If your business is located in B2C retail space And you conduct most (or possibly all) of your transactions via credit or debit cards, then business financing may be the flexible financing solution you need to cover expenses, make investments, and put your business on track for future growth .
Since there are some misconceptions and myths surrounding business financing (often spread by banks that do not offer this solution), here are some of the most important things you need to know about this type of financing:
What is business financing?
Business financing, also known as income-based financing, is a financing tool that allows you to receive a sum of money up front in exchange for a percentage of future sales, or a fixed daily or weekly payment.
This type of financing is often used by small businesses, especially those with fluctuating revenues, and it offers several benefits, such as flexible payment terms (based entirely on day-to-day sales) and no real estate collateral required.
What are the benefits of business financing?
As we just mentioned, your business can benefit greatly from business financing – here are some of its key benefits:
- Get cash quickly – This type of financing provides fast access to funds, typically within a few days or up to 72 hours if you apply to National Business Capital. This gives you the opportunity to pay emergency expenses promptly.
- flexible terms – Another key benefit of business financing is the flexibility of repayment plans – Unlike traditional loans with very strict terms, business financing adjusts to your cash flow.
- No fixed collateral – Compared to traditional business loans, business financing typically does not require fixed collateral and is suitable for businesses without significant assets.
- Easier approval – If you have a low credit score or limited credit history, you may find it easier to qualify for business financing compared to a traditional bank loan.
No fixed monthly payments: Because repayments are tied to sales, there are no fixed monthly payments, which can provide your business with greater financial flexibility.
4 things you need to know about business financing
1. You can use business financing for any purpose
Most bank loans come with strings attached, including conditions that require you to use the funds for a specific purpose, such as purchasing inventory, upgrading facilities, etc. If you deviate from the plan, you may be in breach of the contract and your loan may be repossessed.
However, with business financing, there are no spending rules or limits. You can use cash to cover temporary shortages, buy equipment, pay for advertising, implement new technology – the list goes on.
2. Your total borrowing costs won’t go up if it takes you longer to repay your financing
Technically speaking, business financing is the next step forward in credit and debit card sales compared to traditional business loans. At the end of each working day, a small percentage of daily sales is calculated (For example 2.5%), this amount will be automatically withdrawn and used to offset the advance payment.
One of the main advantages of this approach (and what sets business financing apart from other types of business financing) is that you won’t pay a higher total borrowing cost if it takes longer than expected to pay off your down payment.
Your total costs remain fixed and known from day one, giving you more control, predictability, and stability.
3. You don’t need to pledge your business and/or personal assets to obtain business financing
Unlike traditional bank loans, some lenders, including National Business Capital, offer unsecured business financing.
This means you don’t have to put up your business and/or personal assets as collateral, and you don’t have to endure a lengthy collateral evaluation process that often takes weeks; sometimes months.
4. You can combine business financing with other business financing solutions
If it’s beneficial, you can combine business financing with other business financing solutions. For example, many of our business financing clients also obtain revolving business lines of credit to cover unexpected short-term expenses.
Since interest is charged only on the amount borrowed, this option makes strategic sense as a contingency.
What are the eligibility requirements for business financing?
As opposed to traditional business loans, business financing has less stringent requirements, meaning it’s suitable for a wide range of businesses. If you want to qualify for this type of financing, it’s important to remember that specific requirements may vary from lender to lender.
However, some of the more common requirements include:
- Credit card sales – Since merchant financing is repaid through a percentage of daily credit card sales, you need to have consistent and sufficient credit card transaction volume.
- credit score – While personal or business credit scores are considered, they are generally not as important as traditional loans. You can qualify even if you have a low credit score.
- financial health – Lenders will often review your business’s financials, including bank statements, to assess cash flow and ensure you can meet repayment requirements.
- Industry type – Certain industries are more attractive to business finance providers, particularly those with stable sales and high transaction volumes, such as retail and hospitality.
- outstanding debt – If your business already has a lot of existing debt, especially other merchant cash advances, it may affect your eligibility or the amount you can borrow.
- working hours – Your business needs to be in operation for at least one year before you can apply for business financing. This requirement ensures that the business has a good sales record and stability.
How to use national business capital to obtain business financing
Simply call (877) 482-3008 to speak with a member of our team or fill out our simple 1-minute application online to get started and get the secured or unsecured business loan of your choice in as little as 24 hours!
We’d be happy to learn about your business financing needs and goals, help you understand the details of our unsecured loan products (of which we offer several), and answer all of your questions clearly and honestly, without any confusing jargon.