“Finally! You’ve Got Your Business Capital Or Working Capital Loan – Now What…”

Most of us understand the process for paying back a traditional loan…

Whether it’s a personal loan.

Mortgage and credit card…

What about short term loans?

More specifically a business capital loan?

Using traditional loans you borrow money.

And you make monthly payments for a certain term right?

This can be from 1 year to 30 years if it’s a mortgage…

Short term business capital loan may use a different structure.

This allows some flexibility to get payments in full from borrower.

The main lending factor in paying back this type of loan is risk.

Essentially, higher the risk, lower the payback term…

Short term business capital loans are higher in risk compared to collateralized funding…

The term for payback can generally be 3 months to 2 years with funding amounts of $10,000 to $500,000

Some funding sources lend up to $1mil or more.

1- Lender does not want to increase risk by a prolonged process

2- Lender can gauge a profitable loan risk with several factors including time to pay back loan.

It just makes sense to get paid quickly especially if there is no avenue for recouping through liquidated damages.

Short Term Business Capital Loan…

Here’s how the payment structure usually works to make the most sense for both lender and borrower.

The lender will most likely receive payments on a daily basis.

It’s called micropayments.

And it can be a win-win for both parties…

These micro-payments are spread out over the term of loan.

Micropayments are collected as part of the business’s daily revenue.

The business owner will see daily automatic withdraws from his/her business bank account.

This is a “quick fix” for the lender…

The lender is seeing “skin in the game” from the borrower.

It makes it real and more likely for them to pay it back.

This is both long term or short term.

Another type of short term business loan…

Merchant Cash Advances.

This is similar to a short term business loan.

The pricing structure uses factor rates, payback is slightly different.

Merchant Cash Advance…

Business owner agrees to micropayments deducted from their credit card processing revenue.

This can be ideal for a retailer, restaurant or any other business type with high credit card point of sale cash flow.

The advantage for the business owner’s income from credit card purchases are reduced by amount of daily micropayments…

It can make it much more bearable.

More so than a large hefty end of month payment.

And can be more manageable for the business owner.

Also, from the lender’s perspective…

Even though there is no collateral.

The business’s credit card revenue is collateral for the loan.

It’s important to have a baseline understanding of these loans.

And it would make sense before seeking a lender.

This is why I trust this simple explanation of paying back a short term business capital loan can be beneficial for you and your business.

Short Term Loans