Conventional lenders are declining your loan? If you are a small business owner you have alternatives. Merchant Loans are an interesting alternative to traditional financing.

Opponents of these new forms of business financing claim that they are nothing but loan sharks that are prying on desperate business owners while charging exorbitant fees. In many cases fees that compare to 200% or more in traditional interest rates.

Supporters of the industry however claim, that they offer a valuable service at considerable risk. By offering flexible terms for the payback of the advance and tying the monthly payments to the actual monthly sales, the advance lender essentially becomes a partner in your business. If you are doing better he will get paid back faster, if you are doing worse, than he will have to wait longer. But the fee stays the same.

Here are the mechanics of a typical merchant advance transaction. You are a retail oriented small business owner. You need additional working capital to improve your store and increase sales. Your banker just laughed at you and your mother in law thinks you are crazy. How are you going to be able to find the capital you need to maintain your business or even grow it.

In this situation often your only safe way to additional cash is talking to a merchant lender. There are now dozens of reputable providers of advance loan products, that are available to discuss flexible options of capital that match your actual cash flow.

By looking at your average monthly credit card sales, they will determine an amount that they can advance you. In your case the lender is advancing you $20,000, he charges a fee of, let’s say 20%. So you will pay back $24,000 through your future credit card sales.

By determining what portion of your monthly sales you can safely forfeit in exchange for the advance, the advance provider calculates the maximum amount they are able to lend. As they are now carrying a portion of your risk, you can rest assured that they will try to be very conservative in their assumptions .

Of course they will also benefit if your business is doing much better thanks to the additional cash you have available. If you double your monthly sales you will pay them back in half the time. Your fees and costs stay the same. Quick turnaround is in the best interest of the lender and you as well.

On the other hand if your business slows down because the economy took a nosedive suddenly, your revenue might drop to $5,000 a month. You would still only pay 10% and you would now take 4 years to pay back the advance.

While it may be true that there are “cheaper” alternatives available to some business owners, it is also true that merchant loans offer a safe and convenient option for most companies.

Use a more flexible form of financing for your business! A merchant loan injects working capital into your business, when you need it. Unlike bank loans, Merchant loans can be used for every business purpose.