Loans and advances are said to be beneficial for startups and small businesses, as they provide them with an extra infusion of cash to increase businesses’ working capital. Companies turn their attention towards financing to meet day to day expenses or cover unexpected ones efficiently. This is one of the primary reasons you should look carefully for merchant lenders.
Choosing a merchant lender is similar to shopping for other types of services or products. As a customer, you would expect friendly representatives, efficient service, and a solution that meets your needs. This is what you should expect from merchant lenders who you might choose to provide the required capital for your company.
It is believed that the financing industry has been continually growing over the years with more and more businesses relying on merchant funding. This force lenders to develop more guidelines for self-regulation. Regardless, there is a need to perform proper due diligence to learn about the lender that you might be choosing. This is an important step before applying, as the requirements, approval criteria, and other things vary from lender to lender.
How to get information about merchant lenders?
There are several ways through which you can get to know your lender. Let’s learn the two most common methods to obtain essential information:
The Internet has completely changed the way we communicate and gain information about something. Almost every reputable and experienced lender will have some online presence – mostly in the form of websites. You can learn about their expertise, experience, and reputation from the website. Majority of merchant lenders also provide the eligibility checklist so that businesses know beforehand if they qualify or not.
Better Business Bureau
If you do not know Better Business Bureau or BBB, visit their website now to get valuable information about a certain lender. The results also show if the lender you are going to choose is represented by the bureau or not. In case the chosen lender is represented by the bureau, you can view their letter grades along with the explanation to know better. BBB website also tells if there are any complaints filed against a merchant lender or not.
Most of the merchant lenders are willing to accept all sorts of business applications, as they have minimal requirements and eligibility criteria. In addition to this, the provider can offer up to $500,000 in funding, flexible payment plan, and automatic renewals.
Types of funding offered by merchant lenders
Are you doing business for yourself? If yes, you must have come across a situation where you could have strategically used some extra capital. In scenarios where you are short on capital, merchant funding can be of significant help.
Nowadays, there are numerous options available for business owners as a source of funding. Some of the most popular options are as follows:
– Merchant Cash Advances
– Invoice Financing
– Business Line of Credit
– Online Loans
– Equipment Financing
Benefits of choosing merchant lenders over traditional lenders
Get fast access to cash
This is probably the biggest advantage when you consider alternative lending options, as the lenders provide you the required capital in a matter of hours and days. When we talk about merchant funding, you get the cash quickly. When compared to traditional loans, cash advances do not take as long to get approval and processed. Thus, if you have to cater to some serious financial needs, this is indeed the right solution for you. One such option available to business owners is a merchant cash advance that is known for processing large lump sum of upfront cash within hours of submitting an application online.
Little to no paperwork
When we talk about merchant lenders, it means there is little to no paperwork involved. Unlike traditional lenders, you do not have to complete tens and hundreds of forms or provide excessive documentation to get an approval. Merchant funding is a quick and efficient way to obtain financing for your business.
Flexible repayment terms
Another major factor due to which business owners prefer merchant funding over other financing options is because of flexible repayment terms. The repayment plan gets easier over time. For instance, when you choose merchant cash advance as a source of funding, you do not have to be concerned about making fixed monthly payments to the lender. You are only required to make a certain percentage amount of the sales you make on a daily or weekly basis. Therefore, it all depends on how your business is doing. If you are generating more sales, you will pay more and vice versa.
High approval rates
Merchant lenders have gained maximum traction among startup and small business owners due to high approval rates. Therefore, if you are a business with low credit score or the one that did not qualify for a bank loan, you will probably get accepted by a merchant lender. It is easy to obtain financing through alternative lending options than conventional options.
No requirement of having a perfect credit score
When it comes to startups and small businesses, it is near impossible to obtain financing for them, as they do not have a perfect credit score. This is why alternative funding gained immense popularity, as merchant lenders believe in giving second chances to those who failed to cope with strict requirements and restrictions of previous lenders.
No collateral required
When compared to conventional loan options, there is no collateral required when you choose an alternative lending option such as a merchant cash advance. Your business’ merchant processor is directly linked to the lender to process automatic repayments on a daily basis as you generate sales.
Things to consider while choosing merchant lenders
Unexpected expenses are an important factor to consider when selecting a lender. Majority of the lenders do not include any unnecessary costs upon approval of merchant funding. However, there might be providers for whom closing costs are required. It is also important to understand that there is no interest in a cash advance.
Monthly sales on credit
It also depends on the monthly sales that you generate on credit. Merchant lenders are usually looking how a business is performing to determine if they can provide funding. This is to gain assurance that you can repay the borrowed amount in a given time. Almost every lender asks businesses to submit credit card statements and other related documents before approving an application. This helps them to know if your business is capable enough to support a cash advance repayment or not. Typically, businesses have to submit the most recent statements (three to six months old), so the lender can determine the average monthly sales and income.
For the lender, it is important for them to know your business experience. To get approved for a cash advance, it is important that you are doing business for at least six months or so to be eligible to apply with a lender. However, it all depends on the lender you choose – some would accept even if you started doing business a month ago while some would want you to be in businesses for six months minimum. Regardless, choose a lender that fits your need. In an ideal scenario, most online lenders would approve your application if you are in business for six months and generate $10,000 or more in average monthly sales; you are good to go!
Need for money
Merchant lenders would want to know the need for money and how much you want to cover your financial needs. When we talk about cash advances, the process is not long enough. In addition to this, the process to get approved is simpler and easier. There is little to no paperwork involved, and the lender will only ask for essential documents.
What are your capital requirements? This is one of the most important things for you as well as the merchant lender to know how much money you need. For instance, if you require $500,000 in funding but the lender only offers maximum funding of up to $300,000, you will have to consider some other lender that fits your needs. More or less, regardless of the cash advance lender, the more money your business brings in, the more money you can get approved for.
It is essential for business owners to conduct proper research before finalizing which merchant lenders they would be shortlisting. Every provider has different requirements and funding capability. Therefore, a business should pick one that covers their financial requirement at that time.