Coming back from the business restrictions and shutdowns that resulted from the COVID-19 pandemic can be tough. For many small business owners, just keeping their business afloat has put a serious dent in their working capital. Those who successfully continued to do business had to invest most, if not all of their capital, in equipment and training to adapt to new methods. Others just struggled to minimize and meet their overhead. Their goal was to survive until they could safely get back to doing business as usual. With restrictions being eased or lifted in many states, business owners looking to meet consumer demand for their products and services are going to need merchant funding.
PPP (Paycheck Protection Loans) didn’t reach all small businesses and, with banks already approving fewer small business loans, business owners are left to wonder where that funding is going to come from. Although their ability to provide cash is somewhat limited as well by the current economic environment, alternative finance companies offering merchant funding options may be the perfect solution for some small businesses.
Why Alternative Merchant Funding?
Despite PPP and all the other federally funded business loans that have been offered, not every business qualifies. On top of that, if you’re trying to get a traditional business loan from your bank, it will seem like the aftermath of the 2008 financial crisis all over again. Fewer small business loans are being approved and those that are approved aren’t being funded fast enough. So how is alternative merchant funding different?
First of all, it’s not a loan. Alternative merchant funding options such as the merchant cash advance are an advance on future sales or in the case of invoice factoring, an advance on money that is already owed to you. These types of funding options allow you to get the capital you need without taking on additional debt.
It is not uncommon for some businesses to have less-than-perfect credit during an economic downturn. That can be a red flag when applying for a bank loan. While alternative funding providers may consider your credit score, they also consider other criteria equally as important. For example, with a merchant cash advance, past sales revenue is an important factor since repayment will be generated by future sales. With invoice factoring, the credit score of the customers whose invoices you are factoring are considered, not yours.
Another important benefit of alternative merchant funding is it is faster than receiving a traditional bank loan. Alternative funding providers require less time and paperwork because they leverage the power of fintech to gather and evaluate your financial information and make a determination. The whole process takes much less time and, once your application has been approved, you can typically receive funding in a few days. In business, especially now, time is money.
Best of all, there are no restrictions on how you invest the money in your business. With a bank loan, there are often covenants that dictate how the funds can be spent. With merchant funding, you can use the funds however you see fit.
Alternative Funding with CapFlow
If your business needs an immediate influx of capital to keep your business moving forward, alternative merchant funding options can be a great solution. At CapFlow Funding Group, our team of professionals will evaluate your business’s unique situation and help you determine which funding option would best suit the company’s needs. We service many different industries with a variety of different funding needs. In addition to merchant cash advances and invoice factoring, we work with trusted partners to provide additional merchant funding options. Contact us today!