If your business is in A B2C marketplace and most (or possibly all) of your transactions are done via credit or debit card, then merchant financing may be the flexible solution you need to cover expenses, make investments, and keep your business on track for future growth.
Since there are misunderstandings and myths surrounding seller financing – often spread by banks that don't offer this solution – here are some of the most important things you'll need to know about this type of financing:
What are Seller's Fees?
Seller financing, also known as income-based financing, is a financial tool that allows you to receive a lump sum of money up front in exchange for a percentage of future sales, or a set amount of daily or weekly payments.
This type of financing is often used by small businesses, especially those with variable income – and it comes with many advantages, such as flexible payment terms (based entirely on daily sales) and no need for real estate collateral.
What Are the Benefits of Merchant Financing?
As we just said, your business can benefit greatly from merchant financing – here are some of its main benefits:
- Quick Access to Money – This type of financing provides quick access to funds, usually within days or 72 hours if you apply to National Business Capital. This gives you the opportunity to pay emergency expenses on time.
- Variable Terms – Another big advantage of seller financing is flexibility when it comes to payment plans – unlike traditional loans where the terms are very strict, seller financing is based on your income.
- No Fixed Deposit – Unlike traditional business loans, merchant financing typically does not require collateral, making it accessible to businesses that do not have significant assets.
- Easy Approval – If you have a low credit score or limited credit history, you may find it easier to qualify for seller financing than traditional bank loans.
No Fixed Monthly Payments: Since payment is linked to sales, there is no fixed monthly payment, which can provide more financial flexibility for your business.
4 Things You Should Know About Seller Financing
1. You can use merchant support for any purpose
Most bank loans come with strings attached – including one that obligates you to use the financing for a specific purpose, such as buying inventory, improving the property, and more. If you deviate from the plan, you may be in breach of contract and your loan may be called off.
However, with merchant funds there are no rules or restrictions on spending money. You can use the money to cover temporary shortages, buy equipment, pay for advertising campaigns, implement new technology — and the list goes on.
2. Your total cost of borrowing will not increase the longer you take to repay the money
Merchant financing is technically a precursor to future credit and debit card sales compared to a traditional business loan. At the end of each business day, a small portion of your daily sales is calculated (eg 2.5 percent), and that value is automatically extracted and applied against the previous one.
One of the main advantages of this method – and something that makes seller financing different from other types of business financing – is that you will not pay a higher amount of borrowing costs if it takes longer than you expected to pay upfront.
Your total cost remains constant and known from day one, giving you more control, predictability and stability.
3. You do not have to pledge business and/or personal assets to secure seller financing.
Unlike traditional bank loans, some lenders – including National Business Capital – offer unsecured seller financing.
This means you don't have to pledge your business and/or assets as collateral, and you don't have to endure a lengthy collateral appraisal process that often takes weeks; or sometimes months.
4. You can combine seller financing with other business financing solutions
If it is profitable to do so, you can combine seller financing with other business financing solutions. For example, many of our merchant financing customers also obtain a revolving business line of credit to cover unexpected, short-term expenses.
And since interest is only charged on the loan amount, having this option as an emergency makes strategic sense.
What Are the Eligibility Requirements for Merchant Financing?
Unlike traditional business loans, merchant finance has stricter requirements – meaning it's accessible to a wider range of businesses. If you want to qualify for this type of financing, it's important to remember that specific requirements may vary by lender.
However, some of the more common requirements include:
- Credit Card Sales Volume – Since merchant financing is paid as a percentage of daily credit card sales, you will need to have a consistent and sufficient volume of credit card purchases.
- Credit Effect – Although personal or business credit scores are considered, they are often less important than conventional loans. You can qualify even if you have a low score.
- Financial Health – Lenders will usually review the financial status of your business, including bank statements, to assess cash flow and ensure you can meet payment requirements.
- Industry Type – Some industries can be very attractive to merchant finance providers, especially those with strong sales and high purchase volumes – such as retail and hospitality.
- Outstanding Debt – If your business already has a significant amount of existing debt, especially other merchant cash payments, it may affect your eligibility or the amount you can borrow.
- Time in Business – Your business needs to be in operation for at least 1 year before applying for merchant financing. This requirement ensures that the business has a track record of sales and stability.
How To Get Dealer Money With National Business Capital
Just call (877) 482-3008 to speak with a member of our team, or fill out our easy 1-minute online application to get the ball rolling, and get a secured or unsecured business loan of your choice within 24 hours. !
We are happy to learn about the needs and goals of your financing business, help you understand the details of our unsecured loan products (we offer several), and answer all your questions clearly, honestly, and without any confusing jargon.
