in order to be considered for a Supplemental Award. To do this, grantees should log in to the portal and update through that action item within two weeks. Reconsideration 2.0 is not available to declined applicants. Reconsideration 2.0 Once Supplemental eligibility has been processed, Grantees will be invited to request one final opportunity to apply for Reconsideration of their Award Amount. Grantees will receive an email notification of a new Action Item available through their applicant portal inviting them to ‘Apply for Reconsideration of your SVOG Award Amount’. This Action Item allows a grantee to correct any potential errors on their initial SVOG application which may have decreased their expected award amount. How SVOG Funds May Be Used SVOG funds may only be used for the specific purposes listed below. Grantees are required to maintain documentation demonstrating that they have complied with these uses. Further, grantees must retain employment records for four years following receipt of funds and must retain all other records for three years. PayrollRentUtilitiesMortgage payments (not including prepayment of principal)Debt payments (not including prepayment of principal on any indebtedness incurred in the ordinary course of business prior to Feb. 15, 2020)Worker protection expensesPayments to independent contractors ($100,000 or less per contractor per year)Other ordinary and necessary business expenses, including maintenanceAdministrative costs (including fees and licensing)State and local taxes and feesOperating leases in effect as of Feb. 15, 2020Insurance paymentsAdvertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (This may not be the primary use of funds.) How SVOG Funds May Not Be Used Grantees may not use SVOG funds for any of the following, including any other use prohibited by the SBA: Purchase of real estatePayments on loans originated after Feb. 15, 2020Investments or loansContributions or other payments to—or on behalf of—political parties, political committees, or candidates for electionAny other use prohibited by the administrator Are Shuttered Venue Operator Grants still available? As of Aug. 20, 2021, SVOG applications are no longer being received. Previous applicants who have not yet received a decision are still under consideration and current grantees can manage their grants through the SVOG portal. Can you use a Shuttered Venue Operators Grant to make a loan to an artist? SVOG funds cannot be used to make loans. How long must I retain employment records if I receive a Shuttered Venue Operators Grant? You must retain employment records for four years after initial receipt of funds. All other records must be retained for three years.

https://www.investopedia.com/health-care-options-for-small-businesses-8584711

What Is a Small Business? Definition, Characteristics, and Challenges

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Offering <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/healthinsurance.asp">health insurance</a> as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/small-business-4427743">small business</a> owner can yield tangible and intangible benefits. A good healthcare plan can be a strong incentive when attempting to attract top talent to your business. Employees may feel a deeper sense of job satisfaction in knowing they have healthcare benefits if they need to use them. Employers can also benefit in the form of tax breaks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The challenge is finding the right healthcare option to offer to your employees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Small businesses face challenges in providing good, affordable healthcare coverage to their employees.</li><li>The Small Business Health Options Program (SHOP) helps small businesses provide health coverage and offers benefits such as plan comparisons.</li><li>Small businesses should consider factors like cost, coverage options, and employee needs when selecting a health insurance plan.</li><li>Employer-sponsored insurance plans cater to the needs of small businesses and offer various benefits and considerations.</li><li>Offering healthcare benefits can help you attract and retain talented employees, improve their satisfaction and productivity, and contribute to your business success.</li></ul></div></div></div> <span class="heading-toc" id="toc-are-small-businesses-required-to-offer-health-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Are Small Businesses Required to Offer Health Insurance? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Under provisions of the Employer Mandate of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/affordable-care-act.asp">Affordable Care Act (ACA)</a>, businesses are required to offer health insurance only if they have 50 or more full-time employees or full-time equivalent (FTE) employees. If you meet that standard, you’re considered a large employer for Internal Revenue Service (IRS) purposes.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>A full-time employee is someone who averages at least 30 hours of service per week during the calendar month, or at least 130 hours during the calendar month.</li><li>Full-time equivalent employees refer to a group of workers who may not all be employed full-time, but whose working hours combined are equivalent to a full-time employee.<span class="ql-inline-citation" data-cite="3"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Special rules for determining full-time employee status apply to businesses that hire seasonal workers.<span class="ql-inline-citation" data-cite="3"></span> </p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Independent contractors are not considered employees, so the ACA rules for health insurance don’t apply to them. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp">sole proprietor</a> running a small business may be subject to the rules, but only if they meet the 50 or more full-time employees or FTE guidelines. Self-employed business owners with no employees can enroll in healthcare plans through the federal marketplace if they need coverage for themselves or their family members.<span class="ql-inline-citation" data-cite="2"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-how-small-business-health-insurance-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> How Small Business Health Insurance Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Small businesses that are required to offer health insurance, or that voluntarily choose to do so, are obligated to offer coverage to 95% of full-time employees and their eligible family members. Again, a full-time employee is defined by thresholds of 30 hours per week or 130 hours per month. Businesses would need to have at least one eligible full-time employee to offer coverage.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Coverage must meet two standards to be aligned with ACA requirements: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <li><strong>Minimum value</strong>. An employer-sponsored plan is determined to offer minimum value if it covers at least 60% of the total allowed cost of care for covered employees, and if its benefits include substantial coverage of physician and inpatient hospital services.<span class="ql-inline-citation" data-cite="5"></span></li> <li><strong>Affordability</strong>. For 2024, workplace health insurance is deemed affordable if employees’ share of monthly premiums in the lowest-cost plan offered is less than 8.39% of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/household_income.asp">household income</a>.<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Affordability is based on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance-premium.asp">premium</a> that would cover all individuals in the employee’s household. Income is calculated based on the earnings of everyone in the household who is required to file a tax return. To qualify for a federal tax credit, employers must pay at least 50% of health insurance premiums for covered employees. Employers can, however, opt to pay a larger share of the premiums so that employees have less to pay out of pocket.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Businesses are required to offer health insurance to employees when they become eligible for it. Employers can impose a waiting period before employees are eligible. The maximum allowed waiting period is 90 days.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Employees can make changes to their plan if they qualify for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-health-insurance-after-open-enrollment-7486521">special enrollment period</a>, which is triggered by a life change. For example, a covered employee who has a child would qualify for a special enrollment period to add a new baby to their plan. Employers must provide a special enrollment period of at least 30 days to employees who are eligible to change their plans.<span class="ql-inline-citation" data-cite="9"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-benefits-of-offering-health-insurance-as-a-small-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Benefits of Offering Health Insurance as a Small Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Offering health insurance to your employees, whether you’re obligated to do so by ACA rules or not, can help your business and your workers in many ways. Here are some of the main advantages of including health insurance as part of an employee benefits package. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li><strong>Attract top talent</strong>. Job seekers may be more inclined to pursue career opportunities with businesses that offer attractive benefits, including health insurance.</li> <li><strong>Increase retention</strong>. A good health insurance plan may be an incentive for employees to remain loyal to your business, rather than moving on to another company.</li> <li><strong>Qualify for tax breaks</strong>. Eligible businesses can qualify for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-small-business-healthcare-tax-credit-5070476">small business healthcare tax credit</a>, which is worth up to 50% of employer-paid premiums. Tax credits reduce your tax liability dollar-for-dollar.<span class="ql-inline-citation" data-cite="7"></span></li> <li><strong>Strengthen your business</strong>. Offering health insurance to employees could lead to a stronger business overall if workers experience greater job satisfaction, miss fewer days of work because they’re able to get adequate healthcare when they need it, and are more productive while on the job.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Eligible small businesses will need to file IRS <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-form-8941">Form 8941</a>, Credit for Small Employer Health Insurance Premiums, to qualify for this tax benefit.</p></div></div></div> <span class="heading-toc" id="toc-types-of-health-insurance-for-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Types of Health Insurance for Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Small business owners may choose from multiple types of health insurance plans. Understanding how they compare is important when choosing a plan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li><strong>PPO plans</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preferred-provider-organization.asp">Preferred provider organization (PPO)</a> plans allow covered individuals to pay less out of pocket for care when they use in-network doctors, hospitals, and providers. Employees would still be able to seek care out of the network, but will pay more for it.</li> <li><strong>HMO plans</strong>:<strong> </strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hmo.asp">Health maintenance organization (HMO)</a> plans can have lower out-of-pocket costs for covered employees, but are more restrictive regarding which doctors, hospitals, and providers you can visit. HMO plans are often focused on wellness and preventative care.</li> <li><strong>EPO plans</strong>: <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-health-insurance-7486292#:~:text=6-,Exclusive%20Provider%20Organization%20%28EPO%29,referral%20to%20see%20a%20specialist.">Exclusive provider organization (EPO)</a> plans only cover healthcare costs when an employee uses an in-network provider. These plans can allow exceptions for emergencies.</li> <li><strong>HSA-qualified plans</strong>:<strong> </strong>HSA-qualified plans or high-deductible health plans carry higher deductibles, but offer employees access to a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hsa.asp">Health Savings Account (HSA)</a>. An HSA offers triple tax benefits to employees in the form of deductible contributions, tax-deferred growth, and tax-free withdrawals when the money is used for eligible healthcare expenses.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>POS plans</strong>: <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pointofservice-plan-pos.asp">Point of service (POS)</a> plans have lower out-of-pocket costs when employees use in-network providers. One key thing to note: These plans require a referral to see a specialist.</li> <li><strong>Indemnity plans</strong>: Indemnity plans allow covered employees to visit any doctor, hospital, or healthcare provider, with costs covered by the plan once they meet a certain deductible. These are sometimes called fee-for-service plans since they require employees to pay premiums, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/health-insurance-deductible-4773113">deductibles</a>, and <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coinsurance.asp">co-insurance</a>.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-finding-affordable-small-business-health-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Finding Affordable Small Business Health Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Affordability is likely to be a key concern when choosing a health insurance plan for your employees. The plan needs to be affordable for them to meet ACA standards, but it also needs to be affordable for your business if you’ll be paying some of the premium costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Here are some tips for finding affordable small business health insurance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Use the Small Business Health Options Program (SHOP) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The Small Business Health Options Program (SHOP) is designed for small employers who want to provide health and/or dental insurance to their employees. You’ll need to be eligible for SHOP to purchase insurance through the program.<span class="ql-inline-citation" data-cite="12"></span> You’re eligible if: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> <li>Your business has one to 50 full-time equivalent employees.</li><li>You plan to offer coverage to all full-time employees.</li><li>You anticipate enrolling at least 70% of the employees to whom you offer insurance.</li><li>Your business has an office or employee work site in the state whose SHOP you plan to use.<span class="ql-inline-citation" data-cite="13"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> There are certain benefits associated with using SHOP to find health plans. Business owners can: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> <li>Easily compare pricing and coverage for multiple plans in one place</li><li>Opt to offer more than one plan to employees</li><li>Choose how much to pay toward premiums</li><li>Establish an appropriate waiting period for offering coverage to eligible employees</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> All of the information you need is centralized, but if you need help making sense of any of it, you can work with a SHOP-registered insurance agent or broker. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-subheading__text"> Use a PEO Service </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> A PEO, or professional employer organization, helps small businesses get the insurance they need. Effectively, when you join a PEO, you enter into a co-employment agreement. All of your employees then get access to the health plan options extended to other businesses that have joined the PEO. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> You don’t give up any control over the running of your business, but joining a PEO makes that company the employer of record for your employees. Joining a PEO could offer your employees a wider range of plans to choose from, and it can take the guesswork out of trying to choose a plan on your own. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> Partner with Purchasing Alliances </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Purchasing alliances or cooperatives comprise multiple businesses that come together to purchase insurance collectively. Joining an alliance not only may offer more possibilities in terms of the types of coverage and plans you’ll have access to, but also could save money if you’re able to get access to affordable health insurance that isn’t available elsewhere. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> One of the most important things to consider about joining a purchasing alliance is the types of businesses it serves. The more similar that member businesses are in terms of structure and number of employees, the more likely that the plans offered will reflect the needs of the member group as a whole. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-choosing-the-right-health-insurance-plan-for-your-small-business"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> Choosing the Right Health Insurance Plan for Your Small Business </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Finding the right health insurance plan can be challenging, as there are a multitude of factors to consider, the first being where to buy coverage. Small businesses with fewer than 50 employees can look for options through SHOP or get help from a SHOP-registered broker or agent. Larger businesses can shop for plans with the help of an agent or PEO, or contact insurance companies directly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> When comparing small business health insurance plans, it’s important to consider: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> <li>Premium costs</li><li>Coverage options</li><li>Network providers</li><li>Employee needs</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Business owners who are looking for plans through SHOP can easily compare coverage and prices for plans available in their area. All you’ll need to do is enter your ZIP code to see what options you might have. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> As you look at SHOP plans, here are some other considerations to keep in mind: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> <li>Will you offer one plan or a choice of plans?</li><li>Will coverage be limited to medical only, or will you add dental coverage?</li><li>How much of employee premiums do you plan to pay?</li><li>Will you offer coverage to full-time employees only or include part-time workers?</li><li>When will the coverage begin?</li><li>What waiting period will you impose before employees can become eligible for coverage?</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> There are four types of plans offered through SHOP: bronze, silver, gold, and platinum. The amount employees pay depends on the plan, with the highest employee contribution at the bronze level and the lowest at the platinum level. Once you choose a plan and are ready to enroll, you can do so through a registered SHOP agent or broker, or the insurance company.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_82-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_83-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Some states have their own websites for SHOP enrollment, which you’ll need to use to choose a plan.<span class="ql-inline-citation" data-cite="15"></span> </p></div></div></div> <span class="heading-toc" id="toc-resources-and-support-for-small-businesses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_84-0"> <span class="mntl-sc-block-heading__text"> Resources and Support for Small Businesses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_85-0"> Navigating healthcare rules and coverage options can be confusing for new and seasoned business owners alike. If you’re interested in getting more information about what’s required under the ACA or how to find health coverage as a small business owner, you might find these resources helpful: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_86-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.healthcare.gov/small-businesses/">Health insurance for your business and employees</a> (HealthCare.gov)</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.healthcare.gov/small-businesses/choose-and-enroll/shop-marketplace-overview/">How to enroll in SHOP insurance</a> (HealthCare.gov)</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace">Small Business Healthcare Tax Credit and the SHOP Marketplace</a> (IRS.gov)</li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions">Employer Shared Responsibility Provisions</a> (IRS.gov)</li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://www.healthcare.gov/small-businesses/get-answers/">Small Business—Get Answers Page</a> (HealthCare.gov)</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_88-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_89-0"><span class="heading-toc" id="toc-which-businesses-are-eligible-for-the-small-business-health-options-program-shop"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Businesses Are Eligible for the Small Business Health Options Program (SHOP)?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Small businesses are eligible for SHOP insurance plans if they have one to 50 employees. If you’re eligible, you don’t need to wait for an open enrollment period to start offering coverage to your employees.<span class="ql-inline-citation" data-cite="13"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_90-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_91-0"><span class="heading-toc" id="toc-how-can-small-businesses-find-the-right-health-insurance-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Small Businesses Find the Right Health Insurance Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Small business owners can find the best health plan by first understanding what they and their employees may need. Businesses that are SHOP-eligible may look to the federal marketplace first to compare plans. Alternatively, businesses of any size may consult a private insurance agent or broker to help them make sense of the different health plan options that are available.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_92-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_93-0"><span class="heading-toc" id="toc-how-much-does-health-insurance-cost-on-average-for-a-small-business-per-employee"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does Health Insurance Cost on Average for a Small Business Per Employee?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>On average, the annual premium for single coverage for covered employees at small firms was $8,722 in 2023. The average premium cost was slightly lower for covered employees at large firms: $8,321. The average premium was $23,621 for family coverage at small firms and $24,104 for covered employees at large firms.<span class="ql-inline-citation" data-cite="14"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_95-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_96-0"> Health insurance is a requirement for some small business owners, but it may be optional for others. Offering health insurance, whether you’re required to do so or choose to, could help your employees and your business thrive. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_97-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_98-0"> When searching for coverage, it’s important to shop around to find the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573">best health plan options for small businesses</a> so that you can make an informed decision for your business. </p></div>

Offering [health insurance](https://www.investopedia.com/terms/h/healthinsurance.asp) as a [small business](https://www.investopedia.com/small-business-4427743) owner can yield tangible and intangible benefits. A good healthcare plan can be a strong incentive when attempting to attract top talent to your business. Employees may feel a deeper sense of job satisfaction in knowing they have healthcare benefits if they need to use them. Employers can also benefit in the form of tax breaks. The challenge is finding the right healthcare option to offer to your employees. ### Key Takeaways * Small businesses face challenges in providing good, affordable healthcare coverage to their employees. * The Small Business Health Options Program (SHOP) helps small businesses provide health coverage and offers benefits such as plan comparisons. * Small businesses should consider factors like cost, coverage options, and employee needs when selecting a health insurance plan. * Employer-sponsored insurance plans cater to the needs of small businesses and offer various benefits and considerations. * Offering healthcare benefits can help you attract and retain talented employees, improve their satisfaction and productivity, and contribute to your business success. ## Are Small Businesses Required to Offer Health Insurance? Under provisions of the Employer Mandate of the [Affordable Care Act (ACA)](https://www.investopedia.com/terms/a/affordable-care-act.asp), businesses are required to offer health insurance only if they have 50 or more full-time employees or full-time equivalent (FTE) employees. If you meet that standard, you’re considered a large employer for Internal Revenue Service (IRS) purposes. * A full-time employee is someone who averages at least 30 hours of service per week during the calendar month, or at least 130 hours during the calendar month. * Full-time equivalent employees refer to a group of workers who may not all be employed full-time, but whose working hours combined are equivalent to a full-time employee. ### Special rules for determining full-time employee status apply to businesses that hire seasonal workers.  Independent contractors are not considered employees, so the ACA rules for health insurance don’t apply to them. A [sole proprietor](https://www.investopedia.com/terms/s/soleproprietorship.asp) running a small business may be subject to the rules, but only if they meet the 50 or more full-time employees or FTE guidelines. Self-employed business owners with no employees can enroll in healthcare plans through the federal marketplace if they need coverage for themselves or their family members.  ## How Small Business Health Insurance Works Small businesses that are required to offer health insurance, or that voluntarily choose to do so, are obligated to offer coverage to 95% of full-time employees and their eligible family members. Again, a full-time employee is defined by thresholds of 30 hours per week or 130 hours per month. Businesses would need to have at least one eligible full-time employee to offer coverage. Coverage must meet two standards to be aligned with ACA requirements: * **Minimum value**. An employer-sponsored plan is determined to offer minimum value if it covers at least 60% of the total allowed cost of care for covered employees, and if its benefits include substantial coverage of physician and inpatient hospital services. * **Affordability**. For 2024, workplace health insurance is deemed affordable if employees’ share of monthly premiums in the lowest-cost plan offered is less than 8.39% of [household income](https://www.investopedia.com/terms/h/household_income.asp). Affordability is based on the [premium](https://www.investopedia.com/terms/i/insurance-premium.asp) that would cover all individuals in the employee’s household. Income is calculated based on the earnings of everyone in the household who is required to file a tax return. To qualify for a federal tax credit, employers must pay at least 50% of health insurance premiums for covered employees. Employers can, however, opt to pay a larger share of the premiums so that employees have less to pay out of pocket. Businesses are required to offer health insurance to employees when they become eligible for it. Employers can impose a waiting period before employees are eligible. The maximum allowed waiting period is 90 days. Employees can make changes to their plan if they qualify for a [special enrollment period](https://www.investopedia.com/how-to-get-health-insurance-after-open-enrollment-7486521), which is triggered by a life change. For example, a covered employee who has a child would qualify for a special enrollment period to add a new baby to their plan. Employers must provide a special enrollment period of at least 30 days to employees who are eligible to change their plans. ## Benefits of Offering Health Insurance as a Small Business Offering health insurance to your employees, whether you’re obligated to do so by ACA rules or not, can help your business and your workers in many ways. Here are some of the main advantages of including health insurance as part of an employee benefits package. * **Attract top talent**. Job seekers may be more inclined to pursue career opportunities with businesses that offer attractive benefits, including health insurance. * **Increase retention**. A good health insurance plan may be an incentive for employees to remain loyal to your business, rather than moving on to another company. * **Qualify for tax breaks**. Eligible businesses can qualify for the [small business healthcare tax credit](https://www.investopedia.com/the-small-business-healthcare-tax-credit-5070476), which is worth up to 50% of employer-paid premiums. Tax credits reduce your tax liability dollar-for-dollar. * **Strengthen your business**. Offering health insurance to employees could lead to a stronger business overall if workers experience greater job satisfaction, miss fewer days of work because they’re able to get adequate healthcare when they need it, and are more productive while on the job. ### Eligible small businesses will need to file IRS [Form 8941](https://www.irs.gov/forms-pubs/about-form-8941), Credit for Small Employer Health Insurance Premiums, to qualify for this tax benefit. ## Types of Health Insurance for Small Businesses Small business owners may choose from multiple types of health insurance plans. Understanding how they compare is important when choosing a plan. * **PPO plans**: [Preferred provider organization (PPO)](https://www.investopedia.com/terms/p/preferred-provider-organization.asp) plans allow covered individuals to pay less out of pocket for care when they use in-network doctors, hospitals, and providers. Employees would still be able to seek care out of the network, but will pay more for it. * **HMO plans**:[Health maintenance organization (HMO)](https://www.investopedia.com/terms/h/hmo.asp) plans can have lower out-of-pocket costs for covered employees, but are more restrictive regarding which doctors, hospitals, and providers you can visit. HMO plans are often focused on wellness and preventative care. * **EPO plans**: [Exclusive provider organization (EPO)](https://www.investopedia.com/types-of-health-insurance-7486292#:~:text=6-,Exclusive%20Provider%20Organization%20%28EPO%29,referral%20to%20see%20a%20specialist.) plans only cover healthcare costs when an employee uses an in-network provider. These plans can allow exceptions for emergencies. * **HSA-qualified plans**:HSA-qualified plans or high-deductible health plans carry higher deductibles, but offer employees access to a [Health Savings Account (HSA)](https://www.investopedia.com/terms/h/hsa.asp). An HSA offers triple tax benefits to employees in the form of deductible contributions, tax-deferred growth, and tax-free withdrawals when the money is used for eligible healthcare expenses. * **POS plans**: [Point of service (POS)](https://www.investopedia.com/terms/p/pointofservice-plan-pos.asp) plans have lower out-of-pocket costs when employees use in-network providers. One key thing to note: These plans require a referral to see a specialist. * **Indemnity plans**: Indemnity plans allow covered employees to visit any doctor, hospital, or healthcare provider, with costs covered by the plan once they meet a certain deductible. These are sometimes called fee-for-service plans since they require employees to pay premiums, [deductibles](https://www.investopedia.com/health-insurance-deductible-4773113), and [co-insurance](https://www.investopedia.com/terms/c/coinsurance.asp). ## Finding Affordable Small Business Health Insurance Affordability is likely to be a key concern when choosing a health insurance plan for your employees. The plan needs to be affordable for them to meet ACA standards, but it also needs to be affordable for your business if you’ll be paying some of the premium costs. Here are some tips for finding affordable small business health insurance. ### Use the Small Business Health Options Program (SHOP) The Small Business Health Options Program (SHOP) is designed for small employers who want to provide health and/or dental insurance to their employees. You’ll need to be eligible for SHOP to purchase insurance through the program. You’re eligible if: * Your business has one to 50 full-time equivalent employees. * You plan to offer coverage to all full-time employees. * You anticipate enrolling at least 70% of the employees to whom you offer insurance. * Your business has an office or employee work site in the state whose SHOP you plan to use. There are certain benefits associated with using SHOP to find health plans. Business owners can: * Easily compare pricing and coverage for multiple plans in one place * Opt to offer more than one plan to employees * Choose how much to pay toward premiums * Establish an appropriate waiting period for offering coverage to eligible employees All of the information you need is centralized, but if you need help making sense of any of it, you can work with a SHOP-registered insurance agent or broker. ### Use a PEO Service A PEO, or professional employer organization, helps small businesses get the insurance they need. Effectively, when you join a PEO, you enter into a co-employment agreement. All of your employees then get access to the health plan options extended to other businesses that have joined the PEO. You don’t give up any control over the running of your business, but joining a PEO makes that company the employer of record for your employees. Joining a PEO could offer your employees a wider range of plans to choose from, and it can take the guesswork out of trying to choose a plan on your own. ### Partner with Purchasing Alliances Purchasing alliances or cooperatives comprise multiple businesses that come together to purchase insurance collectively. Joining an alliance not only may offer more possibilities in terms of the types of coverage and plans you’ll have access to, but also could save money if you’re able to get access to affordable health insurance that isn’t available elsewhere. One of the most important things to consider about joining a purchasing alliance is the types of businesses it serves. The more similar that member businesses are in terms of structure and number of employees, the more likely that the plans offered will reflect the needs of the member group as a whole. ## Choosing the Right Health Insurance Plan for Your Small Business Finding the right health insurance plan can be challenging, as there are a multitude of factors to consider, the first being where to buy coverage. Small businesses with fewer than 50 employees can look for options through SHOP or get help from a SHOP-registered broker or agent. Larger businesses can shop for plans with the help of an agent or PEO, or contact insurance companies directly. When comparing small business health insurance plans, it’s important to consider: * Premium costs * Coverage options * Network providers * Employee needs Business owners who are looking for plans through SHOP can easily compare coverage and prices for plans available in their area. All you’ll need to do is enter your ZIP code to see what options you might have. As you look at SHOP plans, here are some other considerations to keep in mind: * Will you offer one plan or a choice of plans? * Will coverage be limited to medical only, or will you add dental coverage? * How much of employee premiums do you plan to pay? * Will you offer coverage to full-time employees only or include part-time workers? * When will the coverage begin? * What waiting period will you impose before employees can become eligible for coverage? There are four types of plans offered through SHOP: bronze, silver, gold, and platinum. The amount employees pay depends on the plan, with the highest employee contribution at the bronze level and the lowest at the platinum level. Once you choose a plan and are ready to enroll, you can do so through a registered SHOP agent or broker, or the insurance company. ### Some states have their own websites for SHOP enrollment, which you’ll need to use to choose a plan.  ## Resources and Support for Small Businesses Navigating healthcare rules and coverage options can be confusing for new and seasoned business owners alike. If you’re interested in getting more information about what’s required under the ACA or how to find health coverage as a small business owner, you might find these resources helpful: * [Health insurance for your business and employees](https://www.healthcare.gov/small-businesses/) (HealthCare.gov) * [How to enroll in SHOP insurance](https://www.healthcare.gov/small-businesses/choose-and-enroll/shop-marketplace-overview/) (HealthCare.gov) * [Small Business Healthcare Tax Credit and the SHOP Marketplace](https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace) (IRS.gov) * [Employer Shared Responsibility Provisions](https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions) (IRS.gov) * [Small Business—Get Answers Page](https://www.healthcare.gov/small-businesses/get-answers/) (HealthCare.gov) ## Which Businesses Are Eligible for the Small Business Health Options Program (SHOP)? Small businesses are eligible for SHOP insurance plans if they have one to 50 employees. If you’re eligible, you don’t need to wait for an open enrollment period to start offering coverage to your employees. ## How Can Small Businesses Find the Right Health Insurance Plan? Small business owners can find the best health plan by first understanding what they and their employees may need. Businesses that are SHOP-eligible may look to the federal marketplace first to compare plans. Alternatively, businesses of any size may consult a private insurance agent or broker to help them make sense of the different health plan options that are available. ## How Much Does Health Insurance Cost on Average for a Small Business Per Employee? On average, the annual premium for single coverage for covered employees at small firms was $8,722 in 2023. The average premium cost was slightly lower for covered employees at large firms: $8,321. The average premium was $23,621 for family coverage at small firms and $24,104 for covered employees at large firms. ## The Bottom Line Health insurance is a requirement for some small business owners, but it may be optional for others. Offering health insurance, whether you’re required to do so or choose to, could help your employees and your business thrive. When searching for coverage, it’s important to shop around to find the [best health plan options for small businesses](https://www.investopedia.com/best-health-insurance-for-small-business-owners-4846573) so that you can make an informed decision for your business.

Offering health insurance as a small business owner can yield tangible and intangible benefits. A good healthcare plan can be a strong incentive when attempting to attract top talent to your business. Employees may feel a deeper sense of job satisfaction in knowing they have healthcare benefits if they need to use them. Employers can also benefit in the form of tax breaks. The challenge is finding the right healthcare option to offer to your employees. Key Takeaways Small businesses face challenges in providing good, affordable healthcare coverage to their employees.The Small Business Health Options Program (SHOP) helps small businesses provide health coverage and offers benefits such as plan comparisons.Small businesses should consider factors like cost, coverage options, and employee needs when selecting a health insurance plan.Employer-sponsored insurance plans cater to the needs of small businesses and offer various benefits and considerations.Offering healthcare benefits can help you attract and retain talented employees, improve their satisfaction and productivity, and contribute to your business success. Are Small Businesses Required to Offer Health Insurance? Under provisions of the Employer Mandate of the Affordable Care Act (ACA), businesses are required to offer health insurance only if they have 50 or more full-time employees or full-time equivalent (FTE) employees. If you meet that standard, you’re considered a large employer for Internal Revenue Service (IRS) purposes. A full-time employee is someone who averages at least 30 hours of service per week during the calendar month, or at least 130 hours during the calendar month.Full-time equivalent employees refer to a group of workers who may not all be employed full-time, but whose working hours combined are equivalent to a full-time employee. Special rules for determining full-time employee status apply to businesses that hire seasonal workers.  Independent contractors are not considered employees, so the ACA rules for health insurance don’t apply to them. A sole proprietor running a small business may be subject to the rules, but only if they meet the 50 or more full-time employees or FTE guidelines. Self-employed business owners with no employees can enroll in healthcare plans through the federal marketplace if they need coverage for themselves or their family members.  How Small Business Health Insurance Works Small businesses that are required to offer health insurance, or that voluntarily choose to do so, are obligated to offer coverage to 95% of full-time employees and their eligible family members. Again, a full-time employee is defined by thresholds of 30 hours per week or 130 hours per month. Businesses would need to have at least one eligible full-time employee to offer coverage. Coverage must meet two standards to be aligned with ACA requirements: Minimum value. An employer-sponsored plan is determined to offer minimum value if it covers at least 60% of the total allowed cost of care for covered employees, and if its benefits include substantial coverage of physician and inpatient hospital services. Affordability. For 2024, workplace health insurance is deemed affordable if employees’ share of monthly premiums in the lowest-cost plan offered is less than 8.39% of household income. Affordability is based on the premium that would cover all individuals in the employee’s household. Income is calculated based on the earnings of everyone in the household who is required to file a tax return. To qualify for a federal tax credit, employers must pay at least 50% of health insurance premiums for covered employees. Employers can, however, opt to pay a larger share of the premiums so that employees have less to pay out of pocket. Businesses are required to offer health insurance to employees when they become eligible for it. Employers can impose a waiting period before employees are eligible. The maximum allowed waiting period is 90 days. Employees can make changes to their plan if they qualify for a special enrollment period, which is triggered by a life change. For example, a covered employee who has a child would qualify for a special enrollment period to add a new baby to their plan. Employers must provide a special enrollment period of at least 30 days to employees who are eligible to change their plans. Benefits of Offering Health Insurance as a Small Business Offering health insurance to your employees, whether you’re obligated to do so by ACA rules or not, can help your business and your workers in many ways. Here are some of the main advantages of including health insurance as part of an employee benefits package. Attract top talent. Job seekers may be more inclined to pursue career opportunities with businesses that offer attractive benefits, including health insurance. Increase retention. A good health insurance plan may be an incentive for employees to remain loyal to your business, rather than moving on to another company. Qualify for tax breaks. Eligible businesses can qualify for the small business healthcare tax credit, which is worth up to 50% of employer-paid premiums. Tax credits reduce your tax liability dollar-for-dollar. Strengthen your business. Offering health insurance to employees could lead to a stronger business overall if workers experience greater job satisfaction, miss fewer days of work because they’re able to get adequate healthcare when they need it, and are more productive while on the job. Eligible small businesses will need to file IRS Form 8941, Credit for Small Employer Health Insurance Premiums, to qualify for this tax benefit. Types of Health Insurance for Small Businesses Small business owners may choose from multiple types of health insurance plans. Understanding how they compare is important when choosing a plan. PPO plans: Preferred provider organization (PPO) plans allow covered individuals to pay less out of pocket for care when they use in-network doctors, hospitals, and providers. Employees would still be able to seek care out of the network, but will pay more for it. HMO plans: Health maintenance organization (HMO) plans can have lower out-of-pocket costs for covered employees, but are more restrictive regarding which doctors, hospitals, and providers you can visit. HMO plans are often focused on wellness and preventative care. EPO plans: Exclusive provider organization (EPO) plans only cover healthcare costs when an employee uses an in-network provider. These plans can allow exceptions for emergencies. HSA-qualified plans: HSA-qualified plans or high-deductible health plans carry higher deductibles, but offer employees access to a Health Savings Account (HSA). An HSA offers triple tax benefits to employees in the form of deductible contributions, tax-deferred growth, and tax-free withdrawals when the money is used for eligible healthcare expenses. POS plans: Point of service (POS) plans have lower out-of-pocket costs when employees use in-network providers. One key thing to note: These plans require a referral to see a specialist. Indemnity plans: Indemnity plans allow covered employees to visit any doctor, hospital, or healthcare provider, with costs covered by the plan once they meet a certain deductible. These are sometimes called fee-for-service plans since they require employees to pay premiums, deductibles, and co-insurance. Finding Affordable Small Business Health Insurance Affordability is likely to be a key concern when choosing a health insurance plan for your employees. The plan needs to be affordable for them to meet ACA standards, but it also needs to be affordable for your business if you’ll be paying some of the premium costs. Here are some tips for finding affordable small business health insurance. Use the Small Business Health Options Program (SHOP) The Small Business Health Options Program (SHOP) is designed for small employers who want to provide health and/or dental insurance to their employees. You’ll need to be eligible for SHOP to purchase insurance through the program. You’re eligible if: Your business has one to 50 full-time equivalent employees.You plan to offer coverage to all full-time employees.You anticipate enrolling at least 70% of the employees to whom you offer insurance.Your business has an office or employee work site in the state whose SHOP you plan to use. There are certain benefits associated with using SHOP to find health plans. Business owners can: Easily compare pricing and coverage for multiple plans in one placeOpt to offer more than one plan to employeesChoose how much to pay toward premiumsEstablish an appropriate waiting period for offering coverage to eligible employees All of the information you need is centralized, but if you need help making sense of any of it, you can work with a SHOP-registered insurance agent or broker. Use a PEO Service A PEO, or professional employer organization, helps small businesses get the insurance they need. Effectively, when you join a PEO, you enter into a co-employment agreement. All of your employees then get access to the health plan options extended to other businesses that have joined the PEO. You don’t give up any control over the running of your business, but joining a PEO makes that company the employer of record for your employees. Joining a PEO could offer your employees a wider range of plans to choose from, and it can take the guesswork out of trying to choose a plan on your own. Partner with Purchasing Alliances Purchasing alliances or cooperatives comprise multiple businesses that come together to purchase insurance collectively. Joining an alliance not only may offer more possibilities in terms of the types of coverage and plans you’ll have access to, but also could save money if you’re able to get access to affordable health insurance that isn’t available elsewhere. One of the most important things to consider about joining a purchasing alliance is the types of businesses it serves. The more similar that member businesses are in terms of structure and number of employees, the more likely that the plans offered will reflect the needs of the member group as a whole. Choosing the Right Health Insurance Plan for Your Small Business Finding the right health insurance plan can be challenging, as there are a multitude of factors to consider, the first being where to buy coverage. Small businesses with fewer than 50 employees can look for options through SHOP or get help from a SHOP-registered broker or agent. Larger businesses can shop for plans with the help of an agent or PEO, or contact insurance companies directly. When comparing small business health insurance plans, it’s important to consider: Premium costsCoverage optionsNetwork providersEmployee needs Business owners who are looking for plans through SHOP can easily compare coverage and prices for plans available in their area. All you’ll need to do is enter your ZIP code to see what options you might have. As you look at SHOP plans, here are some other considerations to keep in mind: Will you offer one plan or a choice of plans?Will coverage be limited to medical only, or will you add dental coverage?How much of employee premiums do you plan to pay?Will you offer coverage to full-time employees only or include part-time workers?When will the coverage begin?What waiting period will you impose before employees can become eligible for coverage? There are four types of plans offered through SHOP: bronze, silver, gold, and platinum. The amount employees pay depends on the plan, with the highest employee contribution at the bronze level and the lowest at the platinum level. Once you choose a plan and are ready to enroll, you can do so through a registered SHOP agent or broker, or the insurance company. Some states have their own websites for SHOP enrollment, which you’ll need to use to choose a plan.  Resources and Support for Small Businesses Navigating healthcare rules and coverage options can be confusing for new and seasoned business owners alike. If you’re interested in getting more information about what’s required under the ACA or how to find health coverage as a small business owner, you might find these resources helpful: Health insurance for your business and employees (HealthCare.gov) How to enroll in SHOP insurance (HealthCare.gov) Small Business Healthcare Tax Credit and the SHOP Marketplace (IRS.gov) Employer Shared Responsibility Provisions (IRS.gov) Small Business—Get Answers Page (HealthCare.gov) Which Businesses Are Eligible for the Small Business Health Options Program (SHOP)? Small businesses are eligible for SHOP insurance plans if they have one to 50 employees. If you’re eligible, you don’t need to wait for an open enrollment period to start offering coverage to your employees. How Can Small Businesses Find the Right Health Insurance Plan? Small business owners can find the best health plan by first understanding what they and their employees may need. Businesses that are SHOP-eligible may look to the federal marketplace first to compare plans. Alternatively, businesses of any size may consult a private insurance agent or broker to help them make sense of the different health plan options that are available. How Much Does Health Insurance Cost on Average for a Small Business Per Employee? On average, the annual premium for single coverage for covered employees at small firms was $8,722 in 2023. The average premium cost was slightly lower for covered employees at large firms: $8,321. The average premium was $23,621 for family coverage at small firms and $24,104 for covered employees at large firms. The Bottom Line Health insurance is a requirement for some small business owners, but it may be optional for others. Offering health insurance, whether you’re required to do so or choose to, could help your employees and your business thrive. When searching for coverage, it’s important to shop around to find the best health plan options for small businesses so that you can make an informed decision for your business.