Some experts are predicting a challenging future for tax consultants. A September 2020 industry report by the global research company IBISWorld suggested that mass unemployment following the COVID-19 pandemic would limit consumer demand for tax services such as accounting. Additionally, in regions with stay-at-home orders or lockdowns, tax consultants such as yourself may be unable or unwilling to take in-person appointments, which can be important when working with new clients.
That said, it’s not all bad news. The economy is expected to rebound over the next half-decade, and with more employment comes more people needing expert tax help. If you want to get ready for that growth now or stabilize your tax consultancy following the recent economic downturn, small business loans for tax consultants can help you do so. Read below to find out all about your low-cost funding options.
Funding challenges and opportunities for tax consultants
Tax consultants such as yourself may face fewer challenges obtaining funding than other business owners. Most lenders are intimately familiar with the duties of a tax consultant and how these tasks might prepare you to remain on top of loan repayments. As such, many lenders may see tax consultants as ideal borrowers.
However, you may occasionally find lenders hesitant to fund small tax consultancies given how often they struggle against competition from larger companies. Additionally, some lenders could think twice about funding tax consultancies given the short-term challenges predicted for the tax preparation industry. Overall, though, most things about being a tax consultant work in your favor when you’re seeking loans, including the ones listed below.
Financial options for tax consultants
As a tax consultant, you can pursue many types of SBA loans or opt for non-government funding. Whichever route you choose, know that no two small business loans for tax consultants will have exactly the same loan approval rates and periods.
The SBA 7(a) loan program
If your tax consultancy qualifies for low-cost SBA 7(a) loans, you may do best to choose this funding option. SBA 7(a) loans are excellent for small businesses given their long terms, low rates, and low monthly payments. You can use them for the following purposes:
- Working Capital – Working capital is the difference between your current assets and your current liabilities. Alternatively, it is the amount of cash your company has immediately available. Negative working capital suggests a need for new equipment or team members to boost your revenue – and you can use SBA 7(a) loans to cover both.
- Debt Consolidation Loans – Through SBA 7(a) debt consolidation loans, you can refinance your tax consultancy’s current loans. These include high-interest business loans, merchant cash advances, daily or weekly payment loans, or short-term business loans.
- Commercial Real Estate – If you’re looking to open a new location for your business, you can use your SBA 7(a) loan to do so. SBA 7(a) loans can go toward buying owner-occupied commercial real estate or refinancing your company’s current commercial real estate mortgages.
Advantages of SBA 7(a) loans for tax consultants
Lending experts near-unanimously view SBA 7(a) loans as the “gold standard” due to their:
- 10-year terms (25 years for commercial real estate loans)
- Low rates
- Affordable monthly payments
- Wide use of funds
- No prepayment penalties
- Availability in all 50 states
Requirements for tax consultants to apply for SBA 7(a) loans
If you and your tax consultancy meet all the below requirements, you may qualify for SBA 7(a) loans:
- You must have no foreclosures or bankruptcies in the last three years
- Your tax consultancy must be no less than two years old
- You and your tax consultancy must be on-schedule with all government-related loan repayments
- Your consultancy must have no outstanding charge-offs, tax liens, or recent settlements
- You must be a U.S. citizen or lawful permanent resident
- Your consultancy must be based in the U.S.
- You must be at least 21 years old
- Your personal credit score must be above 650
In addition to these fundamental SBA 7(a) loan requirements, some lenders may ask more of you than others. For example, some loan providers will ask for your business plan, but SmartBiz Loans will not.
How to apply for an SBA 7(a) loan for tax consultants
Step 1: Confirm your eligibility based on the above SBA 7(a) loan requirements. Read more via the SmartBiz Loans page about SBA Loan Requirements for Existing Businesses.
Step 2: Gather all your required paperwork, which could pile up quickly. Don’t hesitate to ask your bookkeeper, accountant, or another financial expert to be a second pair of eyes. Read the SmartBiz Loans Guide to SBA Loans to learn more.
Step 3: Choose your lender while keeping the following considerations in mind:
Reviews
Browse your lender’s reviews on Google, TrustPilot, and Consumer Affairs to determine whether other borrowers have enjoyed working with the lender. If you can find other tax consultants among the reviewers, you may want to give their opinions especially large weight.
Fees
Your loan should include two primary fee types: interest and repayment. Excessive additional fees mean you should choose a different lender. You should also make sure that all fees are due during your loan’s lifetime and before your loan’s funding.
Transparency
Check for a clearly stated annual interest rate and APR. Anything less than perfectly clear information on this front may indicate that your lender won’t properly communicate loan terms with you, potentially leading to long-term troubles.
Obvious loan terms
As with transparent APR and annual interest rate provisions, your loan’s fine print should leave few questions unanswered. Fine print that veers on incoherent may disguise unfavorable payment schedules and loan costs, so make sure that your loan clearly states a total amount, your collateral requirements, your payment amounts and frequency, and (if applicable) prepayment penalties.
Availability
Even if you find a loan with excellent terms and rates, you might have a tougher loan experience if your lender isn’t readily available by email or phone. Instead, choose a lender that pairs you with an easy-to-reach representative who knows your company, application, and industry like the back of their hand.
The SBA 504 loan program
You can apply for the SBA 504 loan program if you need low-cost funding for expansion or modernization. Whether you’re opening a new location, adding a new department, or upgrading your software, SBA 504 loans can help you get where you need to be.
SBA 504 loans also help if your tax consultancy falls in line with the public policy goals of your local community development corporation (CDC). If it does, your CDC may cover as much as 40% of your project costs, and your 504 loans may cover as much as 50%. You will then cover the remaining costs with a cash down payment.
The SBA microloan program
If your tax consultancy qualifies as a very small business (a.k.a. microbusiness), you may be eligible for the SBA Microloan Program. Microloans are no more than $50,000 and are valid for all business needs besides commercial real estate purchases and debt payments.
Non-SBA loans and other funding options
SBA loans are generally your best funding route, but if you don’t qualify for them, other options exist. These loans may have shorter terms, larger payments, and higher rates than SBA loans. They include:
Bank term loans
With bank term loans, you can obtain funding as quickly as with SBA loans and put money toward refinancing your debts or obtaining working capital. Speak with bank term lenders about your prepayment penalties (if applicable), rates, repayment terms, and potential loan amounts.
Merchant cash advances
If your clients can pay you via credit or debit card, you may be eligible for loans in the form of merchant cash advances (MCAs). Through MCAs, a card provider will lend you money that you can repay by setting aside a small portion of all your transactions for the card company. Alternatively, traditional installment-based repayment plans are available.
The convenience of MCAs comes with one major catch: They typically have extremely high APRs. Read more about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.
Business lines of credit
Business lines of credit are loans of an amount proportional to your credit score but likely less than with a bank term loan. However, unlike with a bank term loan, you don’t have to use the entirety of your business line of credit. In fact, not using your entire line of credit may be better since you’ll only pay interest on the money you do use.
You can tap into your business line of credit as frequently as needed until you entirely use it. Additionally, since business lines of credit are usually unsecured, you won’t have to put up collateral to obtain them. Learn more via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.
Business lines of credit are similar to business credit cards in that both funding routes involve revolving lines of credit. However, business lines of credit fully expire when you reach their maximum, whereas you can reuse business credit cards after you repay them. Another big difference: Only business credit cards potentially offer spending rewards.
Tax Consultant Funding Success Story
Joel Sandoval is the owner of Sandoval Tax, a California tax consultancy started in 2016 that specializes in tax preparation, payroll services, and bookkeeping. Joel came to SmartBiz Loans when his business began growing so quickly that he needed more office space – and a commercial real estate with which to buy it.
“I thought if we’re going to take on a bigger lease payment, why not just purchase?” Joel says. He adds that with the SBA 7(a) commercial real estate loan that SmartBiz Loans helped him obtain, he upgraded Sandoval Tax from 350 to 1,500 square feet of office space. “I’m considering leasing out the unused space to other businesses,” he adds, but not permanently: “My plan is to eventually use the whole building.”
Why Choose SmartBiz Loans?
Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing. About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.
