Businesses dealing with financial difficulties preventing them from obtaining traditional loans are the target market for Pearl Capital. By providing fast cash to high-risk borrowers across industries, this lender makes it possible for small businesses with poor credit or those already carrying other debt to gain access to additional working capital.
With over 23,000 businesses funded, Pearl Capital has built a name for itself in the short-term lending industry. The company was founded in 2010 and was acquired by Capital Z Partners in 2015. Currently headquartered in New York, NY, the lender specializes in “short term capital advance solutions for under-banked and credit-challenged businesses,” providing loans of up to $1 million to companies in high-risk industries.
The loans Pearl Capital offers differ from those provided by other fast-cash lenders. Instead of delivering funding in the form of a merchant cash advance (MCA), where payments are made based on a percentage of daily credit card sales, Pearl Capital uses an automated clearing house (ACH) model with fixed daily payments. This results in a predictable payment amount and a stable payoff schedule for merchants facing unique financial challenges.
Most fast-cash lenders connect directly with merchants to provide funding, but Pearl Capital works via a network of independent sales organizations (ISOs). In doing so, the lender provides a “direct line to a dedicated ISO account executive” for “the necessary support to accommodate even credit-challenged merchants in virtually any industry nationwide.” Therefore, businesses working with ISO in all 50 states have access to Pearl Capital as a potential source of funding.
As part of its policy to help “credit-challenged businesses,” Pearl Capital doesn’t require a minimum FICO score for approval. This gives merchants unable to apply for funding from other lenders an alternative source for money to cover standard or emergency expenses.
Pearl Capital emphasizes a commitment to providing funding for businesses struggling with cash flow and those with credit histories preventing them from obtaining traditional loans. Companies meeting the basic application requirements should be able to get funding from this lender.
It’s important for merchants seeking funding to be cautious about such open lending policies. Although companies like Pearl Capital will often do everything possible to secure deals for applicants, this can result in companies already burdened with debt being unable to keep up with loan payments. Alternatives should be considered before deciding to take out additional loans.
Common markets for the type of loan offered by Pearl Capital are those in industries where sales fluctuate throughout the year. Retail businesses with seasonal peaks in sales often rely on working capital loans to cover expenses during slow periods. Companies in the hospitality industry, such as hotels and restaurants, also seek out this type of funding. Other common industries include franchises, medical establishments, day care and educational facilities, entertainment providers, spas, salons and wholesalers.
Being committed to helping businesses obtain funding when other lenders refuse to grant approval means Pearl Capital is willing to work with companies in industries usually seen as too risky. These include:
Financial service providers and auto dealers in particular may have difficulty getting short-term loans from other sources, even lenders dealing in alternative financial products. Pearl Capital positions itself as a potential partner for these companies when short-term working capital is needed to make up for inadequate cash flow.
Although Pearl Capital doesn’t specify any industries to which it won’t lend, most fast-cash funding providers exclude home-based businesses and companies dealing in firearms, adult entertainment and any activity considered unethical or illegal.
Similar to a merchant cash advance (MCA), the short-term ACH advances provided by Pearl Capital have flexible terms to accommodate the needs of high-risk seasonal businesses. Terms range from four to eight months, and companies with stronger financial profiles may qualify for up to 12 months.
Flexible terms can be beneficial for companies facing financial hardship, but Pearl Capital’s terms should be considered in light of the fact that the company also charges an origination fee and rather significant factor rates. Merchants qualifying for terms of only four months could find themselves paying thousands of dollars per day in order to avoid defaulting or being charged late fees.
Short-term funding in the financial technology (FinTech) industry is usually obtained by applying online or downloading an application from a lender’s website. To apply to Pearl Capital, merchants instead work with an ISO who then connects them with the lender if an ACH advance is the right fit for their needs. Some direct lenders may also deal with Pearl Capital, sending files to the company if they are unable to provide appropriate funding.
Qualifying for a loan from Pearl Capital requires:
Because it’s willing to extend loans of as much as $1 million to businesses in high-risk industries, Pearl Capital asks for a Confession of Judgment (COJ) to back up requested amounts of $20,000 or more. This gives the lender the ability to take quick legal action if a merchant defaults, making it akin to a lien on the business. Merchants already carrying debt should take this into account when applying, since it could mean losing the business if financial circumstances fail to improve.
After an applicant’s file has been passed from an ISO to Pearl Capital, the lender handles the underwriting process, including performing a hard credit check on the applicant. Because this does have an impact on credit score, merchants with questions regarding eligibility, requirements or the lending process should contact Pearl Capital’s customer service department by phone or via the contact form on the lender’s website prior to putting in an application. Applications meeting all requirements may be approved in as little as one hour and funded in one day.
Fees for Pearl Capital loans are deducted daily through an ACH, so merchants can focus on doing business instead of making payments. However, adequate funds must be available in the business bank account to prevent late payments and ensure the loan is paid off within the terms stated on the original agreement.
Factor rates are fixed rates used instead of interest to cover expenses associated with providing short-term loans. Pearl Capital’s rates range from 1.4 to 1.49, which is fairly standard for lenders in this industry but high when compared to traditional loans.
For example, a loan of $150,000 at a factor rate of 1.4 requires merchants to pay an additional $60,000 in fees. When Pearl Capital’s origination fee is added, the total cost of the loan becomes $212,000. Even at terms of 12 months, daily payments on a loan of this size would be nearly $900, an amount not likely to be sustainable for a high-risk business dealing with a seasonal drop in cash flow.
Most lenders require that merchants carry no debt at the time of application or allow only one existing loan. As part of working with high-risk industries, Pearl Capital goes against this trend and specializes in stacking. It is willing to provide funding to businesses with as many as five active loans, taking up to the sixth position behind other loan providers.
To a business in dire need of funding and with no alternatives to obtain additional working capital, this policy may seem like a welcome relief. However, loan stacking poses a serious risk to the health of a company, especially one already attempting to juggle multiple debt payments.
Pearl Capital doesn’t indicate any fees are charged for application or underwriting.
Short-term loan origination fees are usually charged as a percentage of the principal, but Pearl Capital uses a fixed rate instead. Fees range from $199 for merchants approved for deals up to $1,999 to $1,999 for loans of $100,000 or more. This works out to a range of approximately 2 to 10 percent.
Renewals on short-terms loans are typically made available once a merchant has paid off a percentage of the initial loan or after a specific period of time has passed. Loans from Pearl Capital become eligible once 50 percent of the current balance is paid off. Since Pearl Capital works through a network of ISOs, merchants should contact the account executive handling their loan for information regarding renewal requirements and eligibility.
Before seeking a renewal, however, current loan payments and other debt should be assessed to determine if additional funding can be supported. Renewing a short-term fast-cash loan usually means paying another origination fee and dealing with the costs associated with the lender’s factor rates.
It’s not uncommon for lenders offering short-term fixed-rate loans to require all fees to be paid along with the loan principal. Unlike interest rates, which are charged on the remaining loan balance, factor rates are computed as flat fees at the time a loan is secured and are considered part of the full price of funding. Therefore, attempting to pay a loan off early doesn’t result in any savings and may place a burden on merchants already struggling with cash flow or debt.
According to a company overview by SuperMoney, Pearl Capital charges a prepayment penalty to merchants paying off their loans before the end of the terms. However, the lender states exceptions are sometimes made to provide early payoff discounts. Merchants seeking clarity regarding this issue should contact customer service for more information.
Once a loan from Pearl Capital has been approved, the funds can be put toward anything relating to the applicant’s business. Short-term loans are commonly used for working capital to fund small investments or to cover the cash flow gaps experienced in seasonal industries. The type of loan offered by Pearl Capital may be put toward:
Fast cash loans may also be useful in emergencies, especially for businesses without the financial strength to handle unforeseen expenses. Before using short-term funding for this purpose, merchants must evaluate the potential burden of the loan to ensure the company can manage the required daily payments.
Pearl Capital has a more positive reputation than many other lenders providing short-term working capital to businesses. It maintains an A+ rating from the BBB with no current records of any complaints being filed.
Google reviewers give Pearl Capital 4.4 out of 5 stars, with the majority of feedback stating representatives are helpful and professional, communication is clear and straightforward and the company is understanding of the struggles business owners face. Negative reviews mostly point to the expense of taking out a loan with Pearl Capital, although a few suggest the customer service may not be as good as other feedback claim.
Facebook reviews paint a similar picture. A combination of positive and negative feedback puts Pearl Capital at 4.4 out of 5 stars, but the lender’s customers are divided regarding the quality of service.
Pearl Capital has been BBB accredited since September of 2016 and has been highlighted in publications like deBanked and Market Wired.
About Theresa HoughtonTheresa "Sam" Houghton is a wellness consultant and freelance writer from Upstate NY. With more than half a decade of experience in the business world, Theresa understands the unique challenges small business owners face in highly competitive markets. Her experience with researching and writing positions her to provide solid advice and high-quality content on a variety of topics. When she's not writing or helping people get on track to better health, Theresa likes to read the Bible, play humorous card games and knit socks. You can learn more about Theresa's wellness consulting services at GreenGutWellness.com and connect with her on LinkedIn.