Case Study: How a Small Business Transformed with a Merchant Cash Advance?

Business is a competitive landscape, no matter your industry or where you are located. Amid creating a functioning business, you may wonder how to secure additional funds to do the things that need to be done to grow. However, it is possible—with the right lender and a Merchant Cash Advance (MCA). Let’s look at the case of a dental office in Methuen, MA, as well as its transform with the assistance of the team at New Bridge Merchant Capital. By the end, you will know if a MCA is right for your business, too!

 

Key Takeaways

 

  • Merchant Cash Advances offer upfront cash in exchange for a percentage of future credit card sales.
  • MCA repayment is based on daily credit card transactions and a predetermined factor rate.
  • MCAs can be used for various purposes, including working capital, expansion, addressing seasonal needs, emergencies, and opportunistic investments.
  • A $105,000 MCA transformed a dental office, enabling marketing, equipment upgrades, and service expansion, leading to increased capacity and growth.
  • Businesses considering MCAs can explore options with New Bridge Merchant Capital, benefiting from a quick application process and no penalties for early repayment.

 

What is a Merchant Cash Advance?

A Merchant Cash Advance (MCA) is a form of financing where a business receives a lump sum of cash in exchange for a percentage of its future credit card sales. It’s a popular option for businesses that have consistent credit card sales but may struggle with traditional loan approval processes or have unpredictable cash flow.

 

Here’s how it typically works:

 

  • Advance Amount: The lender provides the business with a lump sum of cash upfront. This amount is typically determined based on the business’s average monthly credit card sales.
  • Repayment Structure: Instead of fixed monthly payments, the lender collects repayment by taking a percentage of the business’s daily credit card sales. This means that repayment fluctuates with the business’s sales volume.
  • Factor Rate: The lender charges a factor rate, which is a multiplier applied to the advance amount to determine the total repayment amount. This factor rate is typically between 1.1 to 1.5, depending on various factors such as the risk level of the business.
  • Repayment Period: The repayment period varies but is usually shorter than traditional loans, ranging from a few months to a year or more.

What Can You Do With a Merchant Cash Advance?

A MCA is relatively flexible with how you can use it. Here are some of the ways a business can utilize a Merchant Cash Advance:

 

  • Working Capital: Businesses often use MCAs to cover short-term expenses and maintain cash flow. Whether it’s purchasing inventory, covering payroll, or managing unexpected expenses, MCAs provide quick access to capital.
  • Expansion and Growth: MCAs can be used to invest in business expansion initiatives such as opening new locations, launching marketing campaigns, or upgrading equipment and technology.
  • Seasonal Needs: Businesses with seasonal fluctuations in revenue can use MCAs to bridge gaps during slower periods or ramp up operations during peak seasons.
  • Emergency Funds: In times of crisis or unforeseen circumstances, such as natural disasters or economic downturns, MCAs can serve as emergency funds to keep the business afloat.
  • Opportunistic Investments: Some businesses use MCAs to seize time-sensitive opportunities, such as purchasing inventory at a discounted rate, securing a lucrative business deal, or taking advantage of expansion opportunities.

 

Case Study: Client’s Background

Now that you know a bit more about Merchant Cash Advances, let’s discuss the case of a dentist office in Menthuen, MA. Although the dental office had established itself as a reputable office within the community and had a solid reputation, it was struggling to expand. Despite having an endless stream of patients, the dentist office could not secure enough funds to realize its full potential. Traditional lending institutions presented limited options, with stringent criteria and lengthy approval processes, leaving the dental office at a standstill in its pursuit of expansion.

 

Challenges Faced

 

  • Limited Financial Resources: The dental office lacked the necessary funds to invest in crucial areas such as equipment upgrades, service expansion, and staff recruitment.
  • Traditional Lending Constraints: Conventional banks and lenders imposed strict eligibility criteria and prolonged application timelines, hindering the practice’s ability to access timely financing solutions.

 

Acknowledging that they needed an alternative to traditional lending, the Menthuen dentist office started to search online for lenders, eventually coming across New Bridge Merchant Capital.

 

How a Merchant Cash Advance Aided the Client

Turning to New Bridge Merchant Capital was a decision that ultimately turned things around for the dentist office and made those challenges a thing of the past. How so? New Bridge Merchant Capital offers a a swift and efficient application process, ensuring expedited access to funds to meet urgent business needs. Furthermore, recognizing the diversity of small businesses, New Bridge Merchant Capital offers bespoke financing that meets the requirements of the business and enables clients to pursue their objectives confidentally. Additionally, New Bridge Merchant Capital evaluates applications based on business performance rather than solely relying on credit scores, offering opportunities to businesses with varying credit histories.

 

Empowered by New Bridge Merchant Capital’s tailored financial solution, the dental office secured a $105,000 loan that changed the path of the business. With the funds that the Menthuen dentist secured, they were able to market, upgrade equipment, and expand their services. Finally, the goals the business had set out to achieve were doable, and now they are able to operate at a much higher capacity.

 

Contact New Bridge Merchant Capital Today to Learn if an MCA is Right For You

The case of the Methuen dental office exemplifies the transformative potential of strategic financing with New Bridge Merchant Capital. By overcoming financial constraints and leveraging tailored funding solutions, businesses can unlock new opportunities for growth and success, propelling them towards a brighter future in the competitive business landscape.

 

If you think a Merchant Cash Advance is right for you, consider contacting New Bridge Merchant Capital today to see what we can do for your business. The application process is quick and easy. There are plenty of options available and no penalties for paying your loan off early. Contact us today at 844-228-0593 or by filling out the online form

Boosting Your Business With a Merchant Cash Advance: Pros and Cons

As a small business, you are most likely eager to find ways to bolster your finances. Having some flexibility when it comes to funds is always advantageous, particularly when you need to upgrade equipment or renovate something at your physical location. However, not every small business is capable of receiving a term loan from a bank. That is why Merchant Cash Advances (MCAs) have become an option for many small business owners, as they enable quick cash in hand without a rigorous application process. Is a Merchant Cash Advance right for you? Let’s discuss the pros and cons to help you decide.

 

Key Takeaways

 

  • Merchant Cash Advances offer businesses quick access to capital without the need for extensive paperwork or collateral.
  • MCAs are not classified as loans but are instead cash advances, with repayment based on a percentage of daily sales.
  • Pros of MCAs include quick access to funds, flexible repayment terms, no collateral required, and a simple application process.
  • Cons of MCAs include high costs, potential impact on cash flow, limited eligibility criteria, potential for debt cycles, and lack of consumer protections.

 

What is a Merchant Cash Advance (MCA)?

Also known as an MCA, a Merchant Cash Advance is an alternative form of lending that does not come from a traditional bank or the Small Business Administration (SBA). Instead, an MCA allows for small business owners to receive a cash advance in exchange for a portion of future credit or debt card sales. The nature of MCAs makes them very flexible, which is good for business owners who need access to capital quickly and without all the paperwork. Since collateral is usually not required, MCAs are also more accessible to newer businesses.

 

How Does a Merchant Cash Advance Work?

You may noticed but Merchant Cash Advances are not loans in the traditional sense of the word. Instead they are indeed a cash advance. When you apply for a Merchant Cash Advance, the lender will look over your business’s receipts to figure out your financial state and dependability. Some lenders may review a business credit report, as well, but it is typically the sales that play the greatest role in getting you approved for a MCA.

 

If you are approved, the MCA lender will take an agreed upon percentage of the daily sales until your cash advance has been repaid. This percentage—known as a “holdback rate”—will range from 5% to 20%. The lender will retrieve their holdback rate through one of three methods:

 

  • Automatic Deduction: The MCA lender will withdraw the agreed amount from your credit or debit card after a sale. The better your credit or debit sales, the faster you repay your debt. If revenue drops, the amount you repay also decreases.
  • Direct ACH Withholding: The company will remove a fixed amount from your estimated monthly revenue directly from the business bank account until the cash advance has been repaid.
  • Lockbox or Trust Account: While funneling money through a third party, the MCA lender takes their share of your revenue then sends the remainder to your bank account.

 

What to Know About MCA Rates and Fees

Unlike traditional loans that collect interest, a Merchant Cash Advance accrues money with something known as a factor rate. The factor rate for MCAs can vary depending on the lender and the unique characteristics of your business, ranging from 1.10 to 1.5. Since MCAs fall outside the classification of traditional loans, the regulatory safeguards that cap rates and fees for banks may not apply to them. Consequently, MCA providers have the leeway to impose substantial fees, and some may not fully disclose these fees upfront.

 

Several factors influence the determination of your factor rate, including your industry, business tenure, personal and business credit scores, financial records, and debit and credit card revenue. Similar to other forms of financing, if your business appears to pose a higher risk, you may end up with a higher factor rate.

 

Apart from the factor rate, MCA providers may levy additional charges, such as an origination fee, which could reach up to $3,000. These ancillary fees can significantly augment the overall cost of your financing.

 

What are the Pros of MCAs?

Having learned a bit more about Merchant Cash Advances, let’s take a look at what makes MCAs a beneficial choice:

  • Quick Access to Funds: MCAs provide businesses with fast access to capital, often within a few days of approval, making them ideal for addressing urgent financial needs or seizing time-sensitive opportunities.
  • Flexible Repayment: Unlike traditional loans with fixed monthly payments, MCAs offer flexible repayment terms based on a percentage of daily credit card sales. This ensures that businesses repay more when sales are high and less during slower periods, easing cash flow management.
  • No Collateral Required: MCAs are typically unsecured, meaning businesses are not required to provide collateral to secure funding. This reduces the risk for businesses, especially those with limited assets to pledge as collateral.
  • No Fixed Monthly Payments: Since repayment is based on a percentage of daily credit card sales, there are no fixed monthly payments with MCAs. This can be beneficial for businesses with fluctuating revenue streams or seasonal fluctuations.
  • Simple Application Process: The application process for MCAs is usually straightforward and requires minimal documentation compared to traditional loans, allowing businesses to access funding quickly and with minimal hassle.

 

In short, MCAs are a flexible option that may be advantageous to businesses that do not meet the requirements of a traditional bank loan.

 

What are the Cons of MCAs?

Despite the numerous benefits of choosing a Merchant Cash Advance, you must also way the following downsides:

 

  • High Costs: MCAs often come with higher fees and interest rates compared to traditional loans, resulting in higher overall borrowing costs for businesses. The factor rate used to calculate repayment amounts can translate to a high effective annual percentage rate (APR).
  • Impact on Cash Flow: While MCAs offer flexibility in repayment, the daily deductions from credit card sales can significantly impact cash flow, especially during slow periods. Businesses may experience cash flow challenges if sales decline unexpectedly.
  • Limited Eligibility Criteria: MCAs may have stricter eligibility criteria compared to traditional loans, limiting access to businesses with strong credit card sales history or specific industries. Businesses with poor credit or low credit card sales volume may struggle to qualify.
  • Potential for Debt Cycle: Due to the high costs and daily repayment structure, some businesses may find themselves trapped in a cycle of debt with MCAs, especially if they rely on multiple advances to cover ongoing expenses.
  • Lack of Consumer Protections: MCAs are not regulated in the same way as traditional loans, leaving businesses vulnerable to predatory lending practices, unclear terms, and potential disputes with funders. It’s essential for businesses to carefully review the terms and conditions before accepting an MCA offer.

 

Looking for a Merchant Cash Advance? Contact New Bridge Merchant Capital Today!

Merchant Cash Advances (MCAs) have numerous advantages and disadvantages that businesses need to fully consider before moving ahead. That said, if you are prepared and know that you will be receiving numerous credit sales, a MCA can be easily managed and repaid, all the while giving you additional capital to work with.

Ready to explore the possibilities with Merchant Cash Advances (MCAs) from New Bridge Merchant Capital? Contact us today to learn more about how MCAs can provide the funding solution your business needs to thrive. Whether you’re looking to manage cash flow, fund growth initiatives, or seize new opportunities, our team is here to help. Reach out to us at 844-228-0593 or fill out the online form to get started. Let’s unlock the potential of your business together.

 

Financing Your Path to Success: A Comprehensive Guide to NC Small Business Loans

Financing Your Path to Success: A Comprehensive Guide to NC Small Business Loans

North Carolina’s dynamic business landscape offers fertile ground for small businesses to thrive. Understanding the financial tools available, such as Merchant Cash Advances, business lines of credit, term loans, collateralized finance, and reverse consolidation loans, is crucial for any entrepreneur looking to navigate the path to success. New Bridge Merchant Capital provides a range of these financial solutions, tailored to meet the diverse needs of North Carolina’s small businesses.

Merchant Cash Advances: Quick Access to Capital

Merchant Cash Advances (MCAs) offer a swift and flexible financing option for businesses in need of immediate funding. Especially suitable for enterprises with high credit card sales, MCAs provide funds based on future sales projections, allowing businesses to maintain cash flow during fluctuating sales periods.

Business Lines of Credit: Sustaining Cash Flow

A business line of credit provides a cushion for businesses to draw upon as needed, making it a versatile tool for managing cash flow fluctuations and unexpected expenses. This flexible financial solution allows businesses to adapt quickly to market changes and seize growth opportunities as they arise.

Term Loans: Funding Long-term Goals

Term loans are ideal for businesses planning significant investments like equipment purchases or expansions. These loans provide a lump sum of cash upfront, with a fixed repayment schedule, offering a structured approach to financing large-scale business endeavors.

Collateralized Finance: Leveraging Assets for Growth

Collateralized finance involves securing a loan against business assets, providing an avenue for businesses that might not qualify for unsecured loans. By leveraging assets, businesses can often access larger loan amounts, potentially at more favorable interest rates.

Reverse Consolidation Loans: Streamlining Debt

For businesses juggling multiple debts, reverse consolidation loans offer a strategic solution. By consolidating existing debts into a single manageable payment, businesses can simplify their financial management, focusing more on growth and less on debt.

The Application Process: Partnering with Experts

Applying for small business loans requires a comprehensive understanding of your financial situation and business objectives. Companies like New Bridge Merchant Capital assist businesses in preparing detailed financial statements and robust business plans to ensure a smooth application process and improve the chances of loan approval.

Understanding Interest Rates and Repayment Terms

Interest rates and repayment terms vary greatly among different financial products. It’s crucial to understand the total cost of borrowing, including any fees, to make an informed decision. Businesses should consider not only the immediate benefits but also the long-term impact on their finances.

The Impact of Credit History on Loan Approval

A strong credit history can significantly improve the chances of loan approval in NC. Businesses should strive to maintain a good credit score and rectify any issues before applying. However, options like MCAs provide alternatives for those with less-than-ideal credit.

Government Programs and Resources

NC businesses can also explore government-backed loans and resources, such as those offered by the Small Business Administration (SBA). These programs often have favorable terms and can be an excellent source of funding for qualifying businesses.

FAQs About NC Small Business Loans

  1. How do MCAs work for seasonal businesses? MCAs are particularly beneficial for seasonal businesses as the repayment is aligned with the business’s sales volume, offering flexibility during off-peak seasons.
  2. What should businesses consider when choosing between a line of credit and a term loan? The choice depends on the business’s financial needs. A line of credit offers flexibility for ongoing expenses, while a term loan is better suited for one-time, significant investments.
  3. Can businesses with limited assets obtain collateralized loans? While collateralized loans typically require assets, there are various financing options available for asset-light businesses, including unsecured loans and MCAs.
  4. How do reverse consolidation loans improve financial health? By consolidating multiple debts into one, reverse consolidation loans simplify debt management, potentially lower interest rates, and streamline monthly payments.

Conclusion

Understanding and utilizing the right financial tools is essential for the growth and sustainability of small businesses in North Carolina. From Merchant Cash Advances to term loans, there are numerous options available to suit different business needs and goals. By exploring these options and seeking expert guidance from companies like New Bridge Merchant Capital, entrepreneurs can successfully finance their path to success. Contact us today.

How to Improve Your Business Credit Score

How to Improve Your Business Credit Score

Maintaining a strong business credit score is crucial for the growth and financial health of any company. A good credit score can open doors to better financing options, lower interest rates, and favorable terms from suppliers. In this article, we’ll explore practical steps to improve your business credit score, which can be a game-changer for your business’s financial stability and growth.

Key Takeaways

  • Timely Payments: Regularly paying bills on time significantly boosts your credit score.
  • Manage Credit Utilization: Keep credit usage low to showcase financial stability.
  • Monitor Credit Reports: Regular checks can help identify and rectify errors.
  • Establish Diverse Credit Accounts: Diversify your credit portfolio with suppliers and lenders.
  • Maintain Long Credit Histories: Keep older credit accounts open to strengthen your credit history.

Understanding Business Credit Scores

Before diving into the strategies for improvement, it’s essential to understand what a business credit score is and how it’s calculated. Similar to personal credit scores, business credit scores assess the creditworthiness of a business. They are determined by factors like payment history, credit utilization, length of credit history, and public records such as bankruptcies or liens.

The Importance of a Good Business Credit Score

A strong business credit score is vital for several reasons:

  • Easier Loan Approval: Businesses with higher scores are more likely to get approved for loans, including Small Business Loans and Merchant Cash Advances.
  • Better Interest Rates: A higher score can lead to lower interest rates, saving your business money over time.
  • Supplier Trust: A good credit score builds trust with suppliers, possibly leading to better terms and credit limits.

Strategies to Improve Your Business Credit Score

1. Pay Bills on Time

Timely payment of your bills is the most straightforward way to boost your credit score. Consistent, on-time payments show lenders and suppliers that your business is reliable.

2. Reduce Credit Utilization

Aim to use a small percentage of your available credit. High credit utilization can be a red flag to creditors, indicating potential financial stress.

3. Keep Your Public Records Clean

Any liens, judgments, or bankruptcies on your public record can negatively impact your credit score. Address these issues promptly to maintain a clean record.

4. Monitor Your Credit Reports Regularly

Regularly reviewing your credit reports from major credit bureaus can help you spot errors or fraudulent activities early. If you find inaccuracies, dispute them immediately.

5. Establish Credit Accounts with Suppliers

Having multiple accounts in good standing can positively impact your credit score. Ensure you maintain a good relationship with your suppliers and make timely payments.

6. Increase Credit Limit

Requesting an increase in your credit limit (while maintaining or reducing your actual credit usage) can improve your credit utilization ratio.

7. Keep Old Credit Accounts Open

The length of your credit history impacts your score. Keep older accounts open, even if you don’t use them frequently, to maintain a longer credit history.

 

Frequently Asked Questions

  • Q1: What factors influence my business credit score?
    • A1: Your business credit score is influenced by several factors including payment history, credit utilization rate, length of credit history, types of credit, and any public records such as bankruptcies or liens.
  • Q2: How can I establish a business credit history if my business is new?
    • A2: New businesses can establish credit by opening a business credit card, securing small trade lines with suppliers, and ensuring these creditors report to the major business credit bureaus.
  • Q3: Is it possible to separate my personal and business credit scores?
    • A3: Yes, it’s possible and advisable. You can separate your personal and business credit by establishing your business as a separate legal entity and applying for business credit under the business’s name.
  • Q4: How frequently should I monitor my business credit score?
    • A4: Ideally, you should monitor your business credit score at least quarterly. This frequency allows you to stay informed about your credit status and address any issues promptly.
  • Q5: Can errors on my business credit report be disputed?
    • A5: Yes, if you find inaccuracies or errors on your business credit report, you can dispute them with the credit bureau. It’s important to provide supporting documentation to facilitate the correction process.
  • Q6: Does paying off loans early improve my business credit score?
    • A6: Paying off loans early can positively impact your credit score by reducing your credit utilization and demonstrating financial responsibility. However, it’s also important to consider how this might affect your cash flow.

 

Statistics on Business Credit Scores

Here’s a summary of key statistics relevant to business credit scores:

Awareness and Knowledge
  • Business owners unaware of their credit score: 45%​​.
  • Business owners unaware of how to find their credit score information: 72%​​.
  • Business owners unaware of how to interpret their credit score: 82%​​.
  • Owners understanding their score more likely to be approved for bank loans: 41% more likely​​.
Credit Status and Usage
  • Small business owners as credit ‘ghosts’: 39%​​.
  • Small firms using financing in the last year: 73%​​.
  • Small business owners with a personal credit card: 73%​​.
  • Personal credit card used for business funding: 61%​​.
  • Business owners without business credit believing a card would positively impact their business: 90%​​.
  • Small business owners wanting to improve their credit: 88%​​.
Financing and Credit Applications
  • Nonemployer firms applying for financing in the previous year: 32%​​.
  • Approval rate for some type of financing: 59%​​.
  • Smaller firms’ approval rate: 52%​​.
  • Nonemployer firms not approved for the financing they sought: 41%​​.
  • Reasons for financing denial: Low credit scores, lack of collateral​​.
Startup Capital Sources (2012)
  • Personal savings: 57%​​.
  • Personal credit card: 8%​​.
  • Bank loan: 8%​​.
  • Other personal assets: 6%​​.
  • Home equity: 3%​​.
  • Business credit card: 2%​​.
Differences by Race
  • Black small business owners lacking both personal and business credit cards: 31%​​.
  • White small business owners lacking both types of cards: 12%​​.
  • Higher rate of denial for credit cards for Black owners: Significantly higher​​.

Conclusion

Improving your business credit score is a gradual process that requires consistent effort. By following these strategies, you can enhance your score, which can lead to better financial opportunities for your business.

At New Bridge Merchant Capital, we understand the importance of a strong business credit score. We offer a variety of financial solutions tailored to the needs of different industries. Whether you’re looking for a Small Business Loan, Merchant Cash Advance, or other financial products, our team is here to help. With an easy and fast application process, we make accessing the financial support your business needs straightforward and hassle-free.

Comparing Different Types of Small Business Loans

Table: Comparison of Different Types of Small Business Loans Loan Type Description Pros Cons Term Loans A lump sum borrowed and repaid over a fixed period with interest. Predictable payments, various term lengths. Fixed repayment schedule, interest costs. Lines of Credit A revolving credit limit to borrow as needed. Flexibility, only pay interest on borrowed amount. Variable interest rates, potential for overspending. Merchant Cash Advances Advance based on daily sales, repaid as a percentage of sales. Quick access to cash, flexible repayments. Can be expensive, daily repayments. Comparing Different Types of Small Business Loans

Have you ever been in a position where you need some financial assistance to push your business forward, but you’re not sure which loan to go for? Well, you’re not alone. Today, we’ll dive deep into comparing different types of small business loans to help you make an informed choice. Let’s break it down, step by step, so you can get the best for your business!

Key Takeaways:

  1. Understanding Your Options:
    • Small business owners have various loan options, including term loans, lines of credit, merchant cash advances, and equipment financing. Each has its unique features and benefits.
  2. Repayment Terms:
    • Assess the repayment terms carefully. Some loans offer flexibility, while others have fixed repayment schedules. Ensure the terms align with your business’s cash flow.
  3. Interest Rates:
    • Interest rates are a significant factor in the total cost of the loan. Evaluate the rates and consider how they fit into your business’s financial plan.
  4. Loan Amounts:
    • Determine the exact amount you need to avoid over-borrowing or under-borrowing. Consider your business’s specific needs and financial projections.
  5. Expert Guidance:
  6. Contact for Assistance:
    • Reach out to New Bridge Merchant Capital at 844-228-0593 for personalized advice and guidance on choosing the right small business loan tailored to your specific needs and financial standing.

Introduction to Small Business Loans

Just like a car needs fuel to move, businesses sometimes need a financial boost to grow, invest in new ventures, or manage cash flow. This ‘boost’ often comes in the form of small business loans.

Why Choose New Bridge Merchant Capital?

While there are numerous lenders out there, at New Bridge Merchant Capital, we’re committed to guiding you through the maze of options. Plus, our fresh digital platform, even though on a new domain, emphasizes premier SEO, ensuring you get up-to-date and easy-to-understand information.

Key Factors in Choosing a Business Loan

Before delving into the various types of small business loans available, it’s imperative to consider several key factors that will significantly impact your decision. Much like how you carefully evaluate a major life decision, choosing the right business loan involves weighing the following critical aspects:

Repayment Terms:

Think of repayment terms as the commitment you’re making to the lender, akin to a relationship. It’s essential to determine how long you’re willing and able to be committed to repaying the loan. Some loans require quick payback, which can put a strain on your cash flow, while others offer more extended repayment terms, allowing for more manageable monthly payments over time.

Interest Rates:

Interest rates are the ‘price’ you pay for borrowing money. In general, lower interest rates are preferred, as they translate to lower overall borrowing costs. However, it’s essential to understand that the interest rate you qualify for can depend on various factors, including the type of loan and your business’s financial health. Therefore, it’s crucial to consider how the interest rate aligns with your budget and business plan.

Loan Amounts:

Determining the precise amount you need to borrow is another critical factor. It’s tempting to borrow more than necessary, but doing so can lead to unnecessary debt burdens. Conversely, borrowing too little might not provide the financial boost your business requires. Carefully assess your business’s needs and financial projections to determine the optimal loan amount. Remember that responsible borrowing is key to long-term financial health.

Types of Small Business Loans

Now that we’ve established the fundamental factors to consider, let’s explore the various types of small business loans available:

Term Loans:

Term loans are akin to your traditional loans. When you opt for a term loan, you borrow a lump sum of money and agree to repay it over a predefined period, typically with interest. It’s comparable to buying a durable asset like a jacket – you pay for it once and enjoy its benefits over time. Term loans are suitable for various business needs, such as expansion, inventory purchase, or refinancing existing debt.

Lines of Credit:

A line of credit acts as a financial safety net for your business. With a predetermined credit limit, you can borrow funds as needed. The advantage here is that you only pay interest on the amount you borrow. It’s like having a financial cushion that allows you to address unexpected expenses or capitalize on opportunities without committing to a fixed loan amount.

Merchant Cash Advances:

For businesses with consistent daily sales, merchant cash advances provide a unique financing option. Here, you receive an advance based on your daily credit card sales, and repayments are automatically deducted as a percentage of your daily sales. Think of it as a mutually beneficial partnership where both you and the lender benefit from your daily revenue.

Equipment Financing:

If your business requires specific equipment or assets to operate or expand, equipment financing can be a tailored solution. This type of loan is designed for purchasing equipment, and the equipment itself often serves as collateral. It’s like taking out a loan specifically to acquire the tools you need, whether it’s machinery for manufacturing or kitchen appliances for a restaurant.

Making the Right Choice for Your Business

In conclusion, every business is unique, much like selecting a pair of shoes – what fits one may not be suitable for another. To make the best choice among these small business loan options, it’s imperative to thoroughly understand your business’s needs, evaluate your current financial standing, and carefully weigh these factors against the types of loans available.

Remember that making an informed decision is paramount to ensuring that the loan you choose aligns with your business goals and doesn’t strain your financial resources.

Comparison of Different Types of Small Business Loans

Loan TypeDescriptionProsCons
Term LoansA lump sum borrowed and repaid over a fixed period with interest.Predictable payments, various term lengths.Fixed repayment schedule, interest costs.
Lines of CreditA revolving credit limit to borrow as needed.Flexibility, only pay interest on borrowed amount.Variable interest rates, potential for overspending.
Merchant Cash AdvancesAdvance based on daily sales, repaid as a percentage of sales.Quick access to cash, flexible repayments.Can be expensive, daily repayments.
Equipment FinancingLoans specifically for purchasing business equipment.Equipment as collateral, potential tax benefits.Limited to equipment purchases, collateral required.

 

Conclusion

In the vast landscape of small business loans, making the right choice can be challenging, but it’s not insurmountable. The key to success lies in understanding your business’s unique requirements and seeking guidance from trusted sources like New Bridge Merchant Capital. With the right information and expert advice, you’ll be well-equipped to make the best choice and drive your business forward with confidence.

Frequently Asked Questions

Term loans are quite popular due to their straightforward nature. They offer a lump sum of money with a fixed repayment schedule, making them a reliable choice for many businesses.

Determining the right loan for your business involves assessing your specific needs, understanding your financial health, and seeking guidance from experts like New Bridge Merchant Capital. They can provide personalized advice based on your unique circumstances.

Yes, it's possible to have multiple types of loans, depending on your business's financial standing and requirements. However, managing multiple loans requires careful financial planning to ensure you can meet your repayment obligations.

No, in addition to interest rates, there may be other fees associated with a loan, such as origination fees, service charges, or late payment penalties. It's crucial to review the loan terms carefully to understand the complete cost structure.

You can easily reach out to New Bridge Merchant Capital for expert advice by calling 844-228-0593. Their team of professionals is ready to assist you in making informed decisions regarding your business financing needs.

Key Industry Statistics About Merchant Cash Advances

Key Industry Statistics About Merchant Cash Advances

Merchant cash advances (MCAs) are quick funding solutions small business owners can obtain based almost exclusively on their credit card sales. Once approved, the lender will deposit the advance into your business checking account in one lump sum. In turn, the cash advance provider will receive a percentage of future credit card sales until you fully amortize the loan.

This raises some questions, which is why this article examines the latest industry trends and statistics surrounding cash advances to offer valuable insight into the current business borrowing landscape. Toward the end, we will also explore a few popular alternatives to merchant cash advances to give you a better sense of the wider range of alternative financing options.

 

The Latest MCA Market Trends

 

The Latest MCA Market Trends

Merchant cash advances have experienced significant growth in recent years, with the market estimated to be $19 billion in 2021. This figure marks a substantial increase from $8 billion just five years ago. The considerable uptick in MCA loan origination underscores the growing popularity of this financing option among small businesses, and many analysts expect this segment to only continue expanding.

According to a study conducted by the Federal Reserve, the approval rate for merchant cash advances in 2020 was an unprecedented 84 percent. This statistic further evidences merchant cash advances as one of the most favorable lending options for small businesses, with approval rates closely rivaling those of equipment loans. In contrast, traditional business loans have a much lower approval rate at only 57 percent.

Interest rates for merchant cash advances have been consistently decreasing, as well. MCA rates are finally starting to compete against the more conventional lending solutions. However, the actual interest rate you’ll receive depends on several factors, including your sales, credit history, length of operation, and location. In addition, rates and fees can vary considerably from lender to lender, so researching and selecting the right MCA provider are essential.

Thanks to increased industry regulations, New Jersey small businesses are better protected against predatory practices that once stigmatized MCA loans. Nonetheless, even with the added oversight, exploring all your financing options before accepting a merchant cash advance offer remains important.

Despite the regulations, bad-faith actors can still find ways to target and exploit unsuspecting business owners. Nevertheless, after practicing due diligence during the lender selection process and comparing multiple offers, there’s no reason why you can’t benefit from a merchant cash advance in NJ.

One of the key advantages of MCAs is the streamlined application process that can facilitated in person or online. Depending on your business’s financial health, in many cases, you can expect to have funds deposited into your business bank account in as little as 24 hours after applying.

Of course, this processing time starkly contrasts the often time-consuming and complex application process associated with traditional bank loans. This speed and simplicity can provide small businesses with the immediate funding they need to seize opportunities or address urgent financial needs.

Perhaps the most attractive feature of merchant cash advances is that they do not require businesses to sell their equity in exchange for funding. Instead, the lender will collect a specified portion of your credit card sales until you fully repay the debt. This arrangement allows you to maintain full ownership and control over your operations while still benefiting from the capital injection you need.

Merchant cash advances have undoubtedly become a popular financing option for small businesses in recent years, with a significant increase in market size and a high approval rate. The declining interest rates, coupled with improved regulations, provide companies with more favorable terms and enhanced protection against predatory lending practices.

The streamlined application process offered by alternative small business lenders ensures quick access to funds, and your company can secure financing without sacrificing equity or staking valuable assets as collateral. After conducting a thorough research assessment to find the right provider, there’s no reason why you shouldn’t encounter a favorable merchant cash advance agreement to help you meet your objectives.

Why Restaurants Should Consider Merchant Cash Advances as Working Capital Solutions

Popular Alternatives to MCAs

If you’re unsure if an MCA is right for your application, you’ll encounter several viable alternatives to merchant cash advances that could be better suited to your requirements. One such option is invoice financing. This type of funding involves selling your accounts receivable to a third party at a discount. Invoice financing can provide your business with immediate cash flow, allowing you to access funds that would otherwise be tied up in unpaid invoices.

If your business is in need of new equipment, equipment financing may be a viable solution. With this type of financing, lenders will provide you with a loan specifically for the purpose of purchasing new equipment. The equipment itself serves as collateral for the loan, making it an attractive option for businesses looking to upgrade their industrial machinery.

For established small businesses with a track record of decent and steady sales, a business line of credit could be a good fit. This type of financing provides you with a revolving line of credit that you can draw from as needed. It can be a flexible solution for managing cash flow and meeting short-term funding needs.

In addition to these options, it is also worth exploring other small business lending options like government grants and SBA loans. The Small Business Administration, or SBA, is a valuable resource for finding information on these programs, but loan processing times can be lengthy.

Key Industry Statistics About Merchant Cash Advances

 

Metric
Statistic
Year
– Notes
Market Size
 $19 Billion 2021 – Up from $8 Billion in 2016
Approval Rate
 84% 2020 – Federal Reserve Study
Average Interest Rate
 Varies 2021 – Depends on multiple factors
Traditional Business Loan Approval Rate
 57% 2020 – For comparison
Time to Funding
 As little as 24 hours 2021 – Streamlined application process
Regulatory Oversight
 Improved 2021 – New Jersey regulations protect against predatory practices

 

Getting Approved for a Merchant Cash Advance in New Jersey

In light of these recent trends, it is crucial for businesses to explore all their lending options and find the solution that best meets their needs. New Bridge Merchant Capital is committed to providing personalized lending solutions to businesses of all sizes across virtually every industry.

Whether you are a small startup looking for funding to grow your business or an established company that needs to supplement its cash flow, New Bridge Merchant Capital has the expertise and resources to help your business thrive.

Reach out to one of our experienced business lending consultants today to discuss your requirements and explore all your available borrowing options. You can also conveniently apply online to start the loan process now or give us a call at 844-228-0593. Don’t miss this opportunity to jump-start your business with the extra working capital it needs to succeed.

How Do You Know if a Merchant Cash Advance Is Right for Your Business?

Merchant cash advances (MCAs) can provide immediate capital to small businesses facing cash-flow shortages or time-sensitive short-term expenses. While the approval process for this financing option is relatively hassle-free, MCAs often come with a higher annual percentage rate (APR) than other more conventional working capital solutions. For this reason, business owners considering a merchant cash advance in New Jersey should compare all their financing options and carefully evaluate whether it is the right solution for their organization.

To avoid a potentially burdensome cycle of debt, we advise that customers thoroughly explore every alternative small-business loan option before settling on a merchant cash advance in NJ. To help you make an informed decision about which small business funding option is most suitable for your company, this article takes a comprehensive look at the mechanics of merchant cash advances, their operational dynamics, and key considerations to bear in mind when selecting this financing method.

What Is a Merchant Cash Advance?

A merchant cash advance is a popular financing solution provided by an alternative lender, which is to say, it differs from a conventional bank loan. In an MCA arrangement, the prospective provider examines your credit card sales receipts to determine the amount you need and can feasibly repay.

Once you enter into a contract with an MCA lender, the agreement will specify the disbursement amount along with the applicable interest rates. It is worth noting that interest rates can vary substantially between the different MCA providers in New Jersey, so paying attention to borrowing costs in any MCA loan offer is essential.

Your business’s location also plays a significant role in determining the final amount you will have to pay back. This is because certain states impose regulations that restrict the maximum interest rates MCA lenders can charge. As such, try to familiarize yourself with the specific laws and regulations regarding MCA interest rates in your respective state before entering into a final agreement.

Since interest rates often vary drastically between lenders, you should carefully review and compare offers to ensure you find the best available terms. The MCA repayment structure, which deducts a percentage of your daily credit card sales, means that meeting all your existing obligations during slower periods could be a challenge. So, before opting for this type of financing, thoroughly analyze the potential impact on cash flow and consider how the loan aligns with your overall growth strategy.

The SMB Merchant Cash Advance Guide

The MCA Lender Buying Process Explained

Before working with any of the various merchant cash advance companies in New Jersey, you should first understand the lender buying process. When you enter into an agreement with an MCA creditor, the provider is effectively purchasing your future sales transactions. This unique approach to lending allows businesses to access the funds they need quickly and without having to jump through all the hoops of taking a conventional loan.

Unlike traditional bank loans, MCA creditors focus almost exclusively on your sales as a determining factor for eligibility. The lender carefully assesses your credit card transaction history to determine whether or not you qualify for their services. This means that even with a less-than-perfect credit score, you may still find yourself eligible for an MCA. By placing emphasis on your sales, MCA lenders give low-asset-and-credit businesses the opportunity to access the funding they need to grow, regardless of previous financial setbacks.

Among the key advantages of opting for an MCA is the ability to swiftly secure a much-needed cash infusion. Consider this scenario: you own a thriving restaurant, but unexpectedly, water damage occurs. You start scrambling for funds to address the issue because your cash reserves are limited. MCA lending could be the solution you need in this situation. By leveraging your future sales, an MCA enables you to raise the necessary funding swiftly to cover your unexpected repair costs.

Merchant Cash Advances Explained

Merchant Cash Advances Explained

When considering a merchant cash advance (MCA) for your business, understanding that this financing type is not simply a money grab with no obligations or strings attached is crucial. While the approval process for an MCA is not as rigorous as that of a traditional loan, there are still contractual stipulations to be aware of.

Another vital aspect to consider is the advance amount. This is the agreed-upon sum lenders supply as the merchant cash advance. Carefully assessing your business needs and requesting the exact amount required is crucial. Seeking more funds than you need will only result in a higher repayment amount that you might not be able to afford during slower times.

Advance amounts can vary considerably, too. They can be either less than, equal to, or greater than your monthly sales. The deciding factor should be the amount necessary to support the growth and success of your business, as well as your comfort level in repaying your daily earnings back to the creditor.

The repayment figure in the MCA contract will be higher than the advance amount. In addition to the upfront money provided, an MCA lender charges what’s known as a factor fee. The factor is an additional cost on top of the advance. Understanding the factor amount is vital because this sum can be significantly higher than the interest rate on other business funding options you might qualify for.

With that, the importance of fully comprehending your MCA’s cost breakdown before committing to an agreement should never be underestimated. Review the proposed contract with a fine-toothed comb so you understand all the terms and conditions associated with your MCA. Familiarize yourself with the repayment schedule, potential penalties or fees for early repayment, and any other provisions outlined in the agreement. Seek legal or professional financial advice if you’re struggling to grasp all the implications and obligations of the contract.

Regardless of their known shortcomings, however, merchant cash advances are among the most valuable financing options for small businesses requiring quick access to capital without the lengthy approval process of a traditional bank loan. MCA loans for bad credit borrowers can be an effective way to re-establish themselves in the business lending ecosystem. Just remember to carefully assess your requirements, thoroughly review all contract terms, and evaluate your cash flows before deciding if an MCA is a suitable solution for supporting your long-term growth and success.

How Much Do Merchant Cash Advances Cost?

The costs associated with a merchant cash advance vary depending on several factors. How much you’ll ultimately pay depends on the MCA provider, the agreed-upon terms and conditions, and the state in which your business operates. Moreover, selecting the right MCA provider is crucial for establishing total borrowing costs. Taking the extra time to identify a reputable and cost-effective MCA provider can go a long way in reducing your overall costs to secure the funds.

The terms and conditions agreed upon between the business and the MCA provider will also influence the overall cost of the advance. These terms typically include the total loan amount, repayment period, and factor rate or holdback percentage. The factor rate is the multiplier applied to the advance amount, determining the total repayment amount. The holdback percentage is the portion of your daily sales deducted for repayment. Carefully reviewing and clarifying these terms with the MCA provider will safeguard you from paying unnecessarily high fees or interest.

Finally, as mentioned, the state in which your business operates can affect the cost of MCAs. The different regulatory bodies have their own restrictions that impact the fees and interest rates charged by MCA providers. Some states have stricter regulations that ban specific practices, while others have looser guidelines that often result in higher costs.

The Pros and Cons of MCAs

Small businesses with challenged credit that fast cash tend to benefit the most from merchant cash advance solutions. While the appeal of quickly acquiring the funds necessary for business projects or improvements can be significant, you’ll need to consider the pros and cons before signing the dotted line.

One of the most significant advantages of MCAs is the speed at which you can obtain the funds. Small businesses with urgent financial needs can benefit greatly from the fast turnaround time. Whether it’s for expanding your operations, purchasing inventory, or launching a marketing campaign, MCAs provide quick access to necessary working capital. This is particularly beneficial in situations where time is of the essence, and there’s not enough leeway to complete a traditional loan application.

Another advantage is that MCAs don’t require collateral as security for the loan. This is a relief for small businesses with limited assets. Furthermore, while a lender may still review the business owner’s credit score, MCAs are generally more forgiving to companies with delinquent payment histories. Therefore, small business owners who may have difficulty securing traditional financing options can still access the funds they need through MCAs.

Another advantage of MCAs is the flexibility they offer in terms of repayment. Unlike traditional loans with fixed monthly installments, MCAs typically allow for daily holdbacks based on a percentage of the business’s future debit and credit card sales. This means that during periods of slow sales, the repayment amount adjusts accordingly. This flexibility is a significant advantage, especially for businesses experiencing seasonal fluctuations in revenue.

On the downside, the potential impact on monthly revenue during extreme periods of low sales can be significant. Repayment costs may put you in the red, concerning your operating funds, especially after an unexpected financial shortfall. Give careful consideration as to whether the additional expense of repayment outweighs the benefits of obtaining quick cash.

Another potential drawback is the lack of regulation for MCAs. The lack of regulatory oversight can lead to higher factor rates compared to the interest rates associated with other bank loan types. This can potentially create financial difficulties for small businesses in the future, assuming the repayment amount becomes more than they can afford. Additionally, MCAs typically have shorter payback periods compared to traditional loans. The shorter terms can add pressure to business owners who may be dealing with limited cash flow.

Which Types of Businesses Benefit from Merchant Cash Advances the Most?

Topic

Description

What Is an MCA?
A financing solution provided by alternative lenders. It’s based on your credit card sales receipts.
Approval Process
Relatively quick and hassle-free compared to traditional loans.
Interest Rates
Often higher than traditional loans. Vary between MCA providers.
Repayment Structure
Deducts a percentage of your daily credit card sales.
Regulations
Vary by state; some states have caps on interest rates.
Eligibility
Focuses on sales history rather than credit score.
Advantages
Quick access to capital, no need for collateral, flexible repayment.
Disadvantages
High interest rates, potential impact on cash flow, lack of regulation.
Suitable For
Small businesses needing quick capital and those with less-than-perfect credit.
Not Suitable For
Businesses that have shut down operations due to a major disaster.
Alternative Financing Options
Traditional bank loans, SBA loans, business revolving line of credit, equipment financing, inventory financing.

 

Key Considerations
  • Cost: Understand the factor rate and holdback percentage.
  • Terms: Review the contract thoroughly.
  • State Regulations: Be aware of state-specific laws affecting MCAs.
  • Repayment: Consider the impact on cash flow, especially during slow periods.

Which Types of Businesses Benefit from Merchant Cash Advances the Most?

Merchant cash advances tend to benefit small businesses that require additional funding to enhance their competitiveness and overall functionality. While traditional bank loans may not always be accessible to all small businesses for various reasons, merchant cash advances offer a flexible and accessible alternative. Whether it’s investing in upgrading technology, expanding marketing efforts, or renovating the physical space, a merchant cash advance can provide the fast capital necessary to execute your strategic growth initiatives.

However, it is worth noting that merchant cash advances may not be ideal for businesses that have experienced a major disaster leading to a complete operational shutdown. In such cases, seeking assistance through traditional bank loans or grants would be more suitable, as these options do not typically require your company to continue its daily transactions to pay down the loan.

While merchant cash advances are often an invaluable financing option for many, it is always wise to explore other alternatives. For businesses seeking other means of financing, the lending consultants at New Bridge Merchant Capital can provide a comprehensive overview of all available options. We can help you compare the various financing solutions and select the one that best aligns with your specific goals and unique requirements.

Businesses That Benefit from Merchant Cash Advances

  • Agricultural Businesses
  • Automotive Repair Shops
  • Beauty and Personal Care Salons
  • Construction Companies
  • E-commerce Businesses
  • Event Planners and Catering Services
  • Franchise Owners: Freelancers and Independent Contractors
  • Healthcare Providers
  • Restaurants and Bars
  • Retail Businesses
  • Seasonal Businesses
  • Start-ups and Small Businesses
  • Tourism and Hospitality Businesses
  • Transportation and Logistics Companies
  • Wholesalers and Distributors
The Latest MCA Market Trends
Equipment Financing
How to Get Working Capital For Your Business When You Need It
How to Use a Restaurant Business Loan to Finance Your Expansion
Business Revolving Line of Credit vs Term Loans
SBA Loans New Jersey
Why Restaurants Should Consider Merchant Cash Advances as Working Capital Solutions
Common Funding Options for Small Business Loans in NJ With No Money
How Inventory Financing Works

Need More Information on Merchant Cash Advances in NJ?

Deciding if a merchant cash advance is the right funding solution for your business requires careful consideration of each factor discussed above. After assessing your cash flow needs, revenue projections, and repayment capabilities, you should be able to determine if the benefits outweigh the costs. Comparing the convenience and flexibility of a merchant cash advance against the higher fees and potential impact on your cash flow is vital.

If you are still unsure as to whether a merchant cash advance is a suitable option for your business, connect with an experienced loan consultant at New Bridge Merchant Capital today. Our seasoned finance professionals can provide additional advice tailored to your specific business needs and help you make the right lending decision. For more information on pricing, apply online or contact New Bridge Merchant Capital now at 844-228-0593.

Secondary Business Financing: The Risks, Alternatives, and How to Make an Informed Decision

Should You Take Out a Second Business Loan?

Should You Take Out a Second Business Loan?

Making an informed decision about your second business loan will undeniably have a long-lasting impact on the growth and success of your company. Second business loan origination, also known as loan stacking or piggyback loans, describes the process of taking out secondary secured or unsecured business financing in addition to the loan product you currently have.

While most savvy business owners are aware of the potential risks of opening multiple loan accounts, it is still worth reiterating which secondary loan products could be beneficial. Discussing other viable alternatives to opening another loan is valuable, as well. The following information will help you make the best choice when it comes to evaluating how to support the financial health and profitability of your business.

In this article, we will discuss the risks associated with second business loans, potential alternatives to taking out another loan when you have an existing one, and how to make an educated decision on whether secondary business financing is right for your business.

What are second business loans?

Second loans are relatively common among business owners seeking to expand, restructure, or take advantage of new business opportunities. Opening a new loan account on top of the one you already have can provide the necessary working capital for entrepreneurs facing financial shortfalls, cash flow challenges, and time-sensitive opportunities.

Several secondary business lending products can supply the extra boost your organization needs to realize its growth potential. However, since it carries various risks that could damage a company’s fiscal health, whenever you take on additional business debt, this decision should never be taken lightly.

Opening another loan account demands careful consideration because it could disrupt your financial stability if you make the wrong choice. It’s not uncommon for businesses that feel like they need additional funding to land themselves in the wrong financial product that strains their ability to repay their existing loans while keeping up with another payment schedule and interest rate.

Moreover, failure to repay this new loan could lead to significant financial losses, due to the added expenses, potential late penalties, and loan origination fees. Remember, your second loan’s pricing is premised upon your credit rating and the overall financial health of your business, making the loan more costly if you overextend your debt or haven’t been keeping up with your existing payments.

Before making any decision to take out a second business loan, entrepreneurs should also assess the various alternatives. You should first consider whether or not can safely utilize existing capital, available credit lines, or your other loan accounts, since this option could prove less expensive in the long run. One such viable alternative may include applying for governmental programs or restructuring your current loans in a refinance to improve the terms.

Regardless of whether you decide to take out a loan or an alternative, exercising caution is crucial. Before making the decision, ensure that you understand the repayment terms, interest rates, length of term, and total costs of the loan. Thoroughly researching a prospective loan product and consulting a trusted business lending consultant is essential. Ensure that you understand the financial benefits of the loan before signing any agreement, and the terms should be tailored to your company’s specific needs and abilities to repay in full.

For entrepreneurs to make an informed decision on whether a second business loan is the right option, they should assess their overall situation and available alternatives. Familiarizing yourself with the tangible risks a second loan could pose to their business is equally important.

When you thoroughly research all terms and conditions and understand the repayment structure and potential hidden costs associated with the loan, you’ll be in a much better position to benefit from a second loan product. This approach ultimately helps you make the most informed decision possible on whether taking out a second business loan is the best path for your organization.

Can I get a second loan?

Can I get a second loan?

When your business needs fast capital, and you already have an existing loan your only option may be to apply for secondary business financing. Of course, this is not always the most financially wise decision, so considering the consequences before applying is vital. To get approved for a second loan, you must qualify by evidencing a solid financial history and meeting certain criteria.

When considering a second loan, the first step is to review credit reports from all three of the major credit bureaus: Experian, Equifax, and TransUnion for personal credit scores and the Dun & Bradstreet PAYDEX score in the case of your business credit profile, if you have one. Since lenders base loan approval decisions upon personal and business credit scores, ensuring accurate reporting information is crucial. Any discrepancies in your report should be addressed before submitting a new application.

You should also carefully analyze the type of loan for which you’re applying. In most cases, you’ll have the option of choosing between secured and unsecured loans. Unsecured loans are generally more difficult to qualify for and often come with steeper interest rates. Secured loans, on the other hand, require collateral, but you don’t always need perfect credit, and they typically come with more favorable pricing.

Borrowers should, likewise, be prepared to provide financial information to the lender, such as profit and loss statements, balance sheets, and tax returns. Creditors also require personal information, such as names, addresses, dates of birth, and Social Security numbers for all business owners. Lenders, depending on the circumstances often request additional information, such as a business plan and/or collateral.

Once your application process is complete and the lender has approved the loan request, the borrower will either receive the loan funds directly or through a third party. The repayment terms vary based on the loan amount and product type, so borrowers should ensure that they read and understand all of the relevant loan documentation before signing any agreement.

When deciding if a second business loan is a suitable next step, be sure to consider all of your options carefully. There are advantages and disadvantages to taking out a second business loan; but, with proper research and planning, businesses are all but assured to secure the necessary funds at a reasonable cost.

What are the risks associated with stacking small business loans?

When you cannot obtain adequate funding through traditional avenues, you might find stacking your business loans to finance your operations is always a viable option. And while it can be beneficial to certain businesses, be aware that there are a few potential risks and pitfalls to consider before signing onto a secondary business loan.

One such risk is having too much debt. Businesses that take on multiple loans, each with their own interest rates and repayment terms, can quickly find themselves in a financially precarious position. You want to ensure that the new debt burden won’t become unsustainable. Additionally, businesses should be mindful of their credit health, since multiple loan inquiries and new debt can negatively impact future borrowing capabilities.

Accumulating excessive debt may also lead to less-than-optimal cash flow performance. When you take out different loans from competing lenders, you will find yourself dealing with multiple loan payments with varying due dates. While this is often overlooked, having more than one due date can throw your cash flow out of whack, potentially making it difficult to cover your operating expenses.

Another risk small business owners should be aware of is what might happen in the event of a loan default. When you open more than one loan, this increases the likelihood of falling behind on at least one account. Defaulting on any business loan can have devastating consequences, including a call for full repayment, loss of collateral, legal action, and damage to their credit score. This is why a proper risk assessment before taking any secondary business financing is essential.

Finally, be aware that servicing multiple business loans can lengthen the amount of time you stay in debt. Carrying multiple loan obligations to different lenders with varying terms usually reduces the business’ ability to quickly pay off its debts. If you are extending repayment terms, this decision should be analyzed carefully before committing to a second business or third loan account.

Stacking your business loans offers you the opportunity to access the funds you need, but, as a business owner, you should carefully examine the potential risks associated with this approach. Look at the new debt burden, cash flow demands, potential for default, and the total repayment timeline before deciding if a second business loan is a suitable fit for your organization.

How many business loans can you have at once?

How many business loans can you have at once?

How many business loans can you get? The answer is that it depends. The number of business loans you can hold at one time depends on several factors. The main considerations include your credit score, the amount of capital you have available to invest in the venture, the size of the loan, and the industry you are in. Many lenders will not offer more than one loan to a single borrower. This is due to the increased risk for the lender and the potential for default.

The business lending industry follows generally accepted guidelines for piggyback loans, which are multiple loans taken out on the same collateral within a specific timeframe. The Centers for Industry Research and Standards (CIRS) notes that piggyback loans should not exceed 75% of the collateral’s value. For example, if your collateral is a building worth $2,000,000, the maximum loan amount is $1,500,000. The remaining $500,000 may be used to secure additional financing from other lenders.

As a borrower, consider the total cost of all the loans when planning your business financing strategy. Secondary loans can be a great way to make use of the value of existing assets, but they can also be costly in terms of interest payments. Remember to research and calculate the total cost before taking out multiple loans.

The lending industry follows specific criteria for secondary loan limits. Generally speaking, lenders will not allow a single borrower to have more than three loans at one time. Depending on the amount of the loans, your FICO and DUNS scores, and the creditworthiness of your industry, taking out three loans or more is entirely possible.

Whichever the case, we advise that you consult with an experienced business lending advisor before taking out multiple loans. Since there are numerous factors to consider, a seasoned loan consultant familiar with your industry can give you a better sense of the risks associated with taking out multiple loans and help you plan a reliable long-term growth strategy.

In addition to the loan limit, being aware of the regulations in your state and industry is critical. Some states have specific laws governing the number of loans a single borrower can have at any given time. Before taking out any new secondary financing, refer to your local regulatory guidelines to ensure compliance with all the necessary lending standards.

The most common types of second business loans

The need for additional business financing usually arises after business owners have already leveraged popular options such as conventional bank loans and credit cards. While these are often the go-to choices for business owners, there are several other loan types that shouldn’t be overlooked when you need additional funding. The four most common second business loan types are merchant cash advances, invoice factoring, equipment financing, and business lines of credit.

A merchant cash advance is one of the most common second loan types available and allows for a business to borrow a pre-determined amount of money in exchange for a percentage of future sales. Invoice factoring doesn’t just offer businesses an influx of immediate cash. It also allows the time that would normally be spent chasing down late payments to be focused on other more productive tasks.

Equipment financing options are beneficial when large purchases are necessary as they allow companies to buy now and pay later. Lastly, a business line of credit loan is an effective business finance tool since it lets a business borrow and lend as needed—up to a specified limit or amount.

Considering all of your available options for second business loans?

Connect with New Bridge Merchant Capital business lending consultant today to ensure you receive the best possible terms on your secondary financing. New Bridge Merchant Capital equips companies like yours with the expert advice and premium lending services you need to ensure you make the right decision before opening a second business loan account.

Apply online today, or contact us now at 844-228-0593 to learn more about pricing and our secondary business loan services.

Inventory-Secured Loans: How to Finance Your Inventory and Receive the Best Terms

Inventory-Secured Loans: How to Finance Your Inventory and Receive the Best Terms

Maintaining sufficient working capital is among the primary challenges small business owners face in today’s unpredictable economic clime. When your cash flow starts flagging, seemingly without notice, access to fast funding might appear daunting at first. But luckily, there are several sources of alternative business funding you may not have considered yet, one of which is inventory financing.

In this article, we’ll provide you with a comprehensive overview of inventory financing, its suitability to different business types and applications, its associated pros and cons, and best practices for applying for an inventory-secured loan. By the end, you’ll have sufficient knowledge to make an informed decision about whether or not inventory financing is right for you.

What is inventory financing?

What is inventory financing?

Inventory financing can be an excellent choice for business owners who need quick solutions for replenishing their stock. This loan product represents a type of short-term borrowing solution that gives businesses an opportunity to purchase inventory they can’t pay for upfront at an affordable rate.

The concept is fairly simple. Any inventory you purchase, as well as your existing stock, serves as collateral for the loan. Should your business default on the finance payments, the assets you staked can be collected by the lender to cover any potential losses.

The nice thing about inventory financing is that it’s customizable pursuant to your business needs. You can expect this financing type to come with several unique financial terms engineered to meet your specific requirements and strategic objectives.

The lending terms can vary, with payoff lengths from three months up to three years or more. Borrowers may opt for a set or variable annual percentage rate (APR). Depending on the lending institution, inventory financing term loans, for example, can start as low as $20,000 and go up to $1 million for qualified businesses. Some creditors may allow you to borrow up to 100 percent of your inventory’s value, as well.

Since inventory financing can be tailored to your specific needs, you’ll usually find ample flexibility when it comes to selecting your ideal loan terms. For business owners who need an adaptable financing solution, inventory financing often serves as a reliable long-term option.

This financing type is a great way to build your business through the acquisition of new inventory that you may not have the capital to cover. With the guidance of a business finance expert at New Bridge Merchant Capital, business owners will find identifying and securing an efficient and cost-effective inventory financing option that can be custom tailored to meet their unique business needs.

Which types of business benefit from inventory financing?

Inventory financing is, of course, by implication, best suited to businesses that sell tangible products. It helps ensure your shelves are well-stocked, even in the face of an unexpected financial shortfall.

Inventory financing lenders help companies like yours maintain healthy cash flow while they increase their stock levels. While inventory financing is primarily orientated toward retail stores, wholesalers, and specialty shops, it also offers seasonal businesses a reliable means of boosting their cash flows.

This financing type works by allowing companies to use the value of their inventory as collateral for the proposed funding. The funding structure is generally flexible, and certain lenders may focus on specific types of businesses.

To qualify you for inventory financing, lenders typically assess your financial track record rather than the items you aim to sell. The traditional approval process could make inventory financing less suitable for startups buying inventory for the first time or those with no prior sales.

The possibility of attain an inventory financing loan when you’re first starting out is, by no means, excluded, however, when you consider alternative lending sources. Regardless of who you choose to finance your inventory, this method of borrowing can help you build your business credit and generate short-term working capital to leverage long-term growth.

When should you consider inventory financing?

When should you consider inventory financing?

Any established business that needs to stay well-stocked and increase its inventory levels should consider inventory financing. It’s suitable for several business types, including retailers, wholesalers, and specialty stores. It may also be an effective solution for businesses that experience seasonal fluctuations in demand and need to cover their expenses during the off-season.

Inventory financing lenders assess your business’s financial track record rather than the individual goods you stock. As mentioned, this can make the option less suitable if you’re just starting out.

However, before discounting this option entirely, it’s worth consulting with a reputable business lender to see if you can still qualify for inventory financings or other alternative funding solutions, such as a business credit card, merchant capital advance, or secured term loan.

Inventory financing is a dependable way to sustain a healthy cash flow while expanding your inventory levels to increase sales. But remember to never underestimate the importance of working with credible inventory financing lenders that understand your industry and can provide the right terms to meet your specific requirements. You should also weigh your inventory financing options carefully against other alternative financing solutions to ensure there isn’t a better loan product for your application.

The different types of inventory financing

Many small businesses rely on short-term funding to restock their shelves and pay for supplies upfront, which is why inventory financing has proven vital for managing a stable and profitable business. There are essentially two traditional inventory financing options: loans secured by inventory, or inventory equity loans, and term loans. Both have advantages and disadvantages, and the effectiveness of the financing depends on the season and fiscal health of your company.

For example, inventory financing has grown popular because it allows business owners to use their inventory as collateral to secure a loan from lenders. This type of loan also allows lower credit scores when compared to other loan options, making it among the more accessible short-term financing solutions for low-credit or no-credit business owners. These loans tend to carry a higher interest rate, however, which is why you should explore all your options before committing to any one product.

Unsecured term loans, on the other hand, do not require you to stake personal or business collateral. This loan type usually benefits customers with higher credit scores who are in a good position to take advantage of the lowest borrowing costs. With that mentioned, since the loans are unsecured, they traditionally have stiffer credit requirements than secured loans and, in some cases, higher interest rates.

Alternatives to inventory financing include merchant cash advances, lines of credit, and accounts receivable financing, which many often misconstrued as inventory financing. These alternatives can be more expensive than traditional inventory financing solutions. Nonetheless, they typically entail a streamlined application process for unconventional borrowers who need fast access to working capital.

Knowing the advantages and disadvantages of inventory-secured financing will help you decide on which option best suits your needs. Whether it’s traditional inventory financing or an alternative solution, business owners should take the time to consider every available loan product to ensure the best results.

Loans secured by inventory advantages and disadvantages

While traditional inventory financing is a popular option for many small business owners, the decision to pursue this type of financing must be carefully evaluated. It can provide capital for increased inventory purchases or prevent cash flow issues. It’s not entirely without its downsides, however.

Inventory lines of credit and inventory term loans are generally considered “traditional” inventory financing. Your inventory secures these loans, and the maximum dispersal amount depends on the value of the goods you’re staking as collateral.

In many cases, down payments of around 20 percent may be required before securing the financing. Borrowers must repay the loan in a timely manner, or the inventory is subject to repossession. Likewise, you may be required to use specific fulfillment centers in order to qualify for the loan.

When it comes to satisfying the obligation, you’ll make monthly installments, or the lender may collect a percentage of your sales. It’s also common for a fixed fee to be charged instead of interest, resulting in APRs (annual percentage rates) often surpassing 100 percent. Further alternatives to traditional inventory financing include alternative bank lines of credit, merchant cash advances, and secured and unsecured term loans.

Now that you have the gist of how conventional inventory financing works let’s take a look at a few different popular alternatives to traditional inventory financing:

Lines of credit

Lines of credit give you access to the funds required to replenish your inventory as needed. You can use your inventory as collateral. Or, if you qualify, apply for an unsecured line to cover your operating costs.

Lines of credit require a few more steps than inventory finance loans, however, because you’ll likely have to hand the payment over to the manufacturer yourself. This can make the option more labor-intensive than traditional inventory financing, one reason why some prefer the latter over the former.

Compared to inventory financing fees, the costs to open and maintain a line of credit are usually less expensive. Credit lines typically have an interest rate rather than a fixed fee. Nevertheless, credit lines from online lenders may have higher rates – with APRs reaching as high as 80 percent or more in some cases.

Term loans

A term loan provides a one-time lump sum to be repaid in intervals over a specified time, plus interest. A term loan is a suitable financing option for businesses that do not often require inventory financing or don’t routinely take advantage of it.

Like a line of credit, you can stake your inventory as collateral for the loan. Assuming you qualify, you might also pursue an unsecured term loan that requires no collateral and shifts more risk onto the lender than secured financing.

It’s worth noting that, while the term loan gives you access to funds for attaining additional stock, unlike inventory financing, you are still responsible for paying your suppliers directly, and it may take more time to obtain the inventory itself.

Merchant cash advances

Lenders provide merchant cash advances based on the average monthly sales for businesses that serve customers, such as retailers. Business owners will receive a percentage of their average monthly sales up front and pay it back with a portion of their daily sales plus a fixed fee.

One of the primary upsides to merchant cash advances is that creditors rarely require credit checks or business seasoning. Merchant cash advances are among the most expensive business financing types, however, accruing APRs regularly reaching 300 percent.

The daily payments can be inflexible, as well. Seasoned business owners should, therefore, consider all their lending options before committing to a merchant cash advance since the costs can be high.

How to secure inventory financing

How to secure inventory financing

Inventory financing is an essential and viable solution to attain working capital, but it’s equally important to remember you have access to several other effective funding solutions. Inventory loans, secured by inventory and accounts receivable, are suitable for businesses operating in competitive and cyclical markets where timely financing for inventory purchases is crucial.

This approach to borrowing can help you manage cash flow and stay ahead of your industry counterparts. While inventory financing has its benefits, there are a few disadvantages, like higher borrowing costs and a lack of flexibility with your repayment options. It’s, therefore, crucial that you weigh the pros and cons and explore all your options before securing any business financing.

The experienced lending consultants at New Bridge Merchant Capital can guide you through the process of evaluating whether inventory financing is right for you. We can help you assess a diverse range of small business financing products, including alternative bank lines of credit, merchant cash advances, and secured and unsecured term loans.

Our decades of exposure to the business lending space can put your organization on the path to success, while our financing solutions deliver creative, customized options to businesses across several industries.

Searching for the right loan to secure your business inventory needs?

If you have additional questions on how to finance inventory, dial 844-228-0593 to speak with a New Bridge Merchant Capital lending consultant or apply online now. We’ll guide you through our full suite of business lending solutions that can help you take the next step towards expanding your footprint and securing stable, long-term profits.

Why Restaurants Should Consider Merchant Cash Advances as Working Capital Solutions

Why Restaurants Should Consider Merchant Cash Advances as Working Capital Solutions

The restaurant industry is fiercely competitive and often unpredictable. With ever-changing customer demands and the need to stay ahead of the curve, it can be difficult for restaurants to find the financial flexibility required to make urgent changes. Leveraging merchant cash advances is one reliable way to gain fast access to the required capital that lets you make necessary adjustments to your approach.

Merchant cash advances (MCAs) offer an alternative to traditional small business loans, providing restaurants like yours with expedient working capital solutions. When you secure a lump sum of money, as in a cash advance, you can finance your operations without waiting months for your customers to pay their invoices.

New Jersey Merchant cash advances let restaurants make necessary improvements and upgrades, purchase new equipment, and hire additional staff to support their expanding operations. The repayment process is flexible and tailored to your business. The custom solution ensures that the merchant cash advance is manageable enough for your restaurant and you don’t take on too much debt.

In this article, we’ll cover why restaurant businesses like yours should consider a merchant cash advance as a dependable working capital solution.

What are merchant cash advances (MCAs)?

If you’re a restaurant owner exploring alternative financing options for your business, a merchant cash advance (MCA) is always an effective solution. A merchant cash advance is a type of financing that allows you to access capital quickly in exchange for a fixed percentage of your future credit card sales.

When you opt for a New Jersey merchant cash advance, you will receive a lump sum of cash upfront. This money can be used to reinvest in your business and cover unexpected financial shortfalls that are outside of your control. To repay the advance, you’ll pay back a pre-determined percentage of your future credit card sales. This repayment method is beneficial because it lets you make payments as your business grows. You won’t be tied to a steep fixed monthly payment.

In addition to this, a merchant cash advance requires no hard-asset collateral. For businesses that lack the necessary assets to secure a loan, MCAs are always a good option. The MCA approval process eliminates the need for lengthy paperwork or credit checks and is typically much faster than what you’ll experience at a traditional bank.

A popular alternative financing option for restaurants, MCAs come with a fast approval process, flexible repayment structure, and lack of collateral requirements, a merchant cash advance presents an effective means of accessing the capital you need to grow your business.

What are the pros and cons of unsecured small business financing?

What are the benefits of merchant cash advances for restaurants?

Merchant cash loans give restaurant businesses the ability to receive a lump sum of cash quickly and without waiting weeks or months for your loan to be approved. This is especially beneficial in times of economic uncertainty, when traditional lenders may not be willing to lend to smaller companies with limited holdings. Merchant cash loans are, furthermore, used for diverse applications, including facility upgrades, funding marketing and advertising campaigns, and covering real estate costs.

Unlike traditional bank loans, merchant cash loans do not depend on your borrower risk profile. Instead, lenders evaluate your creditworthiness based on your credit card receipts, meaning that companies with poor payment histories can find funding with a merchant cash advance.

MCA repayment terms are flexible, with the payments taken directly from the anticipated credit card sales. This is especially valuable for restaurant businesses because it means you can remit payments regularly as you make sales and keep your business cash flow positive.

The advances provide an invaluable financing solution for low-credit businesses. With quick access to funds, flexible repayment terms, and no need for perfect credit, merchant cash loans are a reliable solution for any company that needs to overcome an unexpected shortfall, quickly. If your restaurant needs a fast cash injection, consider a merchant cash loan from New Bridge Merchant Capital to help shore up your long-term financial success.

Merchant cash loans for low-credit restaurant owners

As a restaurant owner with a low credit score, it’s easy to feel like you’re perpetually stuck between a rock and a hard place. You realize you need additional funding to help your business succeed, but your challenged credit prevents you from accessing conventional loans that are notoriously difficult to qualify for. Fortunately, merchant cash advances offer a way of escaping this misfortunate quandary and can help you reestablish your personal and business credit profiles.

You can use merchant cash advances for quick access to working capital that allows you to modernize your kitchen and hire additional staff. Unlike traditional loans, merchant cash advances are not dependent on credit scores. Instead, lenders establish your limits based on the volume of credit card receipts your business collects. This financing option lets restaurant owners with low credit scores secure the financing necessary to keep their businesses afloat.

The advance payments factor themselves against a percentage of your credit card sales. This way, restaurant owners can repay the loan over time, while simultaneously improving their credit situation. The benefits of merchant capital advance loans certainly outweigh their drawbacks because they are an effective solution for low-credit restaurant owners who need to establish a business banking partnership.

Merchant cash advances offer more flexible repayment terms than traditional loans. This makes it easier for restaurant owners to manage their cash flow and pay back the advance on their own terms. Merchant cash advances give you the immediate financial support you need to let your restaurant thrive while, at the same time, they can help develop your business credit profile.

Explore your MCA lending options with New Bridge Merchant Capital

To sum it up, restaurant owners with low credit scores can benefit immensely from merchant cash advances because they give them fast access to working capital. MCAs can help establish or reestablish your business credit. Meanwhile, you’ll build a relationship with a trusted business banking partner and continue funding your restaurant operations.

To find out your eligibility for an MCA loan or restaurant line of credit, fill out our online application or dial New Bridge Merchant Capital at 844-228-0593 to connect with a business lending consultant now.