Alternative Lending and Merchant Advances
If you require quick access to capital, you may want to consider a short-term business loan and merchant cash advance. A short-term business loan and merchant cash advance are alternative sources of business funding for business owners who may lack the credit rating or collateral that is required to obtain a traditional commercial bank loan; or simply don’t have the time to go through the traditional business lending and underwriting process.
Unlike traditional commercial lending programs interest rates, which are expressed in percentages, merchant cash advances are charged “factor rates”. Factor rates are usually given in decimal figures. “Alternative Lenders” use factor rates that usually vary from 1.25 to 1.75. The rate you get depends on personal credit profile, the length of time you’ve been in business, your industry, the average of your monthly sales, and the stability of those sales. The cost of the factor rate is “front-loaded” and not “amortized”. This means the borrower agrees to pay the money back, plus a flat percentage of the amount borrowed. Unlike In compound interest, the interest earns interest over time, so the total amount paid snowballs.