American Express Small Business Loans: The Ultimate Guide

Your guide to every type of small business loan American Express offers.
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Every American Express Small Business Loan Available

You probably know American Express as one of the biggest credit card issuers in the world. You may also know of the company as a huge advocate for small business.

But what do you know about American Express’s small business loans?

There are a lot of advantages associated with American Express’s loan offerings, including zero origination fees and reasonable terms and fees. Before we jump in, you should know that these options are only available for Amex customers, meaning you must already carry or accept their cards.

American Express offers merchant financing, short-term loans, and working capital. To see if any of those is a good fit for your business, read on.

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American Express Small Business Loans: What They Have to Offer

You might think of American Express as only a credit card issuer—offering personal and business credit cards.

However, for the right kind of business owner, American Express offers more than just credit cards.

In 2011, American Express launched their small business financing program, offering working capital to small business owners who need more funds than what they can get from their business credit cards, competing with some of the best banks for business loans.

American Express Merchant Financing: How Does It Work?

When you hear “merchant financing,” the first type of financing that pops into your head is likely a merchant cash advance.

While the concept is similar, this American Express business loan isn’t actually a merchant cash advance—it’s fully a commercial loan.

Let’s come back to merchant cash advances for a moment to explain the difference. Merchant cash advances aren’t technically “business loans.”

That’s because, with this type of financing, merchant cash advance companies (not lenders) are purchasing or discounting the value of your credit and debit card sales. You pay the merchant cash advance company back by letting them take a fixed percentage from your daily credit and debit card sales.

Again, American Express Merchant Financing is set up differently than a merchant cash advance.

With the Merchant Financing program, American Express provides qualified merchants (more on what counts as “qualified” to come) with unsecured business loans.

There are two types of American Express small business loans under their Merchant Financing program: short-term loans and settlement advance loans (which is no different than any type of “advance funding”).

The value of any type of American Express business loan, though, is mostly based on your historical credit card and debit card receivables each month. While American Express isn’t purchasing your credit and debit card receivables, they will pull repayment for the loan from your American Express credit and debit card receivables.

American Express Short-Term Loans: Term, Amount, Fees, and Repayment

Let’s get into the details of the first of the American Express small business loans.

What does the short-term loan look like?

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Loan Terms & Amounts

American Express business loans under the Merchant Financing program are offered over either a one- or two-year term.

American Express small business loans with a one-year term offer loan amounts from $5,000 to $2 million, based on general business performance and how much your business brings in with card receivables. (If you’re approved for a loan of $35,000 or less, you might need to sign a personal guarantee on the financing.)

American Express also offers a two-year term loan that’s structured similarly to their one-year counterpart. A two-year term loan offers anywhere from $36,000 to $2 million in financing. With both types of shorter-term loans, American Express disburses the loan all at once.

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Loan Fees

American Express small business loans actually don’t come with “interest rates” in the traditional sense.

Instead, you pay a fixed financing fee upon taking on the loan. This fee is only calculated once when you take on the business loan.

For the one-year term loan, the factor fee could range from 6% to 14%.

For the two-year term loan, the factor fee could be between 12% and 28%.

To see what you’re paying on these American Express business loans, always calculate your APR. Considering that both products have factor rates that range from 1.06 to 1.28, the effective APR for both loans could be anywhere between 11% and 27%.

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Loan Repayment

Once you’re given one of these American Express small business loans, how do you repay the financing?

Well, American Express will tap into your credit and debit card receivables to collect repayment for the loan they extended.

There are a few different ways to repay the loan. The first option is to have American Express set up a lockbox, meaning that all of your credit card transactions get deposited into a bank account that American Express controls. Each day, they go into that lock box and deduct a certain percentage of your credit card profits, sending the remainder that you’re owed back to your business’s bank account.

Another way to repay this American Express business loan is to have American Express partner with your payments processor. With this option, the payments processor does the work: They deduct a percentage of each credit card transaction to send to American Express (along with the usual transaction fees they take). Once repayment and transaction fees are processed, the rest of the transaction amount gets routed to you.

Or, if you have a loan amount that’s greater than $35,000, American Express could collect payment by deducting a percentage of all your American Express transactions.

And finally, American Express could withdraw a fixed amount of repayment from your business bank account each day via ACH (only if your business has a one-year loan below $150,000).

The way you repay your American Express term loan can be decided with an American Express representative.

It’s also important to note that American Express small business loans come with a discount if you can pay the issuer back early.

If you repay within 180 days (for the one-year loan) or 360 days (for the two-year loan), you’ll get a 25% rebate of the remaining balance. The rebate gets smaller the longer it takes for you to repay. So if you repay within 270 days (for the one-year loan) or 540 days (for the two-year loan), that rebate is only 10% of the remaining balance.

All in, if you can repay your American Express small business loan earlier than expected, it’s worth doing so.

American Express Working Capital: Term, Amount, Fees, and Repayment

Another type of American Express small business loan is their working capital option.

The American Express Working Capital is a shorter-term small business loan, intended to help businesses manage cash flow on a monthly basis.

With this financing product, you choose a vendor to pay, select your term, and pay American Express back according to your contract. To be clear, under the terms of this option, the money never passes through your hands—instead, American Express pays your vendor directly.

One last thing to keep in mind: American Express will auto-debit the amount owed at the end of your term, so be sure you’ll be able to have that cash on hand.

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Loan Terms & Amount

How much money you’re able to secure will depend on your situation. However, American Express sets a range of $1,000 to $750,000 for funding requests.

With this option, you choose your term. You can choose 30 days, 60 days, or 90 days. Each term has associated fees.

You have the chosen payment period to pay back the loan amount. More on how to pay to come.

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Loan Fees

Again, American Express doesn’t charge traditional interest on this American Express business loan.

Instead, they charge a fixed fee on the amount they advance to the vendor.

These currently range from 0.5% – 1.75% for 30 days, 1.0% – 3.5% for 60 days, and 1.5% – 5.25% for 90 days.

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Loan Repayment

With the Working Capital option, American Express can collect repayment in two different ways.

One way is for you to pay the money back as you go. There’s no pre-payment penalty if you pay back early.

The other way is to have American Express auto-debit the amount at the end of the payment term.

And of course, you can also do a combination of both.

Who Qualifies for These American Express Small Business Loans?

So, are any of these American Express small business loans for you?

Well, they could be solid financing options for some business owners, and not a fit for others.

First off, in order to pursue this financing option, you have to either use American Express credit cards or be a merchant that accepts American Express credit cards for your business.

American Express small business loans are repaid when they take a portion of your Amex card transactions or use your associated bank account—so accepting American Express cards is the absolute baseline for eligibility.

If you don’t meet that eligibility requirement but are a highly qualified borrower, check out your loan or line of credit options available at other banks and online lenders. Bank of America business lines of creditChase business lines of credit, or Capital One business lines of credit are all worth checking out.

After that, American Express looks at the following qualifications that most small business lenders look at:

  • Annual revenue: American Express wants to see that your business brings in a minimum of $50,000 in annual revenue.
  • Credit and debit card receivables: Because much of this financing is based off of what you bring in in credit card sales, American Express checks to see that you have a minimum of $12,000 in annual credit and debit receivables.
  • Time in business: Like most business lenders, American Express looks to see if you’ve been in business for at least 24 months.

Other Factors American Express Considers

American Express looks at those three factors, along with creditworthiness (though they don’t set a range for eligible credit scores), for any application for their financing products.

However, if you’re applying for the two-year financing, they also look to see that you’ve accepted American Express credit cards for the past 24 months.

You should also be aware that American Express doesn’t lend to businesses in certain industries, which include:

  • Cruise lines
  • Airlines, private jets, or chartered airlines
  • Ticket sales and brokers
  • Adult entertainment
  • Medical marijuana dispensary
  • Check cashing/guarantee
  • Financial services equities, unit trusts, mutual funds
  • Insurance
  • Bail bonds
  • Detective agencies
  • Door-to-door sales (exception for payment on delivery directly to the company or to the franchisee)

Check out their full list of ineligible industries to make sure that your industry isn’t on there.

In general, retail, restaurant, and lodging businesses (in particular, businesses that do high volumes in credit card transactions) are good candidates for American Express small business loans.

What Are These American Express Small Business Loans Good For?

Now that you know what kind of borrowers Amex is looking to work with, how can you tell if one of these American Express small business loans is right for you?

Well, the shorter-term loans are likely good financing options for larger business purposes—like buying equipment, expansion, or financing a major business project. If you qualify for a loan amount in the upper end of their range ($2 million), you’ll have a lot of capital to use for your business.

The Working Capital, on the other hand, is probably a better option if you’re looking for a more flexible way to pay vendors. In general, if you know that you can pay the advance off easily each month, the Working Capital can be used for a variety of purposes.

The Advantages and Disadvantages of American Express Small Business Loans

The Advantages of American Express Small Business Loans

So, should you pull the trigger on one of the American Express small business loans?

Every small business owner will find themselves in a different financial situation.

But when you’re making the decision, here are some advantages and disadvantages to consider.

What are some reasons to go ahead and take out one of these loans?

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Simple application process

The application process for any product in the Merchant Financing program is fully online. Typically, you just need to submit a few different documents: tax returns, bank statements, and monthly statements from credit card processors.

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Fast time to funding

If you’re looking for quick business loans, then an Amex small business loan could be a good fit. In the best case, you could be approved for business funding the next day. The speed of the funding depends on a few different factors, including your credit card processing agreements, the repayment method you choose, the loan amount, and the product term you’re applying for.

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(Relatively) affordable

As far as fast, easy financing goes, American Express business loans offer relatively affordable rates. Compared to similar products, like merchant cash advances, American Express small business loans have a very affordable effective APR range.

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Automatic payments

Unlike other small business financing products, your business loan repayments are automatically deducted. No checks necessary (and no fear of missing payments)!

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Prepayment discounts

Other small business lenders don’t let you repay your financing early (or charge you a penalty if you do). However, if you can manage to pay off your Amex loan early, you can stand to save a fair amount of money in the rebate.

The Disadvantages of American Express Small Business Loans

As with any small business financing product, there are cons to weigh against the pros.

Here are some downsides to American Express business loans that you should consider before signing the dotted line.

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Short terms

If you qualify for a larger loan amount with American Express, that’s a lot of cash to pay back over a short amount of time—even if you qualify for the longest term (two years). You won’t have the debt on your books for too long, but you’ll have high repayment amounts.

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High(er) APRs

Again, when compared to similar financing products, American Express small business loans are relatively affordable. However, if you can qualify for other products—like medium-term loans, SBA loans, or business lines of credit—you’ll certainly find lower rates for your business.

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Tough on cash flow

If you choose to have Amex collect repayment by taking a fixed percentage of your daily credit and debit card sales, that can seriously cut into your week-to-week cash flow.

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(Relatively) more stringent requirements

Whereas merchant cash advance companies and some short-term lenders work on very few qualification standards, American Express does look at your business financials pretty closely before they approve you for an American Express business loan. However, you’ll find that their requirements are much more manageable than that of a bank, SBA lender, or longer-term lender.

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Consequences if you can’t repay

As with any small business lender, American Express has different consequences if you can’t pay—which they outline explicitly on their website. If you can’t pay in full one month, that affects the amount you’re disbursed the next (for the Settlement Advance). If you repay less than 70% of the funded amount, Amex could initiate an ACH debit from your business’s bank account on file for the amount unpaid. For the one- or two-year financing, failure to pay in full at the end of the term results in a repayment rate of 100% until the outstanding balance is repaid. Or they could simply initiate an ACH debit to collect on the amount unpaid.

All in, American Express small business loans could be a solid financing option for merchants who need fast financing. However, if you qualify for a less-expensive option, it’s always better to go that financing route.

An Alternative Funding Option: American Express Business Cards

While not technically on the list of American Express “small business loans,” it’s important to note that Amex’s wide array of business credit cards can be used for financing a business in some way.

If you have small- or medium-sized business expenses to cover, oftentimes you can do so on a business credit card or business charge card. (A business charge card is especially useful in this scenario considering the fact that they don’t come with a credit limit—but you must pay in full each month.)

In general, as long as you’re confident that you’ll be able to pay off the balance on your business card each month, using a business credit card as a loan is a good way to cover your business expenses.

Especially considering the fact that business credit cards come with different reward rates, cash back rates, and different perks every time you spend money on the card.

American Express Business Charge Cards

If you’re looking for a business charge card, here are a few of American Express’s best.

This business charge card is the perfect business charge card for frequent-flyer business owners. From a $200 travel credit to access to the world’s best travel lounges, you’ll earn the most valuable travel perks on the market.

American Express Business Credit Cards

On the other hand, if you’re planning on carrying a balance from month to month, consider these American Express business credit cards with 0% intro APR periods.

The Blue Business Plus offers the longest 0% intro APR period currently available on the market for a rewards points business card. As a Blue Business Plus cardholder, you’ll gain access to 15 months of 0% intro APR. This means you’ll be able to carry an interest-free balance from month to month as long as you pay your monthly minimum payment on time.

The Blue Business Cash offers the same 0% intro APR period than the Blue Business Plus but also comes with cash back rewards. This card offers 2% back on all eligible purchases on the first $50,000 each calendar year, then 1% back on all purchases after. If you’re not interested in dealing with points or other less-than-obvious rewards systems, and prefer cash back that is immediately credited to your account, the Blue Business Cash Card is a good choice.

Which American Express Small Business Loan Is For You?

Now that all the American Express small business loans—plus their top business credit and charge cards—are laid out on the table, are any of them the right financing solution for your business?

For businesses partnered with American Express, and actively accepting their cards, an American Express business loan could very well be.

Whatever financing option you choose to go with, make sure you’ve fully shopped around your options before you move forward with any of them. That way you can be confident that you’re getting the best deal possible for your business!

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