28
2009
Understanding Merchant Loans
An article by admin 
In order to understand exactly how a merchant loan can benefit a small business, it is important to understand how it works. This includes understanding the pros, cons, requirements, benefits and framework of this alternative to traditional bank loans.
Pros
Unsecured – There is no collateral required.
Renewable – Merchants can renew funds every three to four months
Low Credit ok – Having excellent credit is not a requirement.
No Restrictions – Merchant loans can be used however the borrower chooses.
Cons
Not For Startups – Merchant loans cannot be used to fund startups.
Not for Non-Merchant Businesses – Merchants must process credit card sales to qualify for a merchant loan.
More Expensive than Most Bank Loans – In comparison to a traditional bank loan, the merchant loan is more expensive.
Requirements
To qualify for a merchant loan, a small business owner must:
- Have owned his/her business for at least six months
- Process at least $3,500 in monthly credit card sales
- Have no unresolved bankruptcies
- Have at least one year remaining on the business lease
Framework
The way a merchant loan works is very different from other traditional business funding methods. First, a merchant must complete a two-page application. Along with the application, an applicant is required to submit the last four months of his/her merchant statements, a copy of his/her business lease, a copy of his/her driver’s license and a voided business check.
Our funding specialists and underwriters will then review the application. Within 48 hours, the applicant will be informed of the status of his/her application (whether it has been approved or declined). If the application is approved, we can fund merchants’ accounts in as little as five business days.
Repayment begins as soon as the business processes its first credit card sale, after funding. Every time a customer uses a credit card to pay for a product and/or service, a small percentage of the sale goes toward repaying the merchant loan. In about six to eight months, the merchant loan will be repaid and in only three to four months, merchants become eligible to renew their merchant loans.
