With the vast majority of small businesses being over overwhelmingly in favor of financial solutions that create the minimum amount of debt. The alternative lending sector has seen a boom in the last 12 months. With more business owners citing uncertainty surrounding the Brexit agreement as a key component in wanting to reduce debt levels. Rather than increase them. This has opened the door to some innovative lending solutions. In reality, alternative lending solutions have been around for a long time. But in 2017 alternative lenders are seeing an increasing number of SME businesses looking to them as a solution.
For businesses that take the majority of their payments by credit card. A merchant cash advance is being seen as a viable business finance solution. The system works by letting businesses borrow against their average monthly turnover from credit card transactions. Without having to commit to a fixed term arrangement.
The amount a business can borrow ranges between £2,500 and £300,000. Merchant cash advances work in a very simple and effective way that is particularly attractive to small businesses. Repayments of cash advances are made directly from the businesses credit card terminal. Repayments are made at a rate of between 10% and 30% of each credit card transaction. One of the key benefits of the system is that there is no additional admin or equipment required. As repayments are taken at the time of each card transaction. Directly from the businesses existing card processing facility
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This alternative form of borrowing is proving to be popular with a growing number of small businesses. As there are no monthly repayments, there are no worries about big bills coming in at the end of the month. With the amount borrowed being calculated as a manageable percentage of the average monthly turnover from card transactions. There is no need to secure the loan against property or existing assets.
As repayments are a percentage of all card transactions taken. Businesses find themselves paying down loans much quicker during busier periods. While maintaining manageable repayment terms during quieter periods.
It is important that businesses weigh up all of the lending options available to them. There are several resources available to businesses where they can access business lenders through a single gateway and compare the options available to them.
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