Merchant Cash Advance: What it is and how it works

Merchant cash advance give your business the power to trade tomorrow’s earnings for a lump sum today. You are essentially utilizing your business revenue to secure a dollar amount that may have otherwise been inaccessible. These products have fast turnaround and allow merchants to receive cash on demand. Traditional banks do not usually have merchant cash advances and sometimes take months to approve a loan. When time is money, our platform provides real-time access to cash for all projects to keep your business moving forward.

Below you fill find some additional programs that we offer to all business types.

Business Term Loans

In order to get you the funding you need, it’s important to narrow down your options. With our products, we have plenty to offer and help get your the best deal for your buck. Many people will go the traditional route and try to secure themselves with a business loan. This financing option is most popular because it’s been around for decades and have a positive turnout

A business term loan is essentially the basic loan as you know it: a business receives financing that is paid back over a set amount of time (term) with set monthly or weekly payments.

It can be divided into short term loans, medium term loans and long term loans. A business term loan is specified as being over a set term because other types of credit from lenders can vary in payments, such as business lines of credit, invoice financing, merchant cash advances, and other forms of funding that vary in payments depending on credit card sales.

Commercial Loans

A business term loan can be provided by traditional banks, online lenders or alternative funders. Each source has different qualification requirements as well as different preferences for secured or unsecured term loans.

The best option for your business to find a term loan depends on what the funding would be used for, credit score, cash flow, monthly revenue, existing debt and sometimes available collateral.

These factors will affect the structure of your business term loan: term length, payment structure, interest rate, amount. You can get business term loans with lengths ranging from 3 months to 25 years but most commonly are one to five years and varying payments of daily, weekly or monthly.

There are two factors to consider when looking for funding: Where can you qualify for a loan? Where do you actually want a loan? Each lender has a preferred type of borrower they fund. Banks require strong credit scores, strong revenue and more time in business, but can give out lower interest rates because they are taking less risk. Then there are credit unions, SBA loans, online lenders, and alternative funders. Online lender offers speed and convenience but comes with higher rates.

Basically, the better your business is performing, the better rates and terms you will get and vice versa; the worse your business is performing the riskier it is to fund causing rates to go up and amounts to decrease.

Business Line of Credit

No two businesses are alike and thankfully there are a number of products on the market to fit these varying cash flow needs. But how do you decide which is right for your business?

First, think about what you need the working capital for. If it’s for something that will bring returns fairly soon, a short term loan can help you free up cash flow sooner. But if the returns will be gradual, a long term loan would help you extend the payment period, making payment amounts smaller per month. Your project might also be very expensive, urgent, liquid or temporary. These factors all affect the best funding solution for your business.

Then, examine your business’s health. Your business might have weak cash flow, meaning you can’t afford to pay extra interest, but weak cash flow would make it hard to qualify for businesses with low interest rates. It will take some research to find a good match for your business if you have any setbacks. An option to lower rates would be to find a secured loan. A secured loan uses collateral to forfeit to the lender should the borrower default on payments, which reduces the lender’s risk. An unsecured term loan does not require any assets to be put up as collateral, but will likely have higher rates.

Next, forecast cash flow to see what you qualify for. Getting approved for a large amount of funding might be exciting, but if you don’t actually need the total amount you will be wasting money on interest. If you have term length, amount and interest available, you can use New York Tribeca Group’s business loan calculator to estimate your payments over time. Is $350 a month too much? Is $1,620 a week too much? Know how high and how low you can go when you start searching for business term loans.

Apply, but don’t shop around. Once you know what your business can handle without being overleveraged and you find a loan provider you believe is a good fit, it’s time to apply. Be careful to not shop around, that is applying at several places to compare. Most lenders will perform a “hard pull” on your credit report which will temporarily lower your credit score. If multiple lenders are pulling your credit, it could drop your score even more, giving you lower rates and terms for your loan.

Equipment Financing

The main reason business owners like business term loans is the flexible features but fixed rates for predictable payments. It’s easy to calculate how taking on debt will affect your cash flow when you know exactly how much you will be paying each week or month.

Most loans will have an option to pay off early. This can help businesses who wish to rid their cash flow of debt payments early. In some cases, this can also reduce interest. Check if your business term loan or unsecured term loan has early pay off options or amortizing interest. If the interest is amortizing, the interest on the principal amount will be stacked early on, you pay off the interest first before paying off the original loan amount. If the interest is amortizing, you won’t be saving as much as you think by paying off early.

If you like predictability, then a business term loan is for you. A predetermined amount of money with a set interest rate keeps your payment terms steady for the agreed upon amount of time.

Accounts Receivable Financing

A business would take outside funding typically for a one-time project or need. Common uses are:

– Equipment purchases and repairs
– Increasing inventory
– Seasonal rushes
– Expanding product lines
– Covering a payroll gap
– Purchasing real estate
– Expansion and remodeling construction
– Marketing
– Industry specific needs

These are all uses that help encourage growth and would increase the business’s performance, allowing it to payback more than it borrowed. It is not wise to borrow money for something that does not create a return on investment if you don’t already have the cash flow to cover the extra cost of borrowing money.

Asset Based Financing

A business term loan is essentially the basic loan as you know it: a business receives financing that is paid back over a set amount of time (term) with set monthly or weekly payments.

It can be divided into short term loans, medium term loans and long term loans. A business term loan is specified as being over a set term because other types of credit from lenders can vary in payments, such as business lines of credit, invoice financing, merchant cash advances, and other forms of funding that vary in payments depending on credit card sales.

Consolidation Loans

First, think about what you need the working capital for. If it’s for something that will bring returns fairly soon, a short term loan can help you free up cash flow sooner. But if the returns will be gradual, a long term loan would help you extend the payment period, making payment amounts smaller per month. Your project might also be very expensive, urgent, liquid or temporary. These factors all affect the best funding solution for your business.

Then, examine your business’s health. Your business might have weak cash flow, meaning you can’t afford to pay extra interest, but weak cash flow would make it hard to qualify for businesses with low interest rates. It will take some research to find a good match for your business if you have any setbacks. An option to lower rates would be to find a secured loan. A secured loan uses collateral to forfeit to the lender should the borrower default on payments, which reduces the lender’s risk. An unsecured term loan does not require any assets to be put up as collateral, but will likely have higher rates.