By Mario McKellop
One of the biggest challenges facing Los Angeles-based small business owners is the issue of cash flow. Following a protracted market slow down or an unexpected large expense, a small company can find itself without the funds necessary to make improvements, expand or even make payroll. Unfortunately, since the Great Recession, most banks have moved away from making loans to smaller businesses. However, burgeoning entrepreneurs can look to a relatively new form of financing to keep their operations afloat: merchant loans.
Loans applications are approved very quickly
As opposed to banks and credit unions, most merchant lenders process their loans online or over the phone. That means the application process is streamlined and owners can get access to the funds they need in 24 to 48 hours after their applications are approved.
The approval process isn’t focused on collateral or credit history
Merchant lenders don’t base their approval process entirely around their applicants’ credit history and collateral. Their criteria for lending is more focused on performance. The rate at which a company processes credit card transactions is the most significant factor in determining the size of a company’s loan.
The qualifications a small business need to meet in order to apply for a merchant loan include being in business for at least one year and a minimum of $15,000 in monthly gross sales. As such, merchant lenders do fund startups.
They are repaid through a percentage of credit card transactions
Merchant lenders take their repayment in a method that is similar to how car loans are processed. A customer’s bank account is debited an agreed upon amount monthly for the length of the loan term using the Automatic Clearing House system. That way, founders can dedicate their full attention to running their businesses and not be distracted by having make regular manually processed payments. The interest charged by merchant lenders is higher than most banks, but merchant lenders are typically willing to work with companies to create a repayment plan that does not put them under undue financial strain.
If you believe your business would benefit from a merchant loan, please contact Fast Business Financial.