The rise of small business cash advance loans coupled with other alternative lending options has resulted in something like a buffet of funding options for small business owners. These small business owners rather eager to explore alternative lending solutions have more often than not rejected by larger financial institutions. Merchant cash advance lenders on their part have aimed to attract the vast majority of small business owners who are disillusioned with traditional financing institutions. And they have done this somewhat successfully.
What is responsible for the rapid success of merchant cash advance providers?
For merchant cash lenders to have been successful with their small business cash advance loans, they had to incorporate significant changes which quickly set them apart from other small and medium scale business financing options. The most significant change is that merchant lenders refused to characterize their service as a loan, and for a good reason. Just because of this alone, merchant lenders are exempt from both state and federal usury regulations.
Because of the absence of government oversight on the industry, merchant cash advance providers have greatly diversified their services. At present, merchant lenders provide loans for working capital needs, equipment financing, construction, inventory purchase, and just about anything a business deems fit. The fact that merchant lenders are not monitored by the government has meant that each transaction is tailored to suit the needs of the particular business in question. In a nutshell, small business cash advance loans gained much popularity because they promised what conventional loans could not offer.
Have there been some major changes in the operation of merchant cash advance providers?
Just like any other industry, the merchant cash advance industry has evolved to meet current demand. At first, merchant cash advances were only limited to businesses that accepted credit card payments. Because this practice excluded several million small businesses that utilized ACH, industry leaders had to have a rethink. Now, small businesses that process transactions using transactions, as well as those that use ACH, can now be eligible for an advance.
The industry is also evolving in another major way. Before this time there had been calls for the government to monitor the alternative lending industry in general and the merchant cash advance industry in particular, in spite of the benefits of small business cash advance loans. These calls came amidst unscrupulous practices by some rogue merchant lenders. Sensing what might become of it if the government decided to regulate the merchant cash advance industry, merchant lenders are looking toward being self-regulated.
Certain conventions have laid down which ought to be followed by all merchant cash advance providers in the country. However, no merchant lender is obligated to adhere to these. In any case, the point is that industry leaders are making serious efforts to organize the sector.
As if to crown the whole process of evolution, notable firms of the traditional financing stock have ventured into the world of small business cash advance loans. Some of the firms are credit card processors. In short most small business owners now find it quite easier having their processors as merchant lenders.
How much are merchant lenders contributing to the small business lending sector?
Billions of dollars: this is what merchant cash advance providers have contributed to the small business lending sector over the last two decades. This has not, however, been the case from the beginning. For as the number of merchant vendors offering small business cash advance loans grew from hundreds into the thousands, the overall contribution of the sector also grew. So, from hundreds of thousands of dollars at the outset, the industry now boasts of having contributed several billion to the growth and expansion of small businesses. It has been shown that the average mca transaction is worth 300k dollars.
Have merchant loans been unduly criticized and how are emerging issues been tackled?
In spite of how much small business cash advance loans have recused thousands of small businesses from total collapse, they have always been criticized. The reason, of course, has to do with cost. True, merchant cash advance is relatively more expensive than most other sources of financing. But the reason for this is what is often overlooked. Merchant cash advances are unsecured. Merchants are not obligated to repay the advance except under certain circumstance.
The merchant cash advance provider often has to lose all of his investment should help the business fail. If these are not enough reasons for the relatively higher cost of small business cash advance loans, then what is? The answer to that question is left for reach business to answer. But an awareness of certain key benefits of merchant cash advance should easily cause the whole issue of cost to pale into insignificance.
Are merchants getting their money’s worth from merchant cash advance providers?
The above question is indeed easy to answer. For it is because the overwhelming majority of merchants have been satisfied with small business cash advance loans that the industry continues to grow. Small businesses have indeed obtained satisfaction in having funds delivered to them quicker than they could have dreamed possible. They have also felt what is like to obtain loans without having to provide collateral or personal guarantees. In short, small businesses that have opted for merchant cash advance in the past have so impressed, that a good number of them tried a second, their, and many more times. This is what studies have confirmed again and again.
The merchant cash advance industry has managed to attract lots and lots of small businesses despite its relatively higher cost. The reason as we have seen is simply that they have delivered consistently on their promise, which is to make business funding available to deprived business owners through small business cash advance loans. Several experts have predicted that the merchant cash advance industry will continue to grow, judging from present statistics. And, there is every reason to believe that this growth being witnessed will continue into the future.