Brief overview of Breakout Capital

In this comprehensive Breakout Capital review, we examine how this alternative lender has evolved since its 2015 founding to become a notable player in the small business financing market. Following its 2023 rebranding to Breakout Finance, the company continues to specialize in short-term financing solutions, with loan amounts ranging from $10,000 to $1 million. Founded in 2015 and headquartered in McLean, Virginia, the company has established itself as a flexible and accessible option for entrepreneurs seeking quick capital injections.

The lender’s market position strengthened significantly following its 2019 acquisition by SecurCapital Corp. and 2023 merger with 12Five Capital. This consolidation created a combined portfolio exceeding $80 million and expanded their lending capabilities, though their interest rates remain higher than traditional banks, typically ranging from 36% to 60% APR. This acquisition marked a new chapter in the company’s history, potentially bringing fresh perspectives and enhanced capabilities to its operations.

According to recent industry data, Breakout Finance has deployed nearly $500 million in funding across all 50 states and Washington, D.C. since 2015. While this nationwide presence is notable, it’s important to consider that alternative lenders like OnDeck and Kabbage have provided significantly larger funding volumes during the same period. The company extends its services across all 50 states and Washington, D.C., making it a viable option for small businesses throughout the United States. This expansive coverage allows Breakout Finance to cater to a diverse range of industries and regional markets, each with its unique financial needs and challenges.

Key features and unique selling points

Based on our analysis of current market data and verified customer feedback from multiple sources, Breakout Finance offers several distinctive features, though each comes with specific considerations for potential borrowers:

1. Diverse Product Portfolio: Breakout Finance offers a comprehensive range of financial products tailored to meet various small business needs. These include term loans, invoice factoring, asset-based loans, and purchase order financing. This diversity allows businesses to choose the most suitable option for their specific financial requirements.
2. Commitment to Transparency: In an industry often criticized for opaque practices, Breakout Finance emphasizes transparency. The company leverages its proprietary SMARTBox tool, which earned recognition from the Innovative Lending Platform Association for promoting transparency in business lending, designed to help potential borrowers compare offers effectively. This commitment to clarity can be particularly valuable for small business owners navigating the complex world of alternative financing.
3. Flexible Financing Strategies: Recognizing that every business is unique, Breakout Finance aims to tailor its financing strategies to fit specific business models and cash flow patterns. This flexibility can be crucial for businesses with unconventional revenue streams or seasonal fluctuations.
4. Educational Focus: Breakout Finance goes beyond merely providing funds by offering educational resources to help small businesses make informed financial decisions. This approach demonstrates a commitment to long-term customer success rather than just short-term gains.
5. Technology-Driven Approach: By leveraging fintech solutions, Breakout Finance streamlines the lending process. This can potentially lead to faster approvals and funding compared to traditional lenders, a critical factor for businesses facing time-sensitive opportunities or challenges.
6. Speed of Funding: One of Breakout Finance’s most notable features is its rapid funding process. Some reviews indicate that funding can be completed in as little as 24 hours, making it an attractive option for businesses needing quick access to capital.
7. FactorAdvantage Product: This innovative hybrid product combines term loans and factoring, offering more flexibility than traditional factoring arrangements. It’s an example of how Breakout Finance tailors its offerings to meet specific market needs.
8. Referral Service: In cases where Breakout Finance’s products may not be the best fit, the company offers a referral service to other lenders. This demonstrates a commitment to finding the most appropriate solutions for businesses, even if it means directing them elsewhere.

Target audience

Breakout Finance caters to a specific segment of small business owners who may find it challenging to secure funding through traditional channels. The ideal Breakout Finance client typically:

• Seeks financing ranging from $10,000 to $250,000 for term loans or up to $1 million for specialized financing products such as invoice factoring and asset-based lending
• Has been in operation for at least one year
• Maintains a minimum FICO score of 600
• Generates a minimum of $10,000 in annual revenue
• May not qualify for conventional financing with lower rates
• Needs funds more quickly than typical lenders can provide

This target audience profile suggests that Breakout Finance is particularly well-suited for small businesses in growth phases, those facing temporary cash flow challenges, or entrepreneurs looking to capitalize on time-sensitive opportunities.

The relatively low minimum FICO score requirement of 600 indicates that Breakout Finance is willing to work with businesses that have less-than-perfect credit. This flexibility can be a lifeline for entrepreneurs who have experienced financial difficulties but are on a path to recovery.

However, it’s important to note that this accessibility comes at a cost. The interest rates and fees associated with Breakout Finance’s products are significantly higher than those of traditional bank loans, with Annual Percentage Rates (APRs) ranging from 36% to 60%. This pricing structure reflects the increased risk associated with lending to businesses that may not qualify for conventional financing.

Market positioning and unique aspects

Breakout Finance positions itself as a flexible, transparent, and fast-acting alternative lender in the competitive small business financing landscape. The company’s market positioning is characterized by several unique aspects:

1. Speed and Convenience: By offering remarkably fast funding, sometimes within 24 hours, Breakout Finance caters to businesses that need quick access to capital. This speed can be crucial for seizing time-sensitive opportunities or addressing urgent financial needs.
2. Flexibility in Credit Requirements: With a minimum FICO score requirement of 600, Breakout Finance demonstrates a willingness to work with businesses that might be turned away by more traditional lenders. This flexibility opens doors for entrepreneurs who are in the process of rebuilding their credit or have faced past financial challenges.
3. Short-Term Focus: Most of Breakout Finance’s products are designed for short-term financing, with loan terms typically up to 24 months. This focus makes them more suitable for immediate cash flow needs or short-term growth opportunities rather than long-term financing strategies.
4. Technology Integration: By leveraging fintech solutions, Breakout Finance streamlines the application and approval process, potentially offering a more user-friendly experience compared to traditional lenders.

While these aspects position Breakout Finance as an attractive option for many small businesses, it’s important to consider some limitations:

• The higher costs associated with their products may not be suitable for all businesses, particularly those with tight profit margins.
• The focus on short-term financing means that Breakout Finance may not be the best choice for businesses seeking extended financing periods.
• Unlike some competitors, Breakout Finance doesn’t offer a mobile app for on-the-go applications or account management, which might be a drawback for tech-savvy entrepreneurs.

In conclusion, Breakout Finance has carved out a niche in the alternative lending market by offering fast, flexible, and transparent financing solutions for small businesses. While their higher costs and short-term focus may not suit all businesses, their willingness to work with a broader range of credit profiles and their emphasis on education and transparency make them a noteworthy option for many entrepreneurs. As with any financial decision, potential borrowers should carefully weigh the costs and benefits, considering both their immediate needs and long-term financial health.

Loan Products Offered by Breakout Capital

Breakout Capital offers a diverse range of financing solutions tailored to meet the varied needs of small businesses. As an alternative lender, they provide options for businesses that may not qualify for traditional bank loans or require faster access to capital. Let’s delve into the specifics of their loan products, terms, and how they compare to industry standards.

Types of loans offered

Breakout Capital’s product lineup includes several financing options designed to address different business needs:

Term Loans

The primary product offered by Breakout Capital is their working capital term loan. This traditional lending option provides businesses with a lump sum of cash to be repaid over a set period with fixed payments. Term loans are versatile and can be used for various business purposes, from inventory purchases to expansion projects.

Invoice Factoring

For businesses struggling with cash flow due to unpaid invoices, Breakout Capital offers invoice factoring. This solution allows companies to sell their outstanding invoices to Breakout Capital for immediate cash, improving liquidity and reducing the wait time for payment collection.

Asset-Based Loans

Breakout Capital provides asset-based lending, using receivables, inventory, or equipment as collateral. This type of financing can be particularly useful for businesses with significant assets but limited cash flow.

Purchase Order Financing

This product allows businesses to sell outstanding purchase orders to Breakout Capital for immediate cash. It’s particularly beneficial for companies that need capital to fulfill large orders but lack the immediate resources to do so.

FactorAdvantage

Breakout Capital offers a unique hybrid product called FactorAdvantage, which combines elements of term loans and factoring. This product provides more flexibility than traditional factoring arrangements, potentially offering businesses the best of both worlds.

Loan amounts and terms

Understanding the loan amounts and terms available is crucial for businesses considering Breakout Capital as a financing option.

Term Loans:

• Loan amounts: Up to $1 million
• Terms: Up to 24 months

FactorAdvantage:

• Loan amounts: Up to $500,000
• Terms: Up to 24 months

It’s important to note that these terms are relatively short compared to traditional bank loans, which may offer terms of several years. This shorter term structure is typical of alternative lenders, who often focus on addressing immediate cash flow needs rather than long-term financing.

Interest rates and fee structure

Breakout Capital uses a factor rate pricing model instead of traditional interest rates. As of 2024, their rates typically start at 1.25% per month, with APRs ranging from 36% to 60% depending on creditworthiness and business profile, which can make it challenging for borrowers to directly compare costs with lenders using annual percentage rates (APRs).

To assist potential borrowers in understanding and comparing costs, Breakout Capital provides two tools:

1. An APR loan calculator on their website
2. A proprietary tool called SMARTBox, designed to help potential borrowers compare offers from different lenders

While specific fee structures are not publicly disclosed, it’s crucial to understand that alternative lenders like Breakout Capital often have higher costs than traditional bank loans. Their APRs can range from 36% to 60%, which is significantly higher than typical bank loan rates.

This higher cost structure is common among alternative lenders and is often the trade-off for greater accessibility and faster funding. Businesses that may not qualify for traditional bank loans due to credit issues or lack of established business history may find Breakout Capital’s offerings more attainable.

Repayment schedules

Breakout Capital offers flexible repayment options to suit different business cash flow patterns:

• Daily repayment plans
• Weekly repayment plans
• Monthly repayment plans

This flexibility allows businesses to choose a repayment schedule that best aligns with their revenue streams and cash flow cycles. For instance, a business with steady daily income might prefer a daily repayment plan, while one with monthly revenue cycles might opt for monthly repayments.

Additionally, Breakout Capital offers prepayment rebates, which can reduce the overall cost of the loan for businesses able to repay early. This feature can provide significant savings for businesses that experience unexpected windfalls or improved cash flow.

Comparative analysis

When evaluating Breakout Capital’s offerings, it’s helpful to compare them to both traditional bank loans and other alternative lenders.

Compared to traditional bank loans:

Advantages:
– More accessible to businesses with moderate credit scores (minimum FICO score of 600)
– Faster approval and funding process (potentially 24-48 hours)
– More flexible repayment options

Disadvantages:
– Higher costs (APRs ranging from 36% to 60%)
– Shorter loan terms (up to 24 months compared to several years for bank loans)

Compared to other online lenders:
– Funding Circle offers terms up to 5 years with potentially lower rates
– OnDeck and Kabbage specialize in lines of credit, which Breakout Capital doesn’t prominently feature

In the broader alternative lending landscape, Breakout Capital’s offerings are fairly typical. The use of factor rates instead of traditional interest rates is common among alternative lenders, as are higher costs in exchange for greater accessibility and speed.

Industry context and transparency

The short-term nature of Breakout Capital’s loans (up to 24 months) is consistent with industry trends for alternative lenders, who often focus on addressing immediate cash flow needs rather than long-term financing.

One notable aspect of Breakout Capital’s approach is their emphasis on transparency. The provision of the SMARTBox tool and APR calculator demonstrates a commitment to helping potential borrowers understand the true cost of their financing options. This is a positive feature in an industry that has faced criticism for opaque pricing practices.

Considerations for businesses

While Breakout Capital’s products offer accessibility and flexibility, businesses should carefully consider their options before committing to a loan. The higher costs associated with these products mean they may not be suitable for all situations.

Businesses should:
1. Carefully evaluate their financial needs and ability to repay
2. Use the provided tools to understand the true cost of the loan
3. Compare Breakout Capital’s offerings with other financing options
4. Consider the impact of daily or weekly repayments on cash flow

For businesses that need quick access to capital and can manage the higher costs and shorter terms, Breakout Capital’s products may be a viable solution. However, businesses with strong credit profiles or those seeking longer-term financing may find better terms elsewhere.

In conclusion, Breakout Capital offers a range of short-term financing options that cater to businesses that may not qualify for traditional bank loans or need faster access to capital. Their product lineup, including term loans, invoice factoring, asset-based loans, and the unique FactorAdvantage, provides flexibility for various business needs. While their products come with higher costs, they provide accessibility and speed that can be valuable for certain small businesses. The emphasis on transparency through tools like SMARTBox is commendable in the alternative lending space. Potential borrowers should carefully compare these offerings with other financing options to ensure they’re getting the best deal for their specific needs.

Eligibility Requirements for Breakout Capital Loans

When considering a loan from Breakout Capital, understanding the eligibility requirements is crucial for small business owners. While specific criteria may vary based on the type of financing sought, we’ll explore the general requirements that potential borrowers should be aware of. It’s important to note that Breakout Capital’s recent merger with 12Five Capital may have influenced their lending practices, potentially offering more flexibility in their eligibility criteria.

Minimum credit score

The minimum credit score required by Breakout Capital is not explicitly stated in their public information. However, as an alternative lender in the small business space, Breakout Capital likely offers more lenient credit score requirements compared to traditional banks. Many similar lenders consider applications from borrowers with credit scores as low as 500-550, while others may set the bar at 600 or higher.

For instance, some online lenders like OnDeck require a minimum personal credit score of 600, while others like Fundbox may approve applicants with scores as low as 500. Breakout Capital’s emphasis on flexibility suggests they might fall somewhere within this range, potentially considering factors beyond just credit scores when evaluating applications.

It’s worth noting that while a lower credit score might not automatically disqualify an applicant, it could impact the terms of the loan, such as interest rates or repayment periods. Businesses with higher credit scores are likely to secure more favorable terms.

Time in business

The time a business has been operational is another crucial factor in loan eligibility. While Breakout Capital doesn’t publicly disclose a specific time-in-business requirement, many alternative lenders typically require businesses to have been operational for at least 6 months to 1 year before qualifying for a loan.

This requirement serves as a demonstration of the business’s stability and track record. However, given Breakout Capital’s focus on flexibility and customization, they may be more willing to work with newer businesses, especially if they show strong revenue or growth potential.

For comparison, some online lenders like Kabbage require businesses to be operational for at least one year, while others like BlueVine may consider businesses that have been operating for as little as three months. Breakout Capital’s approach might fall somewhere within this spectrum, potentially offering opportunities for both established businesses and promising startups.

Annual revenue requirements

Annual revenue is often a key factor in determining loan eligibility and the amount a business can borrow. While Breakout Capital doesn’t publicly specify their annual revenue requirements, it’s common for alternative lenders to have minimum thresholds.

These requirements can vary widely among lenders. Some may require as little as $50,000 in annual revenue, while others may set the bar at $100,000 or higher. The specific requirement often depends on the loan amount and type of financing sought.

For example, OnDeck requires a minimum of $100,000 in annual revenue, while Fundbox sets their threshold at $50,000. Given Breakout Capital’s range of financing options, including term loans, invoice factoring, asset-based loans, and purchase order financing, their revenue requirements may vary depending on the specific product.

Businesses with higher annual revenues may qualify for larger loan amounts or more favorable terms. However, Breakout Capital’s emphasis on customization suggests they might be willing to work with businesses across a range of revenue levels, tailoring their offerings to each applicant’s specific financial situation.

Industry restrictions

While specific information about Breakout Capital’s industry restrictions is not readily available, it’s common for lenders to have certain high-risk industries they either avoid or subject to additional scrutiny. These often include industries such as:

• Gambling and casinos
• Adult entertainment
• Certain types of speculative investments
• Illegal substances or activities

However, Breakout Capital’s website states, “We provide funding that fits your business, not our agenda.” This suggests a potentially more inclusive approach to various industries. They may be willing to consider businesses from a wide range of sectors, focusing more on the individual merits of each application rather than applying blanket restrictions based solely on industry type.

It’s important for business owners in potentially high-risk industries to directly inquire with Breakout Capital about any specific restrictions or additional requirements that may apply to their sector.

Geographic limitations

Based on available information, Breakout Capital appears to operate nationwide. One source mentions that they have “provided nearly $500 million in funding to small businesses in every corner of the U.S.” This suggests that geographic location is not a significant limiting factor for businesses seeking funding from Breakout Capital.

However, it’s worth noting that while they may offer services across the country, there could be variations in product availability or terms based on state-specific regulations. Businesses should inquire about any state-specific considerations when exploring loan options with Breakout Capital.

Additional considerations

Breakout Capital’s approach to lending seems to focus on flexibility and customization. Their statement, “We provide funding that fits your business, not our agenda,” suggests a willingness to work with businesses that may not fit traditional lending criteria. This could mean more flexible eligibility requirements across all the categories we’ve discussed.

The company’s commitment to transparency and innovation in small business lending also indicates that they may consider factors beyond just credit scores, time in business, and revenue when evaluating loan applications. They might take a more holistic view of a business’s potential and financial health.

Furthermore, Breakout Capital’s recent merger with 12Five Capital has expanded their lending capabilities and potentially affected their eligibility criteria. The merger created a combined portfolio exceeding $80 million and aimed to provide a wider range of in-house financing options to clients. This expansion could translate to more opportunities for businesses that might not qualify with more traditional lenders.

It’s important to remember that eligibility criteria can change over time and may vary based on the specific financial product and the individual business’s circumstances. While this overview provides a general understanding of what to expect, potential borrowers should contact Breakout Capital directly for the most accurate and up-to-date information on their specific eligibility requirements.

By understanding these eligibility factors, small business owners can better assess their likelihood of qualifying for a loan with Breakout Capital and prepare their application accordingly. Whether you’re a startup looking for your first business loan or an established company seeking additional funding, knowing where you stand in terms of these requirements can help streamline the application process and increase your chances of securing the financing you need.

Breakout Capital Application Process

Navigating the loan application process can be a daunting task for small business owners. Understanding the steps involved, required documentation, and expected timeline is crucial for a smooth borrowing experience. This section delves into Breakout Capital’s application process, shedding light on what applicants can expect when seeking funding through this lender.

Steps Involved

Breakout Capital, now part of a larger entity following its merger with 12Five Capital, has designed its application process to be straightforward and efficient. The company leverages technology to streamline the experience for small business owners seeking various financing options, including term loans, invoice factoring, asset-based loans, and purchase order financing. Here’s a step-by-step breakdown of their application process:

1. Online Application: The journey begins with a simple online application designed to shorten turn-around time. This initial step allows Breakout Capital to gather essential information about your business and funding needs.
2. Initial Assessment: Upon receiving your application, Breakout Capital’s team performs a preliminary evaluation of your business’s eligibility for their financing products.
3. Document Submission: If your application passes the initial assessment, you’ll be prompted to submit required documents. This step is crucial for a more comprehensive evaluation of your business’s financial health and creditworthiness.
4. Underwriting: Breakout Capital’s underwriting team conducts a thorough review of your application and submitted documents. This process involves a detailed analysis of your business’s financial situation, credit history, and other relevant factors.
5. Approval and Offer: If your application meets Breakout Capital’s criteria, you’ll receive a loan offer. This offer will outline the terms and conditions of the proposed financing.
6. Contract Execution: Upon accepting the offer, you’ll need to sign a contract formalizing the agreement between your business and Breakout Capital.
7. Funding: Once the contract is signed and all requirements are met, Breakout Capital will disburse the funds to your business account.

Required Documents

While Breakout Capital doesn’t publicly disclose a comprehensive list of required documents, it’s important to be prepared with common documentation typically requested by small business lenders. Based on industry standards, you may need to provide:

• Business and personal tax returns (usually for the past 2-3 years)
• Recent bank statements (typically 3-6 months)
• Financial statements, including profit and loss statements and balance sheets
• Business licenses and registrations
• Proof of ownership or incorporation documents
• Accounts receivable and payable aging reports (especially for invoice factoring or asset-based loans)
• Any additional documents specific to your business type or the financing product you’re applying for

It’s advisable to contact Breakout Capital directly or check their website for the most up-to-date list of required documents, as requirements may vary based on the type of financing and your business’s specific circumstances.

Typical Timeline from Application to Funding

Breakout Capital emphasizes speed as a key feature of their application process. While specific data on average funding times across all their products isn’t publicly available, they provide some insights into their timeline:

• Funding Approval: Breakout Capital states that funding approval is confirmed within 24 hours of application submission. This rapid initial response allows business owners to quickly gauge their likelihood of securing financing.
• Access to Funds: Once a contract is executed, funds can be accessed promptly. However, the exact timing may depend on various factors, including the type of financing and the completeness of your application.
• Factoring Solutions: For businesses opting for invoice factoring, Breakout Capital promises that the advance (80%-92% of the invoice value) is received within 48 hours of invoicing. This quick turnaround can be particularly beneficial for businesses facing cash flow challenges.

It’s important to note that while Breakout Capital aims for speed, the actual timeline may vary based on the complexity of your application, the completeness of your documentation, and other factors specific to your business situation.

Technology Used

Breakout Capital leverages a robust technology stack to enhance its application and servicing processes, aiming to provide a more efficient and user-friendly experience for small business owners. Their technology-driven approach includes:

1. Online Application System: The company offers a simple online application platform designed to expedite the initial stages of the lending process.
2. Salesforce Integration: Breakout Capital has implemented a custom Salesforce solution to streamline loan processing and enhance overall efficiency. This integration allows for better management of customer relationships and loan applications.
3. Additional Technologies:
   • Gong: Likely used for sales intelligence and conversation analytics
   • Gravity Forms to Salesforce Integration through WordPress: Facilitates seamless data transfer from web forms to their CRM
   • Salesforce-Slack Integration: Enables better team communication and collaboration
   • Aircall CTI: Enhances customer service and communication capabilities
   • Grids: Possibly used for data visualization and reporting
   • DocuSign and DocuSign Gen: Streamlines the document signing process and contract generation

This technology stack enables Breakout Capital to:

• Streamline top-of-funnel processes like application intake and early stages of loan processing
• Improve loan officers’ workflows for application management and collection
• Enhance underwriting processes for more accurate and efficient decision-making
• Automate closing and post-close covenants, including contract completion using DocuSign

The implementation of these technologies reflects Breakout Capital’s commitment to providing a modern, efficient lending experience. However, it’s important to note that while technology can significantly improve the application process, the human element in underwriting and decision-making likely remains crucial, especially for more complex financing situations.

Since 2015, Breakout Capital has provided nearly $500 million in funding to small businesses across the U.S., indicating a significant volume of successful applications. This track record suggests that their technology-driven approach has been effective in processing and approving a substantial number of loans.

While specific approval rates and detailed customer satisfaction data are not publicly available, the company’s growth and continued operation in the competitive small business lending space suggest a reasonable level of customer satisfaction with their application process and funding solutions.

It’s worth noting that as of the time of this review, no Trustpilot reviews were found for Breakout Capital. This lack of public reviews makes it challenging to gauge customer sentiment regarding the application process directly from borrower experiences. Prospective borrowers may want to request references or seek out testimonials directly from Breakout Capital to gain more insights into the customer experience.

In conclusion, Breakout Capital’s application process appears to be designed with efficiency and speed in mind, leveraging modern technology to streamline the experience for small business owners. While the company provides some insights into their timeline and technological capabilities, prospective borrowers should be prepared to engage directly with Breakout Capital for the most current and detailed information about the application process, required documents, and expected timelines specific to their business needs and desired financing product.