Once you’ve decided you need a business loan, you shouldn't have to wait long to get it. Unfortunately, lenders don’t always have the same urgency as you do, so it’s important that you understand the various lending processes and have lenders lined up for when you need working capital in a hurry.
How does a Business loan application work?
A loan application essentially has three key steps:
1. Applying
Application is essentially up to you. First you fill in an application and submit the required documents. This may be followed up with a series of calls or emails. Traditional lenders will also want a lot of paperwork to understand their risk, while others are far more flexible and have different ways of safeguarding their investment in you.
2. Underwriting
Once everything has been submitted, the lender will do their due diligence to check that everything is okay with granting you your loan and this will also inform the interest rate they fix. In some cases this underwriting process can happen automatically, while with others it can take a few days. It depends on the funder, how their backend processes work and what their policies are.
3. Funding
Once you loan has been approved, the lender will deposit the cash into your account. The speed of this depends once again, on the lender, their systems and their policies. This can vary from 24 hours to several months depending on the type of lender.
What are some different types of funding?
Traditional lenders
Traditional lenders, like banks, need to review a lot of paperwork before they decide to extend a business loan. These documents include: Income statements and balance sheets, your latest financial statements, tax returns, a business plan, company registration, proof of business address, shareholder agreements, and finally, the loan application forms. All this information needs to be reviewed thoroughly before a business loan will be approved.
Business Refinancing
When you refinance your business loan, you're essentially taking out a new loan to pay off your existing loan. This new loan will have different terms to your original loan, which could include a lower interest rate, a different repayment schedule, or a different loan amount. Business refinancing can be a great way to secure a lower interest rate, consolidate multiple debts, or access additional capital for business growth. However, it's important to understand the risks and implications before deciding to refinance. Consider your current financial situation and compare the costs and benefits of business refinancing before making a final decision.
Asset Finance
When someone borrows money, their assets are used as collateral for the loan. This is called asset-based banking. Business owners often use this kind of financing to buy vehicles, tools, and other things. A business can use asset-based finance to pay for a lot of different things, like assets, operating capital, and growth.
Invoice financing
Invoice financing is another type of alternative business loan. With this type of financing, you sell your outstanding invoices to a lender in exchange for a lump sum of cash. This can be a good option if you have customers who take a long time to pay their invoices.
Peer-to-peer lending
Peer-to-peer lending is an alternative form of financing where businesses borrow money from individuals instead of banks or other financial institutions. This can be a good option for businesses with good credit scores but may be more expensive than traditional loans.
Unsecured loans
The secret to winning an unsecured business loan is in maintaining a healthy credit rating. Lenders will always favour a business's financial history, rather than it’s age or bottom-line. There are a few snags here, though, for the intrepid business owner. Putting up personal assets as collateral in the loan is one drawback that causes many to think twice about this option.
The Merchant Capital solution
Applying for a Merchant Cash Advance takes just a few minutes if you have all your documentation on hand. Our Cash Advance product offers a working capital solution that is much faster than traditional channels, giving you access to funding in just 48 hours. We require less documentation, give flexible terms and ensure a tailored payment plan in line with your business’s turnover. The cash advance is also unsecured, meaning that no pledging of assets is needed and no offering of an equity stake is required either.
In order to qualify for a Merchant Cash Advance, your business needs to have been in operation for more than 12 months, have at least one South Africa director, have a valid lease agreement in place, and make an average monthly turnover of R50 000. If you are eligible, our application process takes mere minutes. Thereafter, we will run a personal and business credit check, process your documentation as well and contact any references provided to better understand your business’ circumstances. All you need to do is upload a few key documents and you are on your way to receiving your cash, in as little as 48 hours.
The Bottom Line
When looking for a business loan, it’s best to plan ahead and understand all the options you have on hand for quick access to working capital when you need it most. Remember that your funding timeline will depend on the lender you go with and the type of loan you’re getting. So make sure you’re prepared and really understand both the options and processes available to you. For more information on how to fund your business in the next 48 hours, contact Merchant Capital today.
