At Merchant Capital we tailor our facilities to suit the best possible option for your business. So how do we determine your deal size and pricing?
Your repayment type will be affected by the following 6 key factors:
1. Your Margins
When we price a client, we first look at their margins and then base the quote on these specific numbers, in relation to the size of the facility. The bigger the facility, the more aggressive we can be. For example, if a gift shop makes 100% margin and lends R100 000 to invest in stock, they will then have R200 000 worth of product. To understand their overall profit, they need to minus the cost of funding from the overall transaction. For example, if this cost of funding was R30 000, the business will then be left with a R70 000 profit.
2. Your Credit Profile
We determine risk when we look at your business and personal credit scores using a custom-built credit matrix. The higher your score, the better your rates (or cost of funding) will be and the larger overall facility we can offer you. Your deal size is based on your own personal credit score.
3. Your Sensitivity to Term
Unlike a bank, we can create products based on different time periods. Meaning that if your business has a buying pattern of six months, we can then structure the product to receive funding every six months. You will then be presented with three quotes: Short, medium and long. The longer the term, the smaller the impact on your daily cash flow.
4. Your Sensitivity to Cost
The longer the repayment term, the higher the cost of funding will be. Similarly, the shorter the repayment term, the lower the cost of funding will be. As the term increases so will the cost of funding. What matters most to your business lies in understanding the cost of funding in relation to the daily impact of the repayment.
5. The way your Business receives Payments
An important factor for us is always holding in mind that the quote needs to be affordable for the business. This is also based on how your business receives income, be it daily or weekly.
For example, if your business receives daily payments, we might create a daily debit order.
The three repayment types Merchant Capital offers are: Split Processing (this is when you repay as a percent of each card swipe), daily debit order or weekly debit order.
6. Your Cash Flow
When creating your quote, it is important to consider managing the pressure on your cash flow.
If you receive R200 000 and the cost is R50 000, and if your business makes more than R50 000 from using the funds the right way, then the funding will earn you a profit. This is why it is crucial to ensure that you always use your funding for growth enhancing activities. For example, purchasing stock in bulk to qualify for a supplier discount, which will in turn increase your potential turnover.
The bottom line
We pride ourselves on customizing your deal to suit the unique needs of your business. If you use the funding correctly it makes an incredible difference to how your business can perform. So always make sure you discuss all your options with your Merchant Capital sales executive. You will always be able to customize this facility to suit your business’s needs, and if the initial quote doesn’t suit your growth plans, your sales consultant is always happy to work together on a bespoke funding solution that will serve your ambitious growth.