It’s not always easy managing cash flow. Often when you realise you’re going to need a loan the bank statements are already looking bad enough that it might not pass a credit team assessing your unsecured loan application. The good news is that there’s an alternative way to go about it if your business uses a card machine (or is an online business using Stripe or PayPal). Every month you should see your merchant services statement. Some credit teams look at this information and provide you with a loan they call “merchant cash advance”.
The application and approval process is quick. You will need to get 12 months merchant statements (but sometimes you can get away with less if your business hasn’t been going that long). You will also need to provide 6 months business bank statements, recent accounts and fill in an application form. We’re happy to help with that.
So I’m sure you’re thinking, how much can you get? In short it depends on the repayment capacity showing by looking at the bank statements, as well as the turnover you’re doing monthly on the card machine. One of the credit teams are happy to look at a maximum loan of 3 times your monthly card machine turnover average. So if you do €50k a month it’s possible to get €150k.
How the loan is repaid is different than a typical loan. The loan company sets up a repayment of a small percentage of the daily income of the card machine. It could look something like 5%. That means if you took in €1000 one day they would take €50 towards the loan repayment. The credit teams are aiming to set a percentage that gets the loan paid in around a year. They are often happy to renew the facility with you again in future once they see it’s being paid down. This type of repayment shows flexibility for seasonal businesses. If you’re a hotel owner with a great summer business and quiet winter the small daily percentage repayment means that when you’re quiet you’re not paying much and when you’re busy you’re paying more.
The interest on these loans can vary according to risk but expect it to be around 1% to 1.5% a month which is comparable to rates for overdraft facilities many SMEs are quoted for. I hope this information helps and remember it’s only one of the business loans options currently available to hard working Irish business owners in the hotel, bar, restaurant, e-commerce and retail industries.
We’re always happy to answer any questions you have so get in touch via the web chat box in the bottom right of this page or by calling 015563655