Every business – regardless of size and industry – at some point in its lifetime will require a cash infusion in order to keep going. Over the years, business owners have preferred other sources of funding over traditional bank loans that are currently too difficult to access for most businesses. These other sources of funding include crowd funding (on sites like Kickstarter), P2P lending, angel investors (AngelList) and venture capitalists.
Online lending is a relatively new sub-sector of this industry that has also grown into its own in the past decade. According to a report by California Office Of Business Oversight, thirteen of the largest online lending firms in the sector made $15.91 billion in U.S loans in the year 2014. This represented a whopping 700% increase over and above the figures for 2010.
These online lending companies offer both business and personal loans. One of the most accessed business loan types from these lenders is the Merchant Cash Advance. Many businesses and business owners choose for this option because of its numerous advantages.
At the end of 2015, one of the leading online lending companies in the UK, Merchant Money, launched an innovative product: Pay-As-You-Trade (PAYT). It is designed with its target market being businesses in the hospitality industry that accept card transactions.
So, if your business falls within the scope of this industry and you require funds to keep your business operational, this option may be your best bet.
This option actually works just like a merchant cash advance loan, only better. Getting approval for a business loan application typically takes a few days for most online lenders. While, this is a much faster response time than you will have to deal with when it comes to banks, the PAYT model approves (or declines) in under 24 hours, giving you more time to re-strategize or look for alternatives.
Speaking of decline rates, business owners will be glad to know that the PAYT facility has a 90% approval rating. The assessment process is dead simple and there are no hidden costs that will threaten to cripple your business in the future. Everything is clear upfront; what you see is what you get.
The application prerequisites for the PAYT advance are not as stringent as those required by banks and some other online lenders. For instance, the PAYT advance requires that you should have been in business for more than 6 months (most online lenders only consider businesses that are at least one year old). Furthermore, you only need to be making monthly card sales of over £3500 (most online lenders require minimum monthly card sales of £5000).
Merchant Money will advance cash to you up to 100% of your average monthly card turnover – this starts at £3500 and caps at £500,000, which is a pretty broad range if you ask me. Almost any business’ loan budget will fit perfectly into this bracket and you only need to pay back when your customers pay you.
The PAYT product does not employ a fixed amount monthly repayment plan. You will agree a small percentage of all future card transactions that will be automatically deducted from each transaction until the loan is completely paid off. What this means is that if your business has a rough month, the repayment for that month will be commensurably less. The PAYT product does not put any financial stress on you while you repay. If you make no sales for the month, there will be no repayment for that month.
In addition, there is no fixed duration for repayment and therefore no duration induced penalty; the length of your repayment term is determined by how your business is faring at any given time.
So how about the repayment percentage? Obviously, every loan has to be repaid with interest. The PAYT loan model attracts a transactional repayment percentage of 8% - 15% (most other lenders can demand a repayment of up to 20%). This translates to a factor rate of 1.15 to 1.25. The factor rate is a decimal formula to calculate the amount that you are required to pay back. For instance, a loan of £10000 at a factor rate of 1.2 means that you will have to repay £12000. Factor rates of most lenders typically read from 1.1 to 1.5, with quite a good number of them tending towards the high end. However, Merchant Money’s modest factor rates on PAYT products means that you will be done with your repayment faster and with considerably lower stress on your business financials.