3 Situations when a Merchant Loan is Best

If you own a business, there may come a time when you start to consider a merchant loan for your financial needs. As a business owner, you understand just how difficult it can be to maintain your cash flow. Expenses come along for things that you never expected. During those times, it will become necessary to come up with extra money to keep the doors open. Sometimes, using a traditional source of financing is not the best option. If that is the case, a merchant loan could be to your advantage. Here are a few situations where a merchant loan could be your best choice. 

1. Bad Business Credit

Sometimes, your business has been through a number of negative situations. You might have struggled to get by at some point in your history and made some mistakes with your credit. As a result, your business credit score may have been hurt in the process. When this happens, it can be very difficult to get a loan from a traditional lending source. The bank wants to deal with businesses that have good credit scores and histories. Therefore, if you do not fall into this category, you will have to explore other avenues. 

2. Short Business History

Another circumstance that may lead you to use merchant loans is a short business history. When you have been in business for less than three years, it may be difficult to find a bank that will lend to you. Banks like to see a steady history of income coming in before will they offer loans. Therefore, if you are a relatively new business, it can be very hard to get the money that you need to get started. Most merchant lenders will still work with you even if your business history is not that lengthy. They typically work with a variety of businesses and new businesses are something that they specialize in. 

3. Credit Card Transactions

If your business does a good percentage of their sales via a credit card terminal, it may be in your best interest to get a merchant loan. Most merchant loans work by setting up a program through your credit card terminal. You pay back the money that you have borrowed a little bit at a time from each transaction. This allows you flexibility to repay the loan as you get money. There are no monthly payments to worry about or any minimum payments. You just get all the money that you need upfront and then go about your normal routine. The company will collect a small percentage from the credit card transactions that you run in order to get their investment back. 

When you have a typical credit card terminal, you will pay a percentage of every sale to the credit card company. Therefore, if you are paying something to process your credit card sales anyway, you might as well get some money out of it at the beginning of the process. A merchant loan will allow you to do just that.