For a business to run smoothly, cash flow has to be considered to ensure current obligations are met and inventory is maintained to ensure customer demands are met in time. For a healthy cash flow to be sustained, business advance now and any other time from financial institutions is necessary. Merchant lenders play a major role in financing businesses and are gaining popularity in the current recession hit. The following are some of the benefits merchant lenders are the best option for financing your business.
Benefits of using merchant lenders
Unlike regular loans provided by most financial institutions, merchant lenders provide alternative business funding that does not need any form of security. The funding is based on future sales of the entity. This is a great relief for infant companies that have no assets to be used as collateral. Bigger companies can also reduce the risk of losing their assets used as collateral for regular loans.
Not based on credit rating
Banks and other financial institutions are very keen on the credit rating of business before considering giving a loan to them. Credit reference bureaus are entitled to rate a company’s credit worthiness to ensure only those that meet their obligations on time are considered for credit. The business which had defaulted to repay a loan even for one installment is rated poorly and will have a tough time accessing finances in the future. Merchant lenders are there to provide a solution for these institutions.
Fast application and collection of funds
With the process being straight forward, receiving the funds will be fast. With no reference to credit rating and no collateral, a business can be saved from sinking further with these funds. You will not worry about being accepted to receive the loan as it’s almost certain. Those once in a while deals can be secured as fast as possible thus the growth of the business. No much paperwork is involved in the processing of the funds as it takes at most seven days, unlike commercial loans that would take months to be processed.
Revenue based payments
Loan repayments from commercial banks are given priority as they have to be paid monthly irrespective of whether sales were made or not. This is not the case with merchant lenders as payments are made only when the entity makes sales. Provisions like these save the company from sinking further into debt to meet their obligations on time.