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Crypto loans for small businesses

Despite the risks, using crypto-backed loans may be a smart choice for startups and businesses that can’t get a traditional loan.

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Crypto lending offers a new source of financing for business owners, especially to those who own businesses in an industry that lenders consider to be risky. A crypto loan can be more expensive than what you’d find at a traditional bank and the volatility of the market may put your collateral at risk. But these loans are available to companies that can’t qualify for a traditional loan — qualifying isn’t based on your company’s financial situation or credit score.

What is a crypto business loan?

A crypto business loan allows you to borrow money for business expenses using cryptocurrency as collateral. Technically, you could use any crypto-backed loan to help your small business. But some lenders provide special business-related features, such as concierge services, shared business accounts, crypto coin bonuses and hardware wallet devices.

You may also see lenders refer to these loans as institutional or commercial loans.

How it compares to traditional business financing

As you shop around for a business loan, you should consider whether a crypto-backed loan or traditional loan will best suit your needs. To get started, compare the following aspects of your loan:

Interest rates

Traditional small business loans typically come with lower rates than crypto loans, with rates that tend to range between 3% and 7%. Some crypto lenders offer lower rates, but the average rate is around 9% for crypto-backed loans.

Crypto loans interest rates become much more competitive when you compare it to alternative business financing available through online lenders. For example, OnDeck charges rates starting at 35% APR.

Another popular alternative to traditional loans are merchant cash advances. These offer loans against your prospective credit card sales with short terms and quick turnarounds similar to crypto-backed loans, but the high fees on each advance can translate to an APR close to 300% in many cases.

Crypto lenders also sometimes offer ways to lower your interest rate, either by adding more crypto collateral, by buying the lender’s tokens or both. For example, SALT Lending’s base interest rate is 9.99%, but if you’re willing to provide collateral to take your LTV to 30%, your interest rate is 5.5%. If you also are willing to redeem SALT tokens, you can take another 2% off your interest rate, making it 3.5%.

Fees

Many crypto loans have origination fees of around 0.5% to 2.0%, similar to a traditional small business loan. But not all do, which is something for you to keep in mind as you compare lenders.

Unlike a traditional business lender, crypto loans sometimes charge prepayment penalties if you choose to repay your loan ahead of schedule. And some may charge you a liquidation fee if the lender has to liquidate your crypto collateral assets to resolve your loan.

LTV and Loan amounts

Crypto loans rarely set a maximum loan amount — and those that do widely vary, from $100 to $50,000 or more. You’re really only limited in what you can borrow by the amount of crypto you’re willing to offer as collateral on your loan.

And that’s the main way that traditional and crypto-backed loans differ. Where secured loans from traditional banks can require a loan-to-value ratio (LTV) from 85% to as much as 100%, crypto loans typically have a 50% LTV requirement.

This means that to take out a crypto loan, your business typically needs to provide collateral worth at least twice the amount you want to borrow. This can fluctuate by lender and often depends on how much interest you want to pay. In crypto lending, a higher LTV usually comes with a higher interest rate.

Loan terms and repayment

Crypto loans are often short-term loans, with repayment terms ranging from a few months to a year. These can often be rolled over into another term if needed. Traditional small business loans tend to offer five- to 10-year terms.

The way repayments work can also be very different. Because of the shorter term, many crypto lenders don’t require repayment until the end of the term. At that point you’re required to pay back all of the loan and interest in one lump sum.

Traditional loans require monthly payments that include interest and principal. While the traditional method gives your business a higher monthly cost, overall it’s less expensive because you’re making payments toward your loan balance and interest.

Requirements

Traditional small business loans tend to come with a strict set of requirements to qualify. Bank loans typically require at least five years in business, a personal credit score of 670 or higher and positive cash flow. Even alternative lenders may require you to have at least one year in business, have a credit score of 670 or higher and require at least $100,000 in annual revenue.

Crypto lenders don’t even ask for your financial information, instead using a know-your-customer (KYC) protocol. Your qualification for the loan relies solely on your ability to meet the collateral requirements and that you live in a state where the lender operates.

Margin call process

Because the cryptocurrency market can be volatile, crypto lenders have a process to deal with drops in the market that may affect the value of your collateral. The process will vary, depending on the vendor. But typically, the lender sets two thresholds, or margin calls.

When the value of your collateral falls to the first margin, the lender will contact you so you can add more collateral to rebalance the loan’s LTV requirements. If your collateral falls below the second margin, the lender liquidates some or all of your collateral to pay off the loan. For example, on a 50% LTV loan, your first margin call may be when your collateral makes your LTV raise to 70% and your liquidation margin may be at 90% LTV.

Compare crypto-backed loans to finance a business

You can start your search below by selecting the lenders you want to compare. Or select More info next to the lender you’re interested in to read our full review.

1 - 4 of 4
Name Product APR LTV Accepted Collateral Issued Currencies
Celsius Borrow
1% to 8.95%
25% to 50%
BTC, ETH, CEL, LINK, MATIC, ADA, DOT, LTC, UNI, EOS, AAVE, XLM, OMG, BCH, ZEC, MANA, DASH, SNX, PAXG, BAT, USDC, ZRX, BSV, COMP, USDT, TUSD, ETC, UMA, KNC, MCDAI, BNB, LUNA, GUSD, PAX, XAUT, BNT, WDGLD, SUSHI, 1INCH, XTZ, WBTC, AVAX
USD, USDC, USDT, TUSD, MCDAI, GUSD, PAX
Celsius offers 3 different interest options depending on the total value locked in your account.
Nexo crypto credit lines
0% to 13.9%
Starting at 30%
BTC, ETH, USDT, NEXO, DOT, AVAX, MATIC, SOL, ADA, XRP, BCH, LTC, BNB, EOS, XLM, LINK, TRX, PAXG, LUNA, UNI, DOGE, USDC, PAXG, TUSD, DAI
USD, EUR, AED, ARS, AUD, BGN, CAD, CLP, CNY, CZK, DKK, EGP, GBP, GEL, GHS, HKD, HRK, HUF, IDR, ILS, INR, JPY, KES, KRW, MAD, MXN, MYR, NGN, NOK, NPR, NZD, PEN, PHP, PKR, PLN, RON, RUB, SEK, SGD, THB, TRY, UAH, VND
Get approved in seconds for a credit line that uses single or multiple cryptocurrencies as collateral.
BlockFi Cryptocurrency Loans
9.75% to 4.50%
20% to 50%
BTC, ETH, LTC, PAXG
USD
Access the value of your crypto assets without cashing them in.
Helio crypto loan
4% to 9%
50% to 75%
BTC, ETH, LTC, XRP
USD, Stablecoin, Crypto
Borrow up to $3 million on the value of your cryptocurrency.
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Compare up to 4 providers

How to use a crypto business loan

You’ll know best how to use the funding from your loan to help your small business, but we’ve included some ideas below that may help expand on that vision.

  • Invest in crypto mining. One of the most popular uses for a crypto-backed loan is to invest in a mining operation, which can allow you to make a profit on your loan, despite the interest and fees you pay.
  • Finance a startup. If you’re not yet a business owner, but you want to be, a crypto loan may be a good option to help raise the capital you need to finance a startup. Because crypto lenders don’t have time-in-business requirements or restrictions on how you use your funds, you may be able to get a much larger loan than you could from a traditional lender, depending on the amount of collateral you can provide.
  • Cover working capital expenses. If you need help to cover your everyday expenses the short-term nature of a crypto loan may be a good fit. If you have the cryptocurrency to cover the needed collateral, you could take out a working capital loan without the requirements of a traditional lender.
  • Cover hiring and payroll expenses. In a tight labor market, hiring and retaining your employees can cost more than you may have budgeted for in the past. A short-term crypto loan could help to fund your efforts.
  • Fund expansion and growth. When you’re ready to expand, but you don’t have the funding, a business expansion loan may help you finance a down payment on a new property, cover any construction costs or help with any other expenses.

5 reasons to get a crypto-backed business loan

If you’re still feeling hesitant about using your cryptocurrency to back a small business loan, consider the following benefits a crypto lender can offer:

  1. Startup-friendly. Crypto lenders’ lack of financial requirements, especially the time-in-business requirement, makes qualifying for a crypto-backed loan as a startup much easier.
  2. No credit checks. Your credit history doesn’t disqualify you from getting a crypto loan. All you need to provide is the required crypto collateral.
  3. No industry restrictions. Traditional lenders often treat industries like cannabis, Internet gambling and crypto as too high risk for a loan. But crypto loans don’t make that kind of distinction. As long as the business can pass anti-money laundering checks and has the crypto collateral to meet the loan’s LTV requirements, it can qualify.
  4. No maximum loan amounts. Your borrowing potential is only limited by the amount of crypto assets you can use as collateral.
  5. Less expensive than other alternative business financing options. A crypto loan isn’t your only option for a nontraditional business loan, but at an average of 9% APR, it may be your least expensive option.

4 reasons to avoid crypto-backed financing

Before you actively pursue a crypto-backed loan, you should consider the following potential drawbacks of working with a crypto lender:

  1. Short terms. While some crypto lenders may give you the option to roll-over your loan amount into a new loan when your term ends, not all do. So a crypto-backed loan may not be the right choice for financing a large, long-term project.
  2. Prepayment penalties. If you’re planning to repay the loan ahead of schedule, be sure to check if your crypto lender charges a penalty.
  3. Lack of regulation. Because crypto lending is relatively new to the industry, most governments haven’t established regulations yet. And newly introduced regulations could change the terms of your loans at a moment’s notice.
  4. Greater risk than traditional financing. Despite the security protocols and theft insurance offered by some crypto lenders, the volatile market and startup nature of many crypto lenders can lead to you losing the crypto assets you put up as collateral. And without government oversight or FDIC insurance, you may have no way to get it back.

How changes in regulations can affect crypto business loans

The federal and state government is still figuring out how to treat cryptocurrency — and by extension, crypto loans, which means that there’s a risk your loan contract terms might suddenly change. An example of this happened in February of 2022, when new regulations forced Crypto.com to add several European countries to its restricted countries list. The lender gave borrowers only one month to pay back their loans, threatening to liquidate collateral to pay back the loans and interest of those who couldn’t meet the deadline.

Are crypto loans a safe way to finance my business?

All loans come with some risks. But using a crypto-backed loan comes with a set of risks that are often mitigated in the traditional financing space with programs like FDIC insurance and federal regulation to protect borrowers.

Some lenders have put crypto-specific security protocols in place, such as insurance against theft and wallet security to store your collateral safely. But you should never use crypto assets you aren’t comfortable losing, especially if the assets are tied to your business and could affect its ability to operate. Even the best security offered in the crypto space does little to protect your collateral from a lender bankruptcy.

And not all crypto lenders are created equal. Comparing lenders and what security they have to offer is vital to make sure your collateral is as safe as possible. Start with our guide to crypto loan safety, so you know what to look for.

Crypto vs. traditional business loans

If you’re running a crypto business and are having trouble getting your financing from a traditional bank, you might also consider alternative business loans — typically available through financial technology, or fintech, companies. For example, you could opt for an equipment loan that uses your business equipment as collateral or an invoicing loan that leverages your unpaid business invoices.

These loans can offer a short-term solution to an immediate financing need and keep you from relying on your crypto assets and the volatility of the crypto market. But alternate loans tend to be expensive, charging fees and interest that can set your APR over 100% in some cases. And because the loans are part of an underregulated online financing, your state might not even require online lenders to be upfront about the costs involved.

Another option is to work with a lender that specializes in loans for crypto businesses, such as BlockFi, which offers financing for crypto miners and exchanges, and, similar to a fintech lender, allows you to use your equipment as collateral instead of your crypto assets.

Bottom line

A crypto-backed business loan can bring much needed financing to your business without a lot of the scrutiny that comes with applying for a traditional loan. As long as you understand the risks and expenses involved, you may be able to find a lender with the security and features you need. To help, consider checking out our crypto loans guide to make sure you find the right loan for you.

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