Truck businesses just like other small-scale businesses are often in need of credit. Getting information on what kind of credit is suited for truck business. The fact is that most funding for truck businesses can be complicated, with the actual cost of the financing exceeding that which the business is told again. Of course, financial institutions which engage in such nefarious practices will often find excuses for the increase in cost beyond the initial value. It is not surprising why most people in the industry are looking for guaranteed commercial truck loans. Initially, business owners were particularly fond of commercial bank loans, but for some time now the number of credits that banks issue to businesses has seen a decline. Right from the start of the recent economic recession in the United States, there has been a 20 percent decrease in total bank lending to small businesses. So, it can be said that the days of relying completely on banks for loans are over.
Limitations of other sources of business funding
Lots of alternative sources of funding for small businesses have been springing up with many of them claiming to be the perfect alternatives to commercial bank loans for all kinds of small businesses including truck businesses. But a careful examination of the facts shows that this is far from the reality. For instance, not many can really claim to provide guaranteed commercial truck loans if one considers the unreliability of some these lenders. For instance, in the case of commercial banks, it is known that the chances of a small business being turned down are quite high. Strict regulations coming from the government have further meant that bank loans will hardly be accessed by small-scale businesses. On the part of the new entrants who claim to be good alternatives to commercial bank loans, what needs to be said about the vast majority of them is that they are not suited to small-scale businesses.
What is merchant cash advance and what are the debates surrounding it?
The most popular alternative to commercial banks for obtaining commercial bank loans is merchant cash advance. But some business people still remain skeptical about merchant cash advance. Most of the time the reasons adduced often revolves around the same thing: cost. Some even go the extent of describing merchant cash advance as the most expensive financial product on the planet. This should come off as a gross exaggeration but the point to be made is that a merchant cash advance is much more expensive than a commercial bank loan or loans from other traditional sources, with annual percentage rates in the triple-digit range. But this does not take away the fact a merchant cash advance remains the surest means of obtaining guaranteed commercial truck loans. And there are good reasons for this.
Benefits of using merchant cash advance
First thing first: the speed with which a merchant cash advance can be obtained is nothing like that which obtains in commercial bank loans. Business owners know how it feels waiting for weeks or months awaiting feedback from banks on loan application. Even when the loan is granted, after a hectic bureaucratic process, it could even take months for the business to finally receive the cash. Other sources of funds such as a line of business credit, equity financing, and others all suffer from setbacks which do make them ideal for a small business in urgent need of a guaranteed commercial truck loan. In addition, the documentation required to process a merchant cash advance is often quite minimal when compared to the usual requirements of traditional loans. In most cases, only such things as the financial statement of the business for the previous few months are required. It is this minimal documentation that further helps to speed up the whole process.
The issue of interest that obtains with other sources of business credit does not exist in merchant cash advance transactions. We are all conversant with how firms battle with interest payments which continue to stack up. But for merchant cash advance there is no interest and the issue of stacking is totally avoided by most merchant cash providers. Stacking is a situation where a single business obtains an advance from more than one company. The reason why stacking is totally avoided is that if a business has to make daily payments from its credit sales to a multiple firm’s serious cash flow problems can arise which can cause the business to fail. There can hardly be any other alternative source of business credit which can claim to have the same level of coordination as merchant cash advance. So business people in the truck sector are beginning to realize that the easiest way to get a guaranteed commercial truck loan is through merchant cash advance.
A merchant cash then is the commercial transaction between a business and a merchant cash provider in which the future receivables of a firm are offered in exchange for a lump sum of cash. Although merchant cash advance has been likened to a loan by different persons, several court pronouncements have served to establish time and again that a cash advance is nothing like a loan. For one thing, loans are secured while merchant cash advances are not secured. This means that there is no requirement for a collateral before a cash advance can be issued to a business. In addition, a merchant cash advance does not require any sort of personal guarantee from the business owners. The implication of this is that there is no risk of a personal loss for the owner, and if the business should fall into hard times it is the merchant cash providers that stand to lose if the firm eventually fails. Even in cases when merchant cash providers have somehow extracted personal guarantees from the merchants, it was often the case that when a dispute arose, courts were quick to dismiss claims brought by merchant providers. No doubt, a merchant cash advance is a right option for those who want guaranteed commercial truck loans.
How merchant cash advance works
To understand how a merchant cash advance works, let us assume that a hypothetical truck business needs $100000 to quickly purchase new vehicles in order to take advantage of some new opening in the market. The merchant could approach a merchant cash provider and request for this sum of cash. Because a merchant cash advance provider has to make some profit this amount is granted to the business but a higher amount is repaid. This happens through the process of factoring. A certain factor, say 1.2, can be used and this will result in total payment of $120000. This factor is dependent on the amount borrowed, the volume of credit sales that the merchant generates on a monthly basis, and the particular nature of the business in question. Once an agreement has been reached on the factor rate, a decision is made on the percentage of the daily credit card sales of the business that is to be remitted on daily basis to the provider. This process continues until the entire advance has been cleared out. So getting a guaranteed commercial truck loan is that simple.
Who is qualified for a cash advance?
In spite of how much merchant advance providers try to meet the financial needs of small businesses, it has to be said that not all businesses qualify for a cash advance. The first thing merchant cash advance [providers will often consider is the volume of credit sales of the business because this is what helps to determine the creditworthiness of the merchant. In most cases, merchant cash providers will require monthly revenue of at least $4000 from the business before considering it for a loan. The length of time a business has been operation also lays role with cash providers stating that a business has to be in operation for at least 3 months in order to qualify for a guaranteed commercial truck loan. It is also required for the business to have a physical location and not just merely existing online. As a rule, online businesses are excluded from receiving a cash advance. Once a firm meets the usual requirements for cash advance it is very likely that the merchant cash advance providers will grant the loan.
The benefits of merchant cash advance have been sufficiently discussed in this article. There is no gainsaying the fact that business people are embracing alternative sources of funding with a particular focus on merchant cash advance. A recent study showed that in a single year, alternative sources of funding accounted for 4 billion dollars of the total loans to small businesses. Also, more than 50 percent of small business who were seeking guaranteed commercial truck loans had their applications rejected. The result of this was a shift in focus from commercial banks to alternative lenders—a shift which has proved again and again to be in the best interest of small businesses. Therefore looking for guaranteed commercial truck loans? A merchant cash advance may be the best call for you today.