Traditional Corporate Lending versus Merchant Cash Advance

corporate lending

Businesses big or small go through a major hurdle in today’s world when they choose a corporate lending experience. The major challenge for them is to meet the criteria on basis of which they received these funds in the first place. Unfortunate for them, the world of business is becoming challenging when it comes to receiving Corporate Lending. Either the corporates are not interested or the companies may not be able to articulate their worth. Whatever the reason is, traditional forms of loans for businesses are becoming more skeptical day by day. Fortunately, there are funds available with institutions who are specialized in financing business owners so that they are able to meet their working capital needs. This happens in form of a loan which is much simpler and has procedures far more straightforward than traditional loan formats. More often than not these institutions also have far more flexible terms than traditional institutions.

How Does Corporate Lending Work?

These specialized Corporate Lending Institutions do not tend to be concerned about the industry a business owner operates in, in fact, they hold a mission of providing the required funds for quick fixes required within a business asking for these loans. These specialized institutions do not become a roadblock for a business owner to plan how this working capital fund should be utilized and are only concerned with the return they receive. Even the return of this loan has a much more flexible and financially feasible breakout. Due to this these agencies tend to have a much wider range of reasons stating their Corporate Lending solutions are better than that of any other traditional lending business.

For young and established businesses who face bigger challenges with raising a capital to meet with their financial gaps, to tend to have a better shot with these firms. Since they are unlike traditional banks, they have a much faster process where the required fund is provided to the business owner just shortly after the application is approved. Furthermore, since these companies do not have as strict a list as traditional funding organizations these companies also tend to pass applications much faster. They have policies and corporate functions well designed to suit the need of being able to fulfill urgent capital requirements and match with the fast pace growth of the general market.

These firms are definitely worth looking into if you are pursuing a quick boost to your business. However, it needs to be considered that many of these business lending firms have their own sets of challenges that do tend to be understood before applying to them. A prime example of this sort of corporate lending is angel investors. These investors are approached by over thousands of young enterprises around the world. They have to look into the most lucrative offer that will allow them to earn the most. Furthermore, they may also have their own ideas of how a business owner should function in order to ensure the safety of their investment. If you start off digging deeper into the angel investor loan mechanism, it is likely that they will consider start-ups and young entrepreneurs from third world countries, instead of developed countries. Since the developing countries in the third world have a higher opportunity to do business and the product being launched is likely to have a higher need and demand within them, it is likely that for entrepreneurs and growing businesses within developed countries these forms of corporate lending may be untouchable.

Of course, companies from the developed countries would turn towards banks and other traditional institutions to receive a loan to fund their working capital needs and fill in the gap. However, the problem has already been discussed earlier. Banks and other traditional lending institutions have so lengthy and time-consuming application processes that by the time your application is reviewed and you receive an answer, you may either have credit that is overdue come in, or if it becomes a bad debt, you might as well file bankruptcy and shut your company down. Of course, that is not a feasible solution and that is not any growing business owner in their right minds would opt for. However, the point does still stay valid. Unless you are not a well-established business or have a good credit backing, the chances are you will have to arrange for working capital investments from another source before a bank or traditional lending institute gives you a fixed answer, let alone provide you with the required funding. In fact, corporate lending from these traditional institutes is affiliated to a high credit bank account which takes up a lot of your funding directly to just maintain the account itself.

In most cases, corporate lending processes take place by institutions who review a business owner’s application and if they feel feasible, they provide this particular business with a loan that is backed by strong corporate institutions who are competing for higher rates on their shares within the market. This makes it simple for you to understand that the businesses funding backing your are not technically concerned about your business’s establishment and neither are they concerned about providing you with resources and financing to fill in your financial gap but are actually minting money out of you in order to win the corporate battle they are fighting at a certain front. This makes the financial institution just a middleman and keeping a cut out of what could have been purely your gain had a corporate provided you with funds directly. These companies do not take responsibility for your company’s industry challenges and neither take reasons into account. Weather your corporate lending process is a success or a failure, whether you make a profit or a loss, these companies are bound to stay stable.

The corporate lending institutes of this sort tend to have an integrated system with investment banking. They have professionals who orchestrate financial expertise along with multiple investments to ensure they are not at a risk. This definitely puts young and growing businesses in a sticky spot. Be it any form of corporate lending these institutions are offering including credit lines, loans based on terms, credit letters or liquidity facilities, each have their own disadvantages that need to be investigated. Now we are not denying that these institutions have structured their loans for every industry including food, energy, healthcare, real estate, agriculture and various types of productions. However what businesses need to understand is that under any circumstances the plans hold an equal amount of risk. Furthermore, for growing businesses, it becomes a challenge all on its own as most of these include secured loan types. For business owners new to learning about loans, a secured business loan occurs when corporate lending takes place on basis of a collateral placed as a security deposit.

Challenges of Corporate Lending for Startups

Corporate Lending for start-up businesses tends to have very strict rules and regulations. These guidelines are followed and to be followed by the receiver like a bible. They need to be given nitty-gritty details about your business that otherwise may not be necessary to even you. You need to also provide them with a lot of personal information which includes, a list of investors and potential investors, predictions of profit, cost and revenue streams, and not to mention the extremely long wait before you get an approval or rejection. Furthermore, businesses need to have a credit rating which is extremely good. Perhaps even guarantee taking clients may be required. For start-ups, this becomes a big challenge since they may not have enough sales to show nor would they have clients that may back them up.

Similarly, in any of these institutions, the rates are based upon traditional bank rates or based on government policies. With changes in policies, your rate of return will fluctuate too, leaving you with no fixed way to predict an outcome. If the rates go higher up, chances are growing businesses may have to use most of their profits paying back the loan and the interest rate associated with it rather than invest it in their own business.

Merchant Cash Advance for Young Businesses

Corporate Lending through Merchant Cash Advance is a feasible option for young and growing businesses, most merchant cash advance firms requiring at least 6 months in operation. For starters, Merchant Cash Advance is far quicker and is considered an advance instead of a loan. The advance provider typically just requires bank statements and a credit history to be able to predict the future credit sales of the company. The past performance will not prove your eligibility towards the loan but instead, showing how long it will take you to return this amount will prove to be enough. You will receive the amount in cash about 48 hours after your application is approved. The rate of return is higher than that of a traditional corporate lending institute, however, the rates are based on a factor ratio instead of a percentage which tells you before you receive the loan what amount you will have to pay back to the provider. This means you can plan in advance. Most organizations qualify for this advance mechanism and this process has a rate of eighty-five percent approvals so far.

Since the Merchant Cash Advance does not link itself to a loan, the process is interesting. A business owner does not really borrow money but instead sells a chunk of their future sales to the provider. Since this is the case, both parties are in a win-win scenario as the entire structuring process of this loan can be very flexible compared to other traditional lending organizations. It would not be wrong to state that Merchant Cash Advance is an incredible alternative to traditional lending institutes.

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