It is entirely correct that the vast majority of small businesses rely on some form of external assistance or the other to finance major projects. Yes, by the very nature of being a small business, you shouldn’t be expecting the same cash at their disposal as Bill Gates. It is even more likely that when a company is faced with an unexpected challenge, it has to go borrowing to have it solved.
A large percentage of small businesses operate this way, and the situation is even worse for small companies who over the years have always had to look to commercial banks for their source of funding. But, for some reasons, things have entirely changed, and they are often in need of cash advance now. There are several reasons why this is the case, and we shall consider them eventually.
For now, it has to be said that the merchant cash advance industry has been thriving, reinventing the operational landscape of the alternative lending industry. At present, alternative lenders offer hundreds of millions of dollars as loans to small businesses each year. In one single year, the figure rose to be as high as 4 billion dollars, with merchant cash advance providing a huge chunk of it.
In short, the success of the merchant cash advance industry is what has motivated big credit payment processors such as PayPal to venture into the cash advance business. Small businesses need cash advance now more than ever before— now when bank lending to the sector has reached a deep level. Let us look at some of the reasons small businesses are in desperate need of merchant cash advance funding.
Merchant cash advance providers do not insist on collateral while traditional lenders do.
One of the biggest reasons why small businesses are insisting on merchant cash advance now—which is also one of the top reasons why they cannot access bank loans—is the troublesome issue of collateral. It is common knowledge that banks and other traditional lending institutions firmly insist that a business has to provide some form of security before obtaining a loan.
The reason a bank does this is, of course, to secure itself in case the business is unable to repay the loan. When the business is unable to repay the loan, it has been the usual practice for a bank to sell off the collateral in some cases and recoup its funds. In spite of how beneficial this might seem, merchant cash advance providers know that to meet up enable small business owners to get cash advance now, the issue of collateral would have to be solved efficiently and thrown off the table.
Thankfully, a merchant cash advance is a mere sales transaction which, by definition, requires no guarantee. In one court ruling, it was sufficiently illuminated that a merchant cash advance is nothing similar to a loan. A loan was viewed as a transaction in which a business is given an amount of money that it promises to repay unconditionally at some time in the future. A merchant cash advance transaction, on the other hand, is simply a commercial one in which a business agrees to sell its future credit card sales to the merchant cash advance provider. Having said that let us take a look at other reasons why small businesses are in need of cash advance now.
Businesses are tired of being rejected because of their poor credit scores.
Another reason why businesses are turning to merchant cash advance vendors is that they do not wish to worry about having a good credit score. Admittedly, having a poor credit score has been identified as one of the top reasons small businesses are unable to get loans. To banks, a lousy credit score is a murderous stink on the reputation of a business. The vast majority of small businesses who want cash advance now are those that would otherwise have been rejected by commercial banks.
There are good reasons banks pay so much attention to the credit score of a business. It is expected that a business that has been faithful in past instances when it was indebted—as this is what the credit score show—will pose a lesser lending risk. Merchant cash advance providers, on their own, do not base much of their lending decisions on the credit score. When they take a look at the credit history of the merchant, it is because they need to be sure that there is no outstanding bankruptcy or other issues that might rightly prevent them from issuing merchant cash advance now. Otherwise, merchant cash advance providers base their decisions on the volume of credit sales of the business. The latter seems a fairer alternative when measured comparatively especially for those businesses who have been scorned worse than lepers by banks because of a poor credit score.
Small Businesses in dire need of cash want it real quick.
Of all the reasons why small businesses need cash advance now the issue of speed makes it into the top. There is no virtually no reason why small businesses should be waiting so long for feedback on loan applications when they could get it in less than a week through merchant cash advance. It is even sometimes the case that businesses wait for months before getting answers from banks. The reason for the delay is, of course, the rigorous documentation process involved with bank loans. On the contrary merchant cash advance require minimal documentation and this speeds up the whole processing time.
What about the question of certainty?
Finally, we cannot examine why small businesses are in dire need of cash advance now without looking at the issue of certainty. One can only wonder if it is of any use applying to a lender when the chances of getting approved are quite slim as is the case with commercial banks. Lacing this with emphasis, it has been found that a good percentage of small business owners did not approach commercial banks because they feared rejection.
While the issue of uncertainty is a big one with most traditional lenders, it does not arise with merchant cash advance. Indeed, the chances of getting approved for cash advance now exceed 90 percent. What this means is that businesses can always be assured that whenever the need for cash arises unexpectedly, they can always count on merchant cash advance providers.