Where can I turn when banks are not helping?

Where can I turn when banks are not helping?

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Getting bank finance for my restaurant is almost impossible.  How else can I access the funding that I need?

Most small businesses will experience a cash flow challenge at some point during the next 12 months and raising capital from traditional banks is becoming a real challenge. Conservative lending policies and onerous application processes mean that finance applications can take up to twelve weeks or longer.

Banks require significant securities, which many business owners are unable to meet. In short, banks are making it very tough for small businesses.

The business cash advance

For businesses that accept credit or debit cards as a form of payment for their goods and services (termed merchants), the business cash advance is now available as alternative source of funding.

In simple terms, a business cash advance offers the merchant an upfront advance to buy a discounted amount of future business turnover.  For example, you may be advanced R80,000 for R100,000 of future turnover, so the fees can be easily calculated as R20,000.

The payback is an agreed percentage of your turnover, paid daily until the full amount is paid across.  Payback increases and drops with your business turnover and the smaller daily payments are often easier than monthly fixed instalments.

Quicker turn-around and more accessible

Comparing it to a bank loan, the business cash advance is more accessible, operates over a shorter term and requires no personal security.  It is also much faster, typically available within two weeks.

 

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The advance amount is based on historical credit and debit card sales and pay overs are daily.   The costs are fully transparent and there are no penalties for late payments or extended payback.    However, accessibility, flexibility and convenience come at higher cost than traditional bank lending products.

As with any financial product, it is important that the benefits gained from using the money are more than the costs, so it is important to have a good purpose for the funding and carefully consider the available options.

Over the last three years, the business cash advance has becoming more main-stream and this funding is used by business with a relatively high card turnover, such as restaurants, retailers, beauty salons, supermarkets, convenience stores etc.

What to use the advance for

The advance is typically used for a business opportunity, such as expansion, new stock, new equipment, marketing etc.  Alternatively, it also offers through a difficult trading period or to cover an unexpected expense such as equipment failure when the money is needed quickly.

Small businesses are a vital part of the South African economy, contributing over 65% of South Africa’s employment and over 50% of GDP – accessing funding is imperative for these businesses to survive and grow.

David Lewis
David Lewis, chief executive officer of Retail Capital, has over 22 years of credit risk management, with operational and executive level experience, gained in ICT, banking and consultancy in the UK and Africa. In his early roles, he was responsible for the implementation and management of ‘value-add’ solutions to enhance efficiency and effectiveness. Following this he joined Fair Isaac providing credit risk management consulting to key clients and ensuring optimal returns on client investment though data, analytics, best practices and aligning operational and technical processes. David and his management team established Retail Capital, a merchant cash advance provider.