In recent years, the rise of Financial Technology (FinTech) companies has introduced innovative approaches to lending and financing. These companies, like Merchant Capital, offer alternative funding options that can mitigate some of the challenges businesses face during periods of interest rate hikes and limited consumer spending.

Interest rates

Unlike traditional bank loans that are tied to interest rates, FinTech businesses like Merchant Capital operate on a different financing model. Instead of charging interest, repayment terms are based on a predetermined fixed amount, giving your business greater clarity and predictability regarding its financing costs. As a result, fluctuations in the interest rate will not impact your repayments.

Related: [UPDATED] SERIES 1/3: Understanding The Impact of Interest Rates on SMEs

Speed and accessibility

FinTechs leverage their technology to streamline loan application processes, making it faster and more convenient for you. Merchant Capital uses sophisticated algorithms and data analysis techniques to assess the creditworthiness of a business, enabling us to provide quick funding decisions; that is why you will typically get your funds within 48 hours. Once funds are disbursed, your business can respond promptly to market opportunities, make bulk stock purchases, or business expansion prospects without being hindered by lengthy approval processes associated with traditional bank loans.

Flexible repayment structures

FinTechs offer flexible repayment structures tailored to the specific needs of your business. Instead of rigid repayment schedules, Merchant Capital’s repayment structure is based on a percentage of your future sales or cash flows – we call this “Repay-As-You-Trade.” This dynamic repayment structure aligns with the revenue cycles of your business, and this helps alleviate the burden of fixed monthly payments during periods of lower sales. As a result, your business has more financial flexibility to manage cash flow fluctuations that may arise due to changes in consumer spending patterns driven by interest rate fluctuations.

Embracing technology and data

As mentioned, FinTechs like Merchant Capital leverage advanced technology and data analytics to assess risk and make lending decisions. By analysing real-time sales data, transaction histories, and other relevant metrics, we comprehensively understand your business's financial health and creditworthiness. This data-driven approach enables us to provide tailored financing solutions and pricing models that meet the unique requirements of your business.

Supporting innovation and growth

FinTech businesses often embrace innovation and actively support the growth of your business. By providing accessible and flexible financing options, you can empower your business by investing in new technologies, upgrading your infrastructure, and embracing digital transformation. This support can enhance operational efficiency, customer experiences, and overall competitiveness in an evolving SME landscape. Fintech businesses are far more flexible than traditional lenders and so are able to really adapt to different demands of various business types. For example, the Merchant Capital MediAdvance product empowers medical practitioners access to funding by interfacing with their claims history and lending against future patient fees, based on existing history. These benefits can be seen across industries including legal, retail and medical, to name a few. 

Fintech loans are often unsecured

An unsecured loan is a loan that doesn’t require collateral of any kind. Rather than using the borrower’s assets as security, the lender approves an unsecured loan based on a borrower’s creditworthiness. This is also known as a ‘good faith loan’. The upside of this model is that it often has a less rigorous application process, for example a Merchant Capital Cash Advance can be applied for and granted within 48 hours. This type of loan is also riskier for the lender, so the lender may require the borrower to have a higher credit score to be approved. Further to this, the lending rate itself may also be more expensive. But this is often counterbalanced by the flexibility and other factors of the product. For example, a Merchant Capital Cash Advance allows the borrower to repay the loan directly in line with trade cycles, meaning the business is under far less pressure to pay back the amount. This is a huge upside for the client and often a reason to accommodate the higher lending rates. 

The bottom line

FinTech businesses like Merchant Capital can offer your business alternative financing solutions unaffected by interest rate changes. With speed and accessibility, flexible repayment structures, data-driven decision-making, and support for innovation, lenders like us play a vital role in enabling your business to navigate the challenges and capitalise on opportunities in this current economic climate. By embracing these innovative financing options, your business can safeguard its operations and position itself for long-term success. If you need to fund your business in the next 48 hours, contact Merchant Capital and inquire about an SME cash advance today.

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