Small Business Funding and the Merchant Cash Advance Industry

Small business funding through merchant cash advance providers is something that is now regularly being adopted and gaining more significant attention in the small business community. Because the credit market remains tight and the inability for small businesses in particular to gain access to business funding has been quite critical, alternative lenders, in general, have become a necessity. The situation is such that even relatively stable small businesses that could obtain funding from banks are not able to do so as underwriting processes have become tighter.

How vital are Small Businesses to the United States Economy

The need for small businesses to have access to business funding cannot be overemphasized. It is common knowledge that the US economy thrives on small businesses. For, small businesses account for more than half of the total non-farm jobs in the country. As it is, small businesses create more than 60 percent of the gross domestic product and are responsible for one out every three new jobs that are created in the country. For these reasons, it is of utmost importance for small business funding to be readily available as anything other than that could be detrimental to the economy.

Why do small businesses always seem in need of one form of funding or the other?

The success of small businesses depends on their ability to seize opportunities as they arose. But most times the greatest impediment to the ability of small businesses to take advantage of business opportunities are finance. Finance is required for small businesses to re-invent themselves to respond positively to rapidly changing consumer trends fashions and tastes. More specifically, small business funding is sometimes necessary for building construction, meeting payroll obligations, debt consolidation and whatever else the business deems fit. Indeed, access to working capital is said to be critical to the health and survival of the small business community.

How do merchant cash advance lenders come into the picture?

Obtaining funding through merchant lenders is something that has proven to be a lifesaver for quite a significant number of small businesses. It has many a time served as a catalyst which enabled the growth and repositioning of small businesses in the face of rapid market changes. But merchant small business funding has to be taken for the right reason and from the right provider for its full benefits to be realized. The main essence of merchant cash advance providers has been to fill in the gap in the traditional financing sector, gaps which have made access to business funding complicated for small businesses and start-ups alike.

Is merchant cash lending a genuinely revolutionary concept?

In spite of the gains of merchant vendors in the last couple of years, the industry has been the subject of a much-heated controversy. At the heart of the matter is whether or not small business funding through merchant cash advance lenders is worthy of its cost. The position people take on this issue is usually of two extremes: that merchant cash advance is too expensive and does not justify its cost or that it is almost of the same cost as conventional bank loans. But nothing is further from the truth. The true position of things is that while merchant cash advance is relatively more expensive than conventional bank loans, for example, its cost is reasonable considering the benefits that come from it.

Because a merchant cash advance is an unsecured form of small business funding, it is a matter of sound business practice for it to attract a higher cost. After all, the inability to provide collateral has been the bane of a good number of small businesses when seeking business funding. That merchant cash advance providers have made it possible for small businesses to obtain adequate funding without having to provide collateral is a revolutionary concept as far as small business funding is concerned. The fact that inability to provide collateral has been identified as one of the top four reasons small businesses are unable to obtain funding makes it clear how much merchant lenders have transformed small business funding.

Other aspects of merchant cash advance that have made it popular among small business

One other aspect of merchant cash advance lending that is worthy of note is the little emphasis that is placed on business credit score. In the traditional lending world, the credit score of a business is a measure of its creditworthiness since it reflects the performance of the business in previous loans. Although judging a business from its credit score has always been the conventional practice, merchant vendors have not found doing so to be too useful. Small business funding through merchant cash advance is essentially based on the ability of the business to repay which is assessed through the volume of credit card sales it generates. That is, insofar as the business generates up to two to four times of its requested loan amount, there are no hitches in the approval process.

The Question of Speed and Ease

The speed and ease with which merchant loans are also obtained factors that help to characterize it as something revolutionary. Everyone in the business world is familiar with how long it takes for a loan to be fully processed. It is not unusual for a typical loan processing to take months. Such delay is, of course, risky when the business is in dire need of funds as is often the case. Merchant cash advance providers recognize this, and that is why small business funding through MCA is made available in a matter of days or even hours as the case might be. The reason my merchant cash advance is unique also has to with the level of certainty that it offers. For a while the chances of being approved for a conventional loan could be well under 50 percent that of merchant cash advance funding is well over 90 percent. This makes merchant lending the ideal source of small business funding under emergency situations, all things being equal. It is no surprise therefore that the merchant cash industry has continued to expand, and will likely continue doing so well into the future.


By | 2018-04-20T15:32:50+00:00 April 17th, 2018|Business Capital|