Loans

Collateralized Crypto Backed Business Loans

Published, 17 September, 2020

Funding a business is always a challenge. Whether you need to pay your employees or fund a business expansion, the hunt for additional capital can be tough for SMEs and small businesses. Traditional lenders force businesses into strict and costly agreements that can sometimes limit a business to reaching its full potential. For businesses that have crypto assets, lenders like BlockFi offer a new way to access USD capital.

Collateralized Crypto Business Loans

For businesses that have access to crypto assets, there are now a number of options for accessing capital. Businesses like ICOs or those that accept cryptocurrency as payment can now use those assets as collateral towards USD by taking out a loan with BlockFi.

Collateralized loans are great for businesses who show low Net Income (NI). A great benefit of collateral-backed loans is that they will actually minimize NI shown on tax returns, which has potential positive tax implications.

Additionally, collateralized loans do not put as much weight on profitability. For example, BlockFi does not does not require business clients to provide tax documents when applying for a loan under $250k. This makes it significantly easier for growing companies to access capital.

Learn more about how a crypto backed loan works.

Cost of Crypto Backed SME Loans

The cost of a loan is dictated by the interest rate and annual percentage rate (APR) of your loan agreement. It’s important to realize that those are not the same time.

Interest rate refers to the amount of interest you will pay the lender during the term of your loan. For example, BlockFi interest rates start at 8%. Unlike the interest rate, APR is the total fees associated with a loan. This can include things like origination fees and other costs to the lender.

Click here to learn more about APR and interest rates.

What Loan is Right for My Business: Interest-Only vs. Amortized Loans?

There are two main types of loans — interest-only and amortized loans. With interest-only loans, a borrower’s monthly payments only require them to pay interest, with a lump sum at the end of the loan term. This provides a low-impact funding option for a variety of business. Amortized loans require borrowers to pay interest and principal every month.

It’s important to determine the cash flows of your business when figuring out which loan is right for your business. Businesses from industries that do not have a steady stream of revenue might be better off with the interest-only structure. For example, ICO start-ups, consultants, and real estate professionals who may have gaps between income periods may find that the interest-only payments are a much more manageable.

Loans with the lump sum at the end of the loan term (also known as bullet at maturity loans) are good funding options for businesses that will take time to become profitable. With BlockFi, small monthly interest payments make it easier to pay off the loan while the company grows.

BlockFi’s crypto backed loans are always interest-only and have no prepayment penalties. Click here to learn more about how BlockFi’s loans work.

How to Convert ICO Raise to Fiat (USD)

After your company completes an ICO, a key priority is securing fiat funding to pay for operations until the business is profitable. For projects like ICOs, leveraging the Bitcoin (BTC), Ether (ETH), or Litecoin (LTC) raised from an ICO towards an interest-only crypto backed loan is a great way to ensure long-term solvency, with many not knowing how to convert ICO funds to fiat.

Additionally, there is also the option to refinance the loan at the end of the 12 months, which will extend the length of funding over a longer period if needed. If the full 12 months is not required, there is also the option to pay-off the loan early, also referred to as prepayment. BlockFi does not charge fees when clients pre-pay, making it easy to use a crypto backed loan as a short-term funding option, also known as a bridge-loan.

BlockFi’s crypto-to-USD business loans are a great source of funding for ICOs and startups looking for the liquidity from a bank while having the flexibility provided by the blockchain ecosystem. If market prices are low, a crypto backed loan lets you continue funding day-to-day commercial expenses without having to sell your crypto assets. Then, once the price recovers, pay off your loan at any time without penalty. Cool, right?

At BlockFi, we understand the frustration that comes with funding a business. Our team of lending professionals work closely with clients to make sure that they’re getting the best possible rates. The best part? It takes less than 2 minutes to apply.

If you have any questions about BlockFi or how our loans work, please visit our contact us page. We love hearing from you.

Last updated on August 8th, 2022

As of February 14, 2022, the BlockFi Interest Account (BIA) is no longer available to new clients who are US persons or persons located in the US and existing US clients with BIA accounts are unable to transfer new assets to their BIAs. Learn More.

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Digital currency is not legal tender, is not backed by the government, and crypto accounts held with BlockFi are not subject to FDIC or SIPC protections. Digital currency values are not static and fluctuate due to market changes. Not all products and services are available in all geographic areas and are subject to applicable terms and conditions. Eligibility for particular products and services is subject to final determination by BlockFi. Rates for BlockFi products are subject to change.

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