Is The End Of The Merchant Cash Advance Here?
We’ve been at it for almost 7 years at Ventury Capital and in that time, we have watched the evolution of private lending and Government lending. Many out there have become familiar with the daily payment loan or Merchant Cash Advance. We may be nearing the end of the merchant cash advance.
Look, I’m not here to bash those lenders because there is a time and a place when it’s needed and we work with several very reputable institutions in that space.
But what happens when you’ve taken your first daily payment loan and you get in a crunch, next thing you know you’re taking a 2nd, 3rd, who knows how many.
At Ventury, we have seen as many as 8 merchant advance loans stacked on 1 business.
That means a business owner has 8 outstanding loans each of which have a daily payment due.
It’s no wonder we’re seeing default rates increase and merchant advance public companies stocks like Ondeck get slashed by 80% since IPO.
Now, a merchant advance is a solid option if the margins are slim, time is of the essence, or maybe the business owner has some credit hurdles which excludes them from a traditional loan.
The bottom line is that every business owner should want to graduate their business to bigger and better options.
That’s why we’ve found a better solution
It’s not 2013 anymore, yes you can get a simple interest loan with monthly payments and no, you don’t have to be perfect to do it. Over the last 3 years, many private investors and the Government have created new products that focus on smaller loans under $500,000.
This has streamlined the underwriting approach and at the same time, the standards for debt ratio have become more lenient.
The thing you have to realize about merchant cash advances, is that you WILL NEVER get the most out of the loan when it comes to the percentage of gross sales lent.
Merchant cash advances typically only lend about 5 – 12% of gross annual sales and conventional products lend as much as 25% of gross annual sales, why is this?
It’s very simple, when you give someone a monthly payment on simple interest and spread the term over 3 – 15 years you’re going to have a lower payment which keeps more cash in the business bank account and keeps the monthly debt load a minimum.
Typically you can prepay or buyout with no penalty.
If you find that your current merchant advance balances are equal to or more than your monthly deposits don’t do yourself an injustice by not checking in to see what else is available.
Our private investor guidelines are now more lenient
With the emergence of hybrid programs, the business owner can get a simple interest loan with less paperwork and hassle, that means a speedier process that creates less stress on the business owner.
These new lending programs, I believe, will phase out the merchant cash advance loan and provide better, more reasonable, products for business owners.
Call me direct at 813-425-1365 if you have questions.