Private Business LoansAll you need to know about small business funding in Canada.
Whether you have good credit or bad, private business loans can sometimes offer an advantage over their big-bank counterparts. The biggest advantage is that private lenders will consider much more than just your credit history when it comes to qualifying you for their products. In fact, private lenders offer many of the same products that their corporate counterparts do.
Merchant advances are loans based upon your anticipated credit card sales over the term of the loan. For example, if your business usually does $10,000 per month in credit card sales, the lender will consider the amount of money you want to borrow, why you want to borrow it, your industry, your length of time in business, and much more in order to qualify you. Once you accept the loan, you simply repay it with a percentage of your daily credit card sales. These loans are not dependent on your credit history, but you need to meet minimum requirements for time in business and gross monthly credit card sales.
Working capital differs slightly from merchant advances in that it considers all of your revenue and not just that which comes from credit cards. To qualify, you need to prove a relatively long history of consistent income from a variety of sources. Just like a merchant advance, you will repay the amount you borrow with a percentage of your daily sales. Good credit is not necessarily a requirement here, but a solid history of generating revenue is. The amount you can borrow varies based upon your business and the money it brings in.
Private lenders also offer up term loans that can compete with those from traditional banks. While a bank will pull your credit and use the information in the credit report to make its decision, a private lender will combine this information with data about your company, its revenue, and its time in business. All in all, private lenders are more concerned with your ability to repay the loan than your past credit history. Because of this, you can expect higher interest rates and fees than loans provided by banks.
Sometimes, private lenders will agree to provide you with a lump sum of cash in exchange for stake in your company. For example, if you want to develop and manufacture a new product to add to your retail stores and you need money to do so, an investor may provide you with those funds in exchange for a percentage of the revenue that product generates – or a solid percentage of all of the revenue your company generates well into the future. This type of loan can be quite risky, but it is especially helpful for startups who need funds to get their business ideas off the ground.
Private lenders offer up plenty of solutions to your everyday business needs. Whether you need a small merchant advance to get through a lull in the action or a large loan to help you open your doors, there is a product out there especially for you.