When a small or medium sized business needs emergency cash, the proprietor may panic and want the most expeditious means of getting funds, other than resorting to a loan shark. Money problems can be the number one stressor for many business owners. A merchant loan is one means to an end. But it is important to check all the facts about the type of merchant loan one is getting.
The traditional small business loan can take weeks if not months to receive. Many times the banks and traditional lenders are not willing to lend money to those who need it the most. It seems like a dichotomy. If you need money, you cannot borrow it. If you do not need money, you can receive a loan. In addition a small business loan means you need to complete application after application, gather up financials and tax returns, and many other documents before you can even apply.
Then there are non-traditional merchant loans from lenders who may have a dubious reputation. Their sales pitch sounds good but you do have to read between the lines. Many say they can have the money in your account the next business day. But what are you really paying for the service? These lenders often require that you have been in business for over a year and that you have a personal credit score above 500. They also have minimum revenue requirements. It is not unusual for them to require annual sales of $100,000 or more.
What is more concerning is that the average time to pay back a merchant loan is six to 12 months of a fixed amount. This means the small business will have to come up with that payment whether sales were soft or hardy.
The better option is to borrow money for a merchant loan based on your credit card and debit card sales. On this type of loan you may be approved even if your credit score is below 500. You are able to get your funds deposited into your checking account within 72 hours of a fast approval. You do not have to present tax returns or financials.
The best part about this merchant loan is that you do not have an outlandish monthly payment that you are tied into. Your payment is flexible and depends entirely on what your gross credit card and debit card sales were for the month. Since your payment is based on a low percentage of future sales, you will pay less in months that are traditionally slow, and your payment will increase as your sales increase. No one will expect a huge payment that will automatically be ACH’d from your account.
When you have a merchant loan based on gross credit card and debit card sales, you do not have to worry about writing a check every month. Your credit card processor is brought into the loop and the agreed upon percentage is directed to the lender while the remainder is deposited into your checking account just as it was prior to your loan.