What is merchant financing?

Merchant financing is technically an advance on future credit and debit card sales vs. a conventional business loan.

How is cash advance calculated?

Divide the cash advance interest rate by 365 (number of days in a year). Then, multiply it by the amount withdrawn. Finally, multiply that number by the number of days from the transaction to the date it is paid (since cash advances start to accrue interest immediately).

What is the benefit of merchant funding?

You can get funds quickly through merchant funding. You don't have to bother about repayment as it is automatic.

What are the fees for the Merchant loan advance?

Lenders charge a processing fee of 2 to 3% of the loan amount. There are no hidden charges. Pre-payment charges are also zero.

Is the collateral required for this loan?

Merchant loan advance is an unsecured loan. You don't need collateral for it.

Are merchant loan advances a good idea?

The repayment depends on daily sales, so it is a good idea. You don't have to follow a set repayment schedule.

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What is Merchant Funding?

If a merchant or a business owner needs quick cash to meet some short term requirements, they can turn to merchant funding. Merchant funding is a cash advance given to the business based on credit card sales. Every merchant has Point of Sales (POS) machines to meet the needs of card swiping. The card swipes volumes are paving way for the merchant loan advance.

Go on to read more about the features of merchant funding and how to avail it.

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What is Merchant loan advance?

Small businesses and merchants face a short-term cash crisis at some point. For getting quick money, the merchant can get a merchant loan advance through its daily or future debit or credit card transactions. Merchant funding providers look at the daily credit card sales to evaluate if the business can pay back on time. In this way, the merchant sells future credit card sales to get credit immediately.

Features of merchant funding

Merchant loan advance may be up to Rs.1 crore depending on the card swipe value.
The repayment tenure is flexible and ranges between 6 to 12 months.
Monthly card sales value helps in determining the loan amount. Higher card transactions increase the chances of getting higher loan amounts.
Most lenders have an online application process.
Merchant funding can be approved and disbursed within 3 days.
The interest rates are higher.

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What are the eligibility criteria to get merchant funding?

The criteria may differ according to the financial institutions. However, basic norms remain the same. They include:-

The business should be one year old.
POS is being used for more than six months.
Monthly card swipes should be at least Rs.50,000.
If the annual turnover of the merchant is more than Rs.10 lakh, then 2 years ITR is needed.

Documents required for merchant financing

KYC of the applicant
Business registration documents
12 months bank account statement of a current account.
Card settlement statements for the last three months.
GST/VAT tax returns

What are the benefits of merchant funding?

Quick Approval: You can apply on the lender's website. It is approved and disbursed within 3 days.
Easy Repayment: The lender connects with the POS vendors and collects the repayment amount on daily basis. Merchants don't have to bother for it.
Flexible Finance: The repayment amount is flexible as it depends on the value of the daily sales.

Frequently Asked Questions

What is merchant financing?

Merchant financing is technically an advance on future credit and debit card sales vs. a conventional business loan.

How is cash advance calculated?

Divide the cash advance interest rate by 365 (number of days in a year). Then, multiply it by the amount withdrawn. Finally, multiply that number by the number of days from the transaction to the date it is paid (since cash advances start to accrue interest immediately).

What is the benefit of merchant funding?

You can get funds quickly through merchant funding. You don't have to bother about repayment as it is automatic.

What are the fees for the Merchant loan advance?

Lenders charge a processing fee of 2 to 3% of the loan amount. There are no hidden charges. Pre-payment charges are also zero.

Is the collateral required for this loan?

Merchant loan advance is an unsecured loan. You don't need collateral for it.

Are merchant loan advances a good idea?

The repayment depends on daily sales, so it is a good idea. You don't have to follow a set repayment schedule.

Solving Real problems

Ram Yadav

I have been running my business for over twelve years but have not been able to undertake expansion activities. I applied to Ziploan and they cleared my loan application in a very short span of time.

Kanchan Lata

I approached Ziploan for an equipment finance loan. Their eligibility criterion was easy to fulfill because it required only 2 years ITR and 10 lacs of annual banking credit.

Babu Lal

I always thought that loans and credit facilities were only available to large businesses with significant turnover. I never thought I would be eligible to qualify for a business loan too. Ziploan is boon for small enterprises like me.

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What is Merchant Funding?