A Yardstick to Evaluate Your Merchant Cash Advance Lender

Tuesday, August 4, 2015, 6:00 AM | Leave Comment

A 2014 study published in Forbes shows that the merchant cash advances industry has grown exponentially over the last 10 years. Analysts attribute this to the economic downturn of 2007 which forced banks to rethink their key customers.

The most affected of these were of course small business owners.

Perfect Financing Alternative

Indeed, the National Federation of Independent Business (NFIB) says over 67% of members were adversely affected. National Business Association in its own study found over 50% of businesses that filed Chapter 7 and 13 were small business owners. This is the major reason merchant cash advances have become exceedingly popular as an alternative to traditional business loans.

Picking the Best Local Lender

With most business owners opting for this kind of financing, myriad credit providers have come up. Therefore, you need to be cautious before picking one. How do you ensure you get the choose company from this crowded market?

Here are some ideas to help you along:

  1. Use a Provider not a Broker

    There are many companies that front services as their own yet they do not actually provide them. When you sign the contract, you will realize the funds come from a different company and terms will definitely change. To get the most affordable rates you need to deal directly with a local lender and not a broker.

  2. Assess Reputation

    The good thing about the internet is that information flow is not curtailed. If a lender is unscrupulous, this information will appear online and this is where you need to start. Look out for complaints from your local BBB and read customer reviews before signing up for any funding.

  3. Seek References and Recommendations

    A reputable firm will be ready to give you references of former clients because they are confident about their services. You need to look at testimonials and where possible contact listed business owners who have used a particular company’s services. This minimizes risks that come with dealing with a new financier.

  4. Experience

    With age comes perfection and if a credit company has been in the business for long then they have perfected the art of this trade. As such, you will get quick funding without hassles and moreover, you have an assurance of professionalism throughout the contract period.

  5. Flexibility

    Every business is unique and as such what your restaurant requires is not what a clothing designer next door requires. A good cash advances provider will assess your case and provide a flexible repayment period in addition to adequate capital to meet your needs.

  6. Mode of Payment

    Collection of funds has put a kibosh in seamless running of many merchant-creditor relationships but this doesn’t have to be so. Before signing a contract ensure you have clearly understood everything. More importantly, verify that this is the best option for you by assessing the available modes including split funding, trust accounts or lockboxes with a provider.

  7. Customer Service Level

    When you initiate contact with a merchant cash provider, assess their willingness to help early enough. Your relationship with the lender will depend on how much they are dedicated to you and if they can’t sort out issues promptly, then keep looking.

A local lender also needs to be financially stable with a record of financing in the market. Go ahead and rejuvenate your business.

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