CIT Direct Capital Review

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Date Established
1993
Location
Portsmouth, NH

Pros

  • Low factor rates
  • Good public reputation

Cons

  • Opaque terms and fees
  • Stringent borrower qualifications

Overview

CIT Direct Capital is a New Hampshire-based online funder serving small businesses; it is a division of New Jersey-based CIT Bank. The company offers three categories of financing: working capital, equipment financing, and franchise financing. This review will focus on Direct Capital’s working capital line.

Direct Capital makes a much better first impression than most online funders, with both better short-term loan (STL) rates and transparency than many of its competitors. There is a small tradeoff, though: companies with really poor credit might not qualify for financing.

We generally recommend businesses do some comparison shopping before committing to short-term funding. You can also read our review of their equipment financing products.

Services Offered

Direct Capital offers:

Borrower Qualifications

These are the minimum qualifications for getting working capital from Direct:

Time in business:2 years
Credit score:680
Revenue:$100K/mo

You also need to own at least 50 percent of your business.

Terms and Fees

Here are the terms and fees for Direct’s STLs:

Borrowing amount:$$10K – $150K
Term length: 6 – 18 months
Factor rate:9.99% – 18% of the borrowing amount
Origination fee:1% (for first-party loans), higher for third-party
Effective APR: Learn more
Collateral:Personal guarantee

Like most short-term funders, Direct uses factor rates rather than interest rates to calculate its loans. So if you were to borrow $10,000 at 9.99%, you would have to pay back $10,999 ($10,000 x 0.0999 + $10,000). Another way to look at it: for every $1 you borrow, you’ll have to repay between $1.09 and $1.18.

This does not include any origination fees Direct may charge. If Direct originates the loan itself, the fee will be around 1% of the amount you borrow. If they can’t help you themselves, they may still be able to get you a loan through one of their partners, in which case you should expect a higher origination fee.

If you’ve never taken out an STL before, the repayment method might come as a bit of a surprise. Rather than send Direct a monthly check, you’ll be making daily payments. These payments are debited from your business account via automated clearing house (ACH).

Note that a counterintuitive feature of flat fees is that your interest is front-loaded into your loan, which means you’ll have a higher effective APR the more quickly you pay your loan off. Keep in mind, however, that many funders will factor term length into their flat fees so that longer term lengths tend to carry higher flat fees. There’s no prepayment penalty for paying off your loan early.

If you want to estimate your payments, Direct Capital provides a handy tool for calculating payments. To get an estimate for working capital loans, select “I have another business expense” from the Financing Purpose pull-down menu. Just be aware that the quoted rate assumes you have a FICO rating over 700.

Application Process

You can begin the application process online or over the phone.

Completing an STL application usually involves providing some corroborating documents such as bank statements, so if you want to expedite the process, you may want to have them handy. If all goes well, you can get same day funding. More realistically, you’ll get your funding within three days.

Sales & Advertising Transparency

Direct Capital’s website is better than that of most short-term funders, offering most of the key statistics you need. The caveat is that the site doesn’t give complete ranges for all their products: the loan calculator assumes you’re receiving the best rates Direct offers, for example.

Customer Service & Technical Support

Direct Capital’s staff was helpful and responsive to my inquiries with almost no gratuitous sales pressure. You can reach Direct Capital at 866-77-0117. The company can also be reached through their Facebook, Twitter, and LinkedIn accounts.

Most customers who left user reviews were also happy with the service they received.

Negative Reviews & Complaints

Direct Capital has an A+ rating with the BBB, but has received 21 complaints over the last three years, most of which involved problems with the product/service or billing issues. General criticisms include:

  • Unclear terms: Many of the complaints revolved around unexpected fees or terms.
  • Billing logistics: One customer said the automated billing continued after the completion of their loan.
  • Difficulty reaching customer service: Some customers complained they had a hard time reaching relevant staff.

Positive Reviews & Testimonials

Direct Capital gets a 7.4 out of 10 on Trustpilot (based on 75 reviews). Customers liked Direct Capital’s:

  • Customer service: Many users were satisfied with customer service, calling it prompt and pleasant to deal with.
  • Speed: Customers appreciated how quickly they received their funds.
  • Flexibility: A lot of customers liked the breadth of Direct Capital’s services.

Final Verdict

Direct Capital’s stands out from that of many of its competitors by offering not-too-unreasonable rates for working capital quickly. The company is also more transparent than the average online funder, which is usually a good sign. On the other hand, there are a fairly high number of complaints to the BBB (though Direct seemed to take initiative in addressing them).

As always, approach even the better online funders with caution. If you want to see what else is available, check out our comparison charts of merchant cash advances and small business loans for alternatives.

Chris Motola

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he's not pushing keys or swiping screens, he's probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.
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