10.15.08

5 Reasons Why Merchant Advances Can Make More Sense Than Traditional Loans

Posted in Uncategorized tagged , , , , , , , , , , , , , , , at 5:55 pm by Ted Stearns

 

iMerchant’s parent company Aegean Capital Partners has an SBA division in which it is the responsibility of the advisors to secure SBA loans for their clients. Since we are in a unique position to advise our clients on what method of financing is the best in their individual case, traditional loans or merchant advances, I am in an easy position to compare the two methods.

 
1. FAST:
Even when banks are working under optimal conditions (AKA, not in the midst of a credit crisis/lending freeze) piles of paper work, credit checks, business plans and financial projections prolong the wait for needed funds. Right now it is taking 2-3 months to secure SBA or conventional bank financing.

Compare that to merchant advances where it is taking clients around 7-days to receive their funds. The reason why: our underwriters do not have to mull thru business plans, financial projections and executive summaries. For merchant advances, clients don’t have to specify what they are using the funds for; it could be for payroll, expansion, equipment purchasing or building an addition to their shop.

2. FEWER CREDIT RESTRICTIONS
Unlike traditional loans, a merchant advance does not show up on the business owner’s personal credit and requires no collateral, no liens and no personal guarantor.

Right now a conventional loan must be collateralized at 100%, meaning, if a client would like a 100k loan, they would have to show 100k of liquid capital in their bank.

A merchant advance can be received without any collateral whatsoever; our clients who need a 100k advance do not need to show any liquid capital, even with a past bankruptcy (after one year) or with a

credit score as low as 500.

3. NO PREDETERMINED PAYBACKS/ NO INTEREST
 
Perhaps what makes merchant cash advances so attractive is the absence of predetermined payments. Instead of making installments against the advance once or twice a month, 20% (it varies between 8-25%) of your credit card swipes are credited directly to your balance.

So when your business is up, your balance decreases at a faster pace. When business is slow, at a slower pace. Either way, it is always decreasing.

4. NO INTEREST
 
Without the stress of a burdensome interest rate multiplying your existing balance, your merchant advance balance will never increase due to interest and there is no penalty for paying it off early.

5. MORE COST EFFECTIVE
 
Bank loans are notorious for having fees, there is a application fee, a underwriting fee, administration fee a SBA guarantee fee. Now again, sometimes conventional financing has its place in life but when we compare it to a merchant advance, there is a distinct difference. Merchant advances have no fees like a traditional loan. No set up fee, no admin fee, no application fee.

This is coming from a guy who has been in the capital and credit markets for 14-years. In this market environment, for that merchant that needs immediate working capital without all the hassle, a merchant advance is the quickest, easiest way to get it by the end of the week.

If you need trusted advice from a company who can look at your overall picture and assess which choice would be best for you, call us today 888-838-6006 or email support@iMerchantAdvance.com.

iMerchant Advance and our parent company is America’s small business advocate, we can be heard on the radio at KCEO AM 1000 7am-8am morning drive.

 

 

 

 

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