StreetShares Review: The Rise of Affinity-Based Lending

HomeBlogStreetShares Review: The Rise of Affinity-Based Lending

Rebecca Hosley
on March 21, 2020

Read in 4 min

This peer-to-peer lender offers community-based funding to unite business owners who need funding with investors who share similar characteristics.

For example, U.S. military veterans might be matched together, or two women business owners.

The company calls this “affinity-based lending.”

The concept is that by connecting borrowers with investors who have a shared background or cause, borrowers will be less likely to be late on a payment or default on the loan.

This reduces some of the risks of lending, which can result in lower APRs for some borrowers.

StreetShares Review – Designed with Veterans in Mind

StreetShares was initially founded to increase access to small business loans for veterans and protect them from predatory lending practices.

The company was co-founded by a military veteran who said he was inspired to start the company after noticing the high number of payday lenders who flocked to military bases to take advantage of younger, less financially-savvy service members.

However, you don’t need to be a veteran to qualify for a loan with this online lender.

StreetShares has expanded beyond its initial base and now matches investors and borrowers with other common characteristics, such as geography, gender, etc.

How It Works

By offering competitive rates, StreetShares helps small business owners borrow the funding they need to obtain sufficient working capital, hire new employees, purchase business equipment or inventory, or expand their business.

If you have a personal credit score of 600 or more, have been in business for at least a year, have $25,000 in revenue, and are continuing to grow and expand, you may be able to qualify for financing with StreetShares.

Term Loans

For those who do qualify, StreetShares offers 3- to 36-month term loans ranging from $2,000 to $100,000.

Business Line of Credit

They also offer a line of credit from $5,000 to $100,000.

Annual percentage rates for both loans and lines of credit can go as low as 9%, which is lower than most other alternative lenders.

Government Contract Financing

One unique loan product they offer is contract financing designed for small business owners with government contracts.

If you secure a government contract, StreetShares will advance you up to 90% of the invoice, capped at a maximum of $500,000 per contract.

After StreetShares is reimbursed by the government agency (or commercial corporation if you are a subcontractor), they then pass the remaining balance to the borrower – minus any fees of course.

There aren’t any minimum revenue or credit score requirements to qualify, and APRs will usually run between 12% to 25%, although they can run as low as 1% for a 30-day invoice advance.

Worth noting: If you have any liens on your business, you won’t be eligible for contract financing.

StreetShares Review of Benefits

Flexible Revenue Requirements

StreetShares reviews small business loan applications for at least one year of operation and annual revenues of at least $25,000.

A Personal Touch

In addition to filling out the basic details to apply for a loan, business owners are asked to create a pitch deck when applying.

It needs to tell their story and explain why they need a loan (as with pitching any other investor.)

This makes for a more personal process, and assists in matching borrowers with a compatible lender.

Few Fees

While the company does charge a fee of 2.95% every time you draw from your credit line, those are the only fees you will have to pay (other than potential late fees if you miss a payment.)

There are also no fees for repaying loans early.

No matter how long the term of your loan, StreetShares allows borrowers to pay the loan back immediately – with no pre-payment penalties.

This is not common, and can be a huge pro for borrowers.

Referral Program

StreetShares also offers a $250 referral bonus to encourage borrowers and lenders to help grow the community.

StreetShares Review of Drawbacks

Capped Loan Amounts

One of the primary disadvantages with this lender is that, while the company does offer term loans and lines of credit up to $100,000, borrowers can only qualify for up to 20% of their business’ annual revenue.

For example, if your business earns $100,000 per year, that means you would only qualify for a loan of up to $20,000.

So, if your revenue is limited, the amount of money you are eligible to borrow will be too.

Automatic Payments

Unlike some more traditional loans where borrowers make monthly payments, StreetShares automatically deducts weekly loan payments from your bank account.

While this is convenient for some, if cash is tight, the pressure of a weekly payment may be restrictive.

Not Yet Available Everywhere

Another obstacle for some would-be borrowers is geography.

StreetShares does not operate nationwide.

Instead, it has expanded selectively in response to market demand.

The company currently does not offer loans to businesses based in the following states:

Alaska
Montana
Nevada
North Dakota
Oregon
Rhode Island
South Dakota
Vermont

Sole proprietors in Washington, D.C., and the following states are also ineligible:

Delaware
Minnesota
Nebraska
New Jersey
New York
Wisconsin

Certain Types of Businesses Are Ineligible

Finally, StreetShares does place some limitations on the types of industries it will take on.

For example, the company will not lend money to construction contractors, or to borrowers who want a loan to flip real estate.

It also doesn’t work with law firms, or tax preparation or accounting firms.

The one exception is if the business belongs to a certified public accountant.

StreetShares Review – The Bottom Line

StreetShares specializes in helping small veteran-owned businesses by giving them the opportunity to borrow money from other veterans through the concept of affinity-based lending.

While the size of the loan is partially dependent on the borrower’s revenue, they also can pay the loan back early without prepayment penalties, making this an option to consider for young cash-strapped businesses.