Banks and Financial Institutions are not the only sources of loans for small businesses. There are many alternative lenders such as merchant cash advance providers who can help you with your funding needs. In fact, some such lenders may even get in touch with you directly through merchant cash advance leads. However, before you decide on signing the agreement with any such alternative lenders, there are things you need to know about working with them:
The interest rates they may charge you would be higher
If there is one thing that stops many small businesses from going for alternative business funding, it is the high-interest rates. This is because most such lenders do not ask for collateral while providing funds. They have fewer restrictions and are easy to obtain even for those who don’t have a decent credit score. The best thing is that they are available quickly and can fulfill your emergency cash requirements. However, if you don’t have the resources to pay your monthly installment payments on time, it is better not to go for an alternative funding option.
You may not get too small loans
Most alternative lenders insist on signing off on larger loans that give them better returns. Nevertheless, not every small business would be ready to take on this much amount of debt. A few thousand dollars may be good enough for you to cover your operating costs until your customers settle their accounts. So unless your loan requirement exceeds $50,000 it is better not to go for alternative funding.
There is always an element of risk in alternative funding
Most alternative lenders who might come to you through merchant cash advance leads are relatively new in business. Considering the kind of competition that exists for alternative funding, not all lenders might have established themselves in the market. If you are not so lucky you might end up with someone who might be ready to close his doors at any time. Therefore, it is always crucial to do your homework and evaluate your lender before transacting. A few things you need to find out include:
- The number of years they have been in business for
- The kind of funds they have provided and can provide
- If they have been backed by a legitimate bank or financial institution
- The kind of support and service they offer
- The number of positive customer reviews they may have
Pre-payment of loans may not be rewarded
Most businesses that are into alternative lending thrive through interests. They do not expect you to repay your loan earlier than the specified term. So you can’t expect any prepayment discounts if you pay an 18-month loan within a period of 10 months. Before deciding to work with an alternative lender who comes to you via merchant cash advance leads, make sure you find out about pre-payment penalties or early repayment fees if any.
There could be hidden fees
Not all alternative lenders who approach you through merchant cash advance leads could be transparent in their dealings. With time they may tack on different kinds of hidden fees such as origination fees, disbursement fees, repayment fees, and so on. Make sure you do your due diligence and read the fine print carefully before signing the contract with any such alternative lender.
Alternative lending definitely has its own set of advantages when it comes to business funding. But since alternative lenders who come through merchant cash advance leads are not bound by any rules and regulations it is important for you to evaluate them and learn about them in detail, before you strike the deal with any of them.