Unsecured Business Finance: The Hot Trend in the Lending World
Small businesses have their fair share of challenges with the financial challenges being a major hindrance to their growth as business entities. Traditional lenders didn’t quite address this and this can be proven by their low approval rates for most of the small business loan applications. To deal with this situation, alternative lenders have come up with lending plans that are pretty favorable for most of the small businesses seeking unsecured business finance.
Merchant cash advances (MCAs) are a form of alternative finance which are provided with the MCA companies without the need of any form of collateral. These unsecured business finance are a prompt and more reliable way of sourcing for financial aid for small businesses. They have become popular in recent times for a couple of reasons which will be outlined in this article.
What are Merchant Cash Advances?
Merchant Cash Advances are a form of alternative finance which are mostly offered to small business owners. They are simply a lump sum that the small business owner is given which is to be repaid from a fixed percentage of their daily credit transactions. MCAs are not strictly loans as they are basically an investment in a given business’s future credit sales. What is unique about them is their tag as unsecured business finance; you don’t need to provide any form of collateral during the application process.
Though they are high-interest in nature, many small businesses seem to prefer them all the same. They are a quick and reliable way of getting financial help. You will need to meet only a few requirements, which we look at shortly and your advance will be approved in no time. Since they are unsecured business finance, most of the MCA providers will pay particular attention to your revenue base as a business. It is also good to mention that small businesses with a bad debt history will still be considered by most of the MCA companies.
Small businesses that can qualify for Unsecured Business Finance
Most of the small businesses would easily qualify for these unsecured business finance. However, there are some few requirements which are meant to cushion the MCA providers from the possibility of bad debts. A small business needs to:
- Be a relatively established business: you will need to have been in business for more than a year for you to be considered by most of the MCA companies. This is an assurance that you have a steady flow of income as a business.
- Be able to generate at least $10,000 on a monthly basis: the repayment of these unsecured business finance is usually fulfilled on a daily basis and your business needs to sustain such an arrangement.
These are the two main things that need to be put into consideration before you approach an MCA provider for these advances.
Requirements for an Unsecured Business Finance application
As mentioned earlier on, there are just a few requirements that are needed to apply for these unsecured business finance. Unlike most of the traditional lenders, MCA providers won’t take you through long and strenuous application procedures. You will only be required to submit some documents which will be used to assess your suitability based on your revenue base in the past and in the near future.
You will need to provide the following documents:
- A financial statement of your small business
- A copy of your estimated credit earnings in the near future
- A copy of your past credit sales transactions
As you might have noticed no form of collateral is required for you to qualify for these unsecured business finance. A quick reminder is that you can still apply for Merchant Cash Advances even if you have a bad debt history.
Approval and repayment of Unsecured Business Finance
The good news about the Merchant Cash Advances is their high approval rates that you can enjoy. The approval and sending of the cash advance is usually handled in just a matter of days. Some MCA providers are quite prompt with the provision of these unsecured business finance within 24 hours after the application.
Repayment of MCA is not that problematic and the model is so sustainable. The cumulative interest is spread over a repayment period that could range from as short as 3 months to 12 months. During this period, you will have to submit a fixed percentage of your credit earnings on a daily basis.
This is convenient for those who are repaying these unsecured business finance. They will be left with sufficient funds to keep their businesses running during times characterized by both high and low credit sales volumes. Though they will part with higher amounts when their businesses are doing well, there will also be left with enough cash to meet their working capital needs on days with low credit sales.
Read More: 5 Things You Need Before Applying for a Business Loan
Reasons Why You Should Consider Unsecured Business finance
Having looked at some of the basic aspects of Merchant Cash Advance, it is also good to determine how appropriate they could be to you as a small business owner. Here are some of the reasons as to why you should consider applying for these unsecured business finance:
They are a quick way of obtaining financial aid: it takes just a matter of days for an Merchant Cash Advance to be approved and sent to you. When you are faced with situations that require you to act promptly, considering these unsecured business finance could be an excellent and prudent idea. They are way better than the traditional loans which could take months to be processed and sent to you.
They have high approval rates: putting into consideration that most of the traditional lenders have low approval rates for most of the small business loan applications will be in order to apply for a Merchant Cash Advance. You only need to prove that you can sustain the repayment period by providing documents that showcase the revenue that you generate on a regular basis. Chances of a small business qualifying for these unsecured business finance are quite high, you should definitely consider them.
No collateral is needed during the application: what makes Merchant Cash Advances to be really attractive to most of the small businesses, is this. This implies that you don’t risk losing part of your property or valuable possessions because of defaulting in the payment of these unsecured business finance. If you are a business that doesn’t have any form of collateral to offer in a loan application, Merchant Cash Advances are the way to go.
Having a bad debt history is not a hindrance: most of the MCA providers are quite accommodative to most of the small business owners to the extent of accepting applications from those with a bad debt history. Most of the traditional lenders shy away from such businesses but those seeking for these unsecured business finance should not worry about such.
They have a sustainable repayment schedule: as illustrated in the repayment section you will only need to part with a fixed percentage of your daily credit sales. This means that you will be left with enough cash to sustain your business during the repayment period. Though the long run cost will be higher, you will have a less strenuous time during the repayment period.
MCA providers are simple and more reasonable funding sources: right from the time of the application to the full repayment point, you will have an easy time due to the simplification of all the processes. It is easier to apply for unsecured business finance as they involve long and strenuous application procedures. The requirements are additionally few and easier to meet besides no form of collateral being demanded from you.
Merchant Cash Advances are an easier way of meeting most of your small business needs. If you are short of the much-needed working capital, you can approach most of the MCA providers for these unsecured business finance. It could also be an advantageous business niche that you have just discovered; applying for an MCA could see you capitalize on this. Small business owners of your kind could also want to expand your business to meet your increased demand. These advances will sort you out when you are faced with all these scenarios.
The notable downside of considering Merchant Cash Advances is the high-interest rates that are charged by the MCA companies. This should not be a reason for you not to try out these unsecured business finance considering the return on investment that could work in your favor. You can make way more than the cumulative amount that you will repay the MCA providers.
The financial challenges that most of the small businesses face could be dealt with by them applying for unsecured business finance. Merchant Cash Advances are a prompt way of addressing such needs, besides the application process being less intense and quite simple. You can additional qualify for these alternative financing options in case you don’t want to provide any form of collateral or in the event that you have a bad debt history.
Have you considered your options for ecommerce credit card processing?
There are so many decisions to be made when starting a business online that this crucial one can often be overlooked.
There are many types of chargebacks, and the process can often be frustrating, costly and timely.
This document will help you better understand what a chargeback is, the time frames in which a chargeback can occur, and how to effectively prevent these from impacting your busines
In 2000, in the wake of the dot-com bust, Amazon was forced to sell almost $700 million in convertible bonds to investors abroad. In fact, the company had to offer an extremely interest rate (7%) just to complete the deal. A month after they closed the deal, the...