Principis Capital serves companies looking for a flexible working capital loan with the option to obtain additional funding in the future. Small businesses with poor credit ratings preventing them from qualifying for traditional loans may be able to use funding from Principis to cover gaps in cash flow. However, reviews from previous clients suggest this lender should be approached with caution.
Founded in 2008, Principis Capital positions itself as a provider of "alternative financial services" for small businesses. By providing merchant cash advance (MCA) loans in the form of credit card advances and total deposit advances, this lender allows merchants to basically sell a portion of future sales or deposits and pay the money back as new sales are made.
Principis Capital's website suggests the company is focused on promoting growth for and strengthening the structure of small businesses. As a small company itself, Principis seeks to help merchants needing cash to achieve short- and long-term goals but that are unable to qualify for traditional bank loans. The company currently has its headquarters in Jersey City, NJ, although a location in New York, NY is listed on its LinkedIn page. Despite the rather excessive amount of content on its website, it's difficult to obtain much specific information about this lender and its policies.
Principis Capital is among a rare group of lenders requiring no minimum FICO score for applicants. According to its website, the majority of the company's clients have scores under 600, and 30 percent of the client base has scores of 500 or less.
The lender clams to "look at [the] future, not [the] past" when evaluating merchant applications, focusing on growth potential rather than previous financial difficulties. For companies in industries experiencing frequent fluctuations in cash flow and those with less-than-optimal credit histories, this approach may make Principis a viable alternative to the lengthy application processes and stringent requirements of traditional lenders.
With no FICO limit to present a barrier to funding, merchants at all levels of financial health can potentially obtain funding from Principis Capital. However, businesses showing higher risk due to volatility in cash flow and those without a strong history are unable to qualify for the lowest loan rates the company offers.
Merchants in many industries considered volatile or high-risk by banks and other standard lenders are welcome to apply for funding from Principis Capital. The lender lists the following preferred markets in the "Industries We Serve" section of its website:
Each industry has its own page with funding information and suggestions for loan use, but the content is fairly repetitive and doesn't offer a great deal of detail to help potential applicants make a decision about whether Principis Capital is right for them. Merchants with questions about the qualification and lending process may have to contact the company prior to applying.
Most markets to which Principis Capital provides funding experience seasonal shifts in sales or orders, and the lender is willing to work with a range of different businesses. Application requirements are the same for all industries with the exception of construction. Companies in this market must have 10 years of established business history to be considered for funding.
Principis Capital requires all applicants to operate a physical location and won't provide funding to home-based businesses.
The structure of MCA loans allows for more flexible term lengths than other loan types. Instead of being set at a fixed monthly amount, payments are based on credit card sales volume. During prosperous periods, more of the loan balance is paid off. When sales are slow, less money goes toward payments.
Principis Capital keeps these shifts in mind when working with merchants and doesn't set term lengths in stone. Basic terms are 8 to 12 months, but merchants may be given up to 18 months to pay off their balances. However, Principis stipulates that merchants may not deliberately take any action to try to divert payments from the lender during the terms of the loan. This includes discouraging customers from paying by credit card and attempting to switch merchant account providers without first alerting the company.
Principis Capital requires all merchants applying for funding to:
At least 51 percent of the business must be owned by the person filing the application. This one-page document can be filled out on the Principis Capital website or downloaded and faxed to the company upon completion. Merchants must provide the following information when applying:
In addition to the completed application, Principis asks for the most recent four months' worth of credit card processing records and two most recent monthly bank statements. Merchants may also provide four months of the most recent bank statements if card processing information is unavailable. No collateral is required.
Applicants can expect preapproval in as little as 24 hours, although it may take up to two days to be notified. Once all the required application paperwork is received, Principis Capital sends a proposal within 24 hours. Verification and approval after a merchant agrees to the contract may take between one and three business days. The entire process can be as short as three days if applicants are able to provide paperwork in a timely manner, but Principis cites seven days as the average time to funding. Merchants typically receive between 1 and 2.5 times their average monthly credit card sales.
Principis Capital has two programs for merchants: Standard and Platinum. Specific rate information isn't given on the company's website, but Principis does stipulate the "stability" of an applicant's business affects the ability to qualify for lower rates. These rates may be as low as 1.33 for terms of up to 18 months. Rates are higher for companies in high-risk industries or with financial histories suggesting potential difficulty in making regular payments.
For merchants desiring a payment option allowing them to budget set amounts each day, Principis Capital offers "Flex-Defined Payments." This payment structure is created based on historical patterns in credit card sales and lays out a predictable daily payment amount for each month. As a result, merchants can plan to pay less per day in slow seasons, more during busy seasons and an average rate the rest of the time. Small businesses with concerns about seasonal cash flow can use the Flex-Defined model to prevent bounced payments and stick to the agreed loan terms.
As a first-position lender, Principis Capital prefers to do business with companies not currently in loan agreements with other providers. If a merchant is carrying a balance at the time of application and is able to net as little as 30 percent of the loan, Principis will pay off the balance to maintain first position status.
Merchants may be able to avoid the cash flow problems common with stacking by requesting additional funding through Principis if more money is needed before the end of the initial loan terms.
Principis Capital promises not to add any "hidden costs" to their loans and presents all payment and fee information in the initial loan proposal.
No origination fees are charged on funding from Principis.
First-time customers in need of more money before an initial loan from Principis is completely paid off may request additional funding after doing business with the lender for three to four months. Returning customers may put in a request after 30 to 60 days.[http://principiscapital.com/renewals/] In both cases, 60 percent of the current loan must already have been paid off for Principis Capital to approve the request. The amount of additional funding a merchant receives is based on "business performance."[http://principiscapital.com/resources/question-and-answer/] Principis looks at the financial strength of the company to determine if its level of stability has remained the same since the initial application. If so, or if the company's financial and operational situation has improved, renewals may be delivered in as little as two days.
The structure of MCA loans means no interest is accrued over time. Merchants don't receive any special discounts for paying a loan off early, and is there is no period of paying down interest before paying off the principal. This lender does offer some relief for companies experiencing cash flow problems by not charging penalties for bounced payments.
Because the money Principis Capital provides is based on credit card sales, it's meant to be used only for business purposes. However, the lender doesn't ask applicants to provide information about how the money will be used in the context of their companies. The diverse range of industries to which Principis Capital lends requires flexibility in loan use, although there are several common reasons why businesses with seasonal variations in cash flow seek out MCA loans, including:
Some merchants treat MCAs in a similar way as a line of credit, taking out loans as necessary to cover small or short-term expenses instead of seeking out a large loan that would require hefty monthly payments. Principis Capital extends this type of funding to finance small steps toward business growth, allowing companies to make purchases or take advantage of time-sensitive investments with the potential for significant future payoffs.
Although Principis Capital maintains an A+ rating from the BBB, the company's overall reputation among previous customers is negative. All current reviews on the BBB website are poor, and the company's responses to these complaints suggests resolution may be for merchants encountering problems during the course of a loan.
A 1.8 out of 5 rating on Google and 2.7 out of 5 on Facebook show further negative responses from clients. Complaints include:
Common review sites like Yelp and TrustPilot have no listings for Principis, and the company hasn't been reviewed by Merchant Maverick or Fundera, which is usual for a lender that has been in business for 10 years.
Principis Capital is a member of the Small Business Financing Association (SBFA) and the Electronic Transactions Association (ETA). The company is not currently accredited by the BBB and hasn't been recognized by any major financial organizations or publications.