Even though the business loan is the most common form of lending for small businesses, they’re not the best. Whereas business loan companies provide some benefits, there are some things you need to consider before you partner with a loan company. Here are some of the reasons why the majority of small business owners prefer working with merchant cash advance lenders over traditional loan companies.
Getting approved for a commercial loan can be hard since business loan companies will ask for extensive documentation and your business must have a good credit rating. It is also not easy for new business owners to be eligible and will be required to build credit before applying.
It involves an exhaustive application process that requires a detailed financial statement of the business, an accurate evaluation of predictable income and a detailed information of all the risks involved. Typically, you will be required to present a highly persuasive business plan that will convince business loan companies that there is a low risk of business failure.
You will be required to present your personal financial history comprising credit score, annual revenue, and unpaid debts. Note that even the smallest fault in your financial report might affect your eligibility for a loan. On top of that, business loans are known to offer less personal autonomy with some loan products. Unlike with the merchant cash advance where you have the freedom to use the funds the way you want, you will have to explain how the loan will be used.
Merchant cash advance
Merchant cash advance, on the other hand, is one of the innovative forms of lending in the alternative business funding industry. Given that the idea has only been around for a short amount of years, it has already proved to be the most popular in the retail business. Unlike business loan companies that need collateral, a merchant cash advance will use your future credit card receivables to give you the advance you need. This form of lending is ideal for business that don’t have assets, but who have higher monthly sales volume. Repayments are then deducted as a percentage of your total credit card sales, making it a quick and flexible funding solution for many small business owners.
Who is eligible for the merchant cash advance?
Merchant cash advance is suitable for any business that handles credit/debit card transactions from clients. Because the merchant lender can easily trace amount of income, the business generates over an average month, the lender and the borrower can agree on the advance amount and repayment terms faster than with the firm loan companies.
Benefits of merchant cash advance
When it comes to merchant cash advance, the repayments are deducted as a percentage of the revenue. This means that the advance repayment will be based on your business’ monthly income, when you have good sales, you will pay back more, but if your business is experiencing a slow month, you will pay a small amount. These are favorable repayment terms for many small businesses because unlike business loan companies; you have a guarantee that you will be making your payments once things get tough. Click Here to find out how to acquire these easy small business loans.