If you want to start your own business or to modernize the work of an existing business, you will need funds for this. If you are denied a loan – no need to despair, there are two options that can help get a loan for a small business. You can find a guarantor who will take responsibility for paying the merchant cash advance if you are unable to do so. Or provide valuable property as collateral.
These two ways will help to convince the lender that he will not be left with the nose if you do not get to repay. In addition, by providing a guarantor or agreeing to pledge, the borrower can count on a lower interest rate or a larger cash advance amount.
Although, even if such conditions may seem ideal, you can expect unpleasant consequences, especially if you cannot cope with your obligations under the loan agreement. Assess all sorts of risks before you decide to use one of the methods.
Guarantor for Merchant Cash Advance
The guarantor can play a large role in the decision making by the bank for approval. Most banks can issue a loan to those who were denied before, because now the contract will specify two entities who have accepted the responsibility to repay the loan. But non-payment of a cash advance can cause a headache for you and for your guarantor. Let’s take a look at the pros and cons of such a reception before asking someone to participate.
– with a guarantor, you can approve a larger amount than without it;
– you can count on a lower interest rate and, accordingly, on smaller monthly payments and the total amount of overpayment;
– in time making all payments, you will improve your credit history, and the next time you will not necessarily attract a guarantor.
– you can approve the loan amount more than you can pay due to the evaluation of your guarantor. Be careful and carefully assess your financial situation. Consider every payment you need to make to repay the cash advance.
– The guarantor has a great responsibility. If you, for whatever reason, cannot pay the bills, it will have to be done by him anyway. If it comes to court, it is the guarantor who will have to assume full responsibility for the loan agreement.
– throughout the duration of the contract, the credit of the guarantor will be credited as an open, valid loan. Accordingly, it will be more difficult to take a microloan or loan until this one is closed. The same will happen in case of payment delays – all negative transactions and omissions under the contract will be reflected in the credit report of the guarantor.
Secured cash advance for your small business
The bank needs a certain guarantee that a borrower will return the money on time to give a loan to a small business. If the client does not have many years of work experience or a solid bank account, then a pledge can help him. To do this, you can use valuable property such as a house, real estate, inventory, equipment that the lender can use to sell and receive its dividends.
– if you were denied a loan, the mortgage can help you get it in the way the bank can sell such an asset to cover the balance;
– the use of collateral can speed up the process of approving your application, and you will receive funds faster;
– You can ask the amount more than you approved without collateral because the lender reduces the risks;
– just as in the case of using a trustee, you can count on a reduced interest rate on the loan.
– as is the case with the guarantor, you can approve the loan amount slightly more than your balance can afford. Be carefull.
– if for any reason you cannot make payments on time and a substantial delay is formed, the bank will legally confiscate your property. It is important to remain realistic. And to understand that a situation in which you break up with property can have a deplorable effect on your business and personal life.
– in some cases, borrowers misjudge their pledged assets. And upon the occurrence of the description of the property, it can be estimated less than expected due to depreciation or other factors, and then you have to give more than was originally planned.
- a house or a car of which you are not the owner cannot be used as a deposit. If you rent, for example, inventory or equipment for work, you will not be able to use them as collateral.
Cash advance for a small business
A guarantor or mortgage may allow you to take a cash advance for a small business in a situation when all lenders refused to provide the service. Also, these techniques can help to quickly borrow, and for a large amount. But to treat debt obligations in any case need to be responsible. The guarantor removes some difficulties from the borrower, but you need to think through all your actions far in advance. And if you decide to use the pledge, you should have a clear understanding that in case of problems with finances you will lose your property that you have mortgaged.