Merchant Loan Guide: Quick Business Funding Made Easy

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Merchant Loan Guide Quick Business Funding Made
Easy
Master the essential terms and options of
merchant loans. This guide covers everything from
merchant financing to quick funding solutions for
small businesses. Learn the key business loan
terms, financing types, and how to make the best
funding choice for your business that would help
you grow and achieve success.
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Annual Percentage Rate

• The Annual Percentage Rate (APR) of a loan is the
  yearly rate charged for a loan it factors in
  the interest and fees to be paid over the life of
  the loan. An APR may also be applied to merchant
  financing. of a loan is the yearly rate charged
  for a loan it factors in the interest and fees
  to be paid over the life of the loan. An APR may
  also be applied to merchant financing.

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Balloon Payment
With some types of loans, your payments are split
between interest and principal. But in other
cases, you make interest-only monthly payments
throughout the life of the loan and pay off the
principal in one lump sum payment at the end of
the life of the loan. That one lump sum payment
is referred to as a balloon payment.
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Blanket Lien

• A blanket lien gives a lender the right to seize
  all of a borrowers assets in the event of a
  default. In a vacuum, a blanket lien is very
  unfavorable for borrowers. But if youre a
  risky borrower who is struggling to qualify for
  a loan, or youre getting offered a much lower
  interest rate in return for agreeing to a blanket
  lien, it may be worth considering.

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Collateral
The term collateral refers to a business asset,
such as real estate, a vehicle, or equipment,
that the lender can seize in the event of a
default. With collateral, you increase the
likelihood of qualifying for small business
financing and securing attractive small business
loan terms.
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Default

• If you default on a loan, you didnt fulfill your
  obligation to repay the loan. At that point, the
  lender can take legal action against you,
  depending on the loan agreement terms.

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Factor Rate
A factor rate is used to express the total
repayment amount on a short-term loan or merchant
cash advance or other type of merchant advance
funding. You multiply the loan amount by the
factor rate to get the total repayment amount.
For example, you have a loan amount of 40,000
and a factor rate of 1.25. In this case, you
would be on the hook for 50,000.
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Interest-Only Payment Loan

• With an interest-only payment loan, your monthly
  payment depends on the interest rate of the loan.
  At the end of the loan's life, you either pay off
  the principal in one lump sum payment or
  refinance and get a new loan.

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Loan-To-Value Ratio
If youre taking out a loan to finance a specific
asset, such as new equipment or commercial real
estate, you should calculate the loan-to-value
(LTV) ratio. This ratio represents the percentage
of the asset that is covered by the loan.
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Personal Guarantee

• If you have a new business, a bad personal credit
  score or credit history, or no valuable assets on
  your balance sheet, a lender may require you to
  provide a personal guarantee to get a loan. With
  a personal guarantee, the small business owner
  puts their personal assets on the line in case of
  a default. While agreeing to include a personal
  guarantee may be the only way to get a loan in
  certain situations, you should carefully consider
  the consequences.

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Permanent Penalties
If your business exceeds expectations, you may be
in a position to repay your business loan ahead
of schedule. However, some loan merchant
financing agreements include prepayment penalties
to compensate lenders for the loss of interest if
this scenario comes to fruition. You should try
to get a loan without prepayment penalties, but
if the lender insists on including them, you
should at least be comfortable with the penalty
amounts.
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Principal

• The principal is the amount that you borrowed for
  your small business, excluding interest. So, if
  you borrowed 50,000 to meet working capital
  needs, your principal is 50,000.

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Refinancing
If you refinance your debt, it means that you pay
off one loan with another loan. The opportunity
to get a lower interest rate or extend the length
of the repayment period are two common reasons
for a borrower to refinance a loan.
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Types Of Interest Rate

• When borrowing money via a loan, there are two
  types of interest rates fixed and variable. With
  a fixed interest rate, the interest remains the
  same throughout the life of the loan and youll
  make fixed payments. With a variable interest
  rate, the interest rate could change at some
  point this change has the potential to impact
  your monthly loan payment significantly, so you
  should determine when and how much the interest
  rate will change before signing the loan
  agreement.

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Best Practice Before Signing A Loan Agreement

• Check whether the loan going to be under your
  personal name or your business name
• Budget the monthly payments
• Ask the lender any questions
• Have a lawyer review the loan agreement

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Types Of Business Loan

• SBA 7(a) Loans
• Term Loans
• Business Line of Credit
• Merchant Cash Advances (MCAs)

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Bottom Line
By understanding the typical business loan terms,
you can increase the likelihood of taking out a
loan that meets your small business's
requirements.
By Nick Perry
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Why Choose Biz2Credit?

1. Trusted partner for franchise funding
2. Biz2Credit was founded in 2007 and has provided
   more than 10 billion in loans.
3. Dedicated support team
4. Tailored financing solutions

Source Biz2Credit
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