As far as the global economy goes, 2016 did not start off on the best foot. Beginning with additional stock market instability in China, the past two months this year has seen highly unstable markets throughout the major economies, an American financial community bracing for another interest rate hike from the Fed, and up north in Canada, a Canadian economy that remains pinned behind low oil prices and a low Loonie.
The broader consequence of these negative patterns is that many analysts in the United States are foreseeing a new recession appearing later this year or in 2017.
Certainly, a recession, if it were to come, would have an impact on many economic fronts, one of which would be in the area of small business growth and small business lending.
In the United States and Canada, traditional types of lending, such as an established bank lending to a new or small business, never fully recovered from the Great Recession.
In fact, at the risk of weighing on the negative, the Huffington Post published an article late last year commenting on the difficulty of small businesses getting a loan. This, while a more recent article, published in Business Insider in February this year, remarked on the tightening of credit in America and a return to tougher lending standards.
If lending standards are to get stricter this year and in 2017, does that mean that many companies will be entirely barred from gaining access to credit?
Not necessarily. After all, alternate forms of lending do exist. In fact, alternate forms of lending are continuing to gain in popularity, both in the United States and Canada.
Consider one form of alternative lending that has gained particular traction among small businesses: merchant cash advances.
A merchant cash advance is a form of alternate lending where a merchant or business owner will sell a percentage of his or her business’ future sales in exchange for an up-front loan.
What that means is that a merchant cash advance company will approve a lump-sum payment to a small business. That business will then pay back the loan by automatically giving a percentage of its credit and/ordebit card sales to the merchant advance company. This is done automatically on daily transactions until the loan is paid off in full.
In many ways, merchant cash advances are more convenient and more attune to the needs of small businesses than traditional bank loans, and there are many reasons why the merchant cash advance industry, first in the United States, and now in Canada, is rapidly growing.
Under Merchant Cash Advances, Loans Are Approved Within Days, Not Months
The pace of business around the world is only getting quicker.
In order to stay competitive and stay one step ahead of competitors, today’s small businesses need access to capital — and they need it quick. Instead of investing precious time and energy in filling out all the necessary paperwork that attends traditional bank loans, merchant cash advances require comparatively little paperwork.
Most importantly, most merchant cash advance companies approve loans within a matter of days, not weeks or months. Consider, for example, Business Cash Advance Canada Ltd., a Canadian merchant cash advance company operating in Toronto. Business Cash Advance Canada promises approval of small business loans within 1 business day.
No Fixed Payment Schedules
One of the most distressing things about getting a traditional loan is making sure that your business earns enough revenue so that you as the business owner can keep up with paying back the loan on time, on a monthly basis.
If your businesses misses a payment one month or begins to fall behind on paying back the loan over the span of several months, that can be incredibly detrimental to your business’ credit score. In fact, falling behind on loan payments can even close your business down.
With merchant cash advances, loans are repaid automatically with a percentage of every credit or debit card transaction going toward repaying the cash advance.
What’s more, there are no monthly payment schedules like in traditional forms of lending. That means no penalties for falling behind on monthly loan repayments.
With Merchant Cash Advances, Business Owners, Not Banks, Determine How to Spend the Loan
Many business owners are all too familiar with the long queue of restrictions and red tape that come with getting approved on a loan. Sure, the business just got approved for a loan, but then comes the lender’s heavy hand and instructions on how the loaned funds can be used.
This is not the case with merchant cash advance companies.
Merchant cash advance companies give businesses free reign on how the loaned money can be spent. If the business wants to use the loan to make renovations to its place of business, that’s fine. If the business chooses to use the loan to pay its employees a more competitive wage, that’s fine as well.
There are no strings attached besides the automatic repayments that are made with every credit or debit card transaction.
Access to credit truly is the lifeblood of the small business industry. Dramatic growth in the online lending market will promise to provide businesses in the United States and Canada greater options for finding access to the capital they need.
However, with an increasing number of companies discovering the advantages of working with merchant advance companies, it’s likely that the merchant cash advance industry and the list of merchant cash advance companies will continue to enjoy growth in 2016 and next year.