Operating small-scale business entities comes with its fair share of challenges and by far the most disturbing is running short of funds to keep your business running. It is common for auto dealers to deal with cash crunches from time to time. Relying on traditional lenders for auto dealer financing could just worsen the situation due to their low approval rates of small business loan applications. You, however, need to have fewer worries since alternative lenders have the potential of meeting you at your point of need, as far as finances are concerned.
Among the alternative lenders, merchant cash advance (MCA) providers have stood out due to the responsive nature of their services. You can get auto dealer financing in no time to address your short-term financial challenges. Being an auto dealer entails keeping up with the latest trends in terms of vehicle models. Besides this, your services need to have an edge over those of your competitors if you wish to be competitive. Here is what you need to know about MCAs.
MCAs in basic terms
The lending world has a couple of options that you could consider for auto dealer financing. Among the options are the alternative lenders who have adopted business models that are quite different in comparison with the traditional lenders. Some of the alternative lenders include the MCA providers, asset-based lenders, the lenders offering loans on future receivables as well as the ones providing startup loans.
An MCA usually refers to a lump sum that a client is offered to act as an investment on their future credit sales. The auto dealer financing offered is to be repaid in fixed percentages of the daily credit sales over a repayment period that you will settle on with the MCA provider. This kind of alternative loan is provided in a prompt manner and the MCA companies are known for their high approval rates of loan applications from small business entities.
Before you consider approaching an MCA provider for auto dealer financing, you need to ensure that:
- You’re an established business with at least a year of experience in business
- Accept the use of credit or debit cards though some MCA companies accept other modes of daily repayment
- Generate at least $10,000 on a monthly basis
All these prerequisites are intended to assess the revenue base of your business before you are considered for auto dealer financing. MCAs are unsecured loans with the revenue of your business acting as the only proof that you have the ability to repay the cash advance.
Application and Approval of MCAs
Unlike the traditional lenders, MCA providers are known for having impressively short and less stressful application procedures. You will only need to furnish the MCA Company with few financial documents during the application for auto dealer financing. As mentioned earlier on, these documents are used to assess the financial position of your business. Be armed with the following while applying for an MCA loan:
- The financial statement of your business
- A copy of your past credit sales
- A copy of your estimated credit sales in the near future
It is worth mentioning that you can secure auto dealer financing from MCA providers without providing any form of collateral. This is in stark contrast with traditional lenders who will demand that you provide a form of collateral during the loan application. What is more is that if you happen to be an auto dealer with a bad credit history, you could still apply for auto dealer financing as long as you can prove that your business can sustain the repayment schedule.
The prompt nature of MCA providers is more than enough reason for you to shift your options as far as lenders are concerned. Cash advances can be sent to you in a matter of days and even after a few hours after you MCA loan application is received. This is a quick way of sourcing for auto dealer financing as opposed to the traditional lenders who take weeks to months to respond to a loan application.
The Repayment Schedule for MCAs
It is the wish of everyone who qualifies for a loan to have an opportunity of repaying it in a less stressful manner. MCA providers offer the best version of this with their sustainable repayment schedule. The cash advance offered for auto dealer financing will be repaid following an elaborate repayment model; a fixed percentage of the daily credit sales will be deducted and remitted to the MCA provider.
The repayment period could range from three months to at most a year. It is a convenient and sustainable model since the performance of your business will be put into consideration. During days with higher credit sales volumes, you will have to part with a larger share of your cash while days with low credit sales will leave you with enough cash to keep your business running.
Some critics argue that MCAs loans are expensive if you consider the cumulative interest accrued from the cash advances offered for auto dealer financing. While this might be true, the prompt and responsive nature of MCA providers is crucial in enabling you to capitalize on profitable business opportunities. You can thus ensure that your return on investment is favorable to cover up for the high interest that comes with MCA loans.
Why MCAs are preferable for Auto Dealer Financing
At this point you might have picked a number of attributes that makes MCAs to be favorable for auto dealer financing. The following reasons should compel you to consider this form of alternative lending for your financial needs:
- A prompt source of small business loans
If you are in need of a faster source of auto dealer financing then look no further than MCA loans. While it might take weeks or even months to secure finance from the traditional lenders, MCA provider go out of their way to offer you finance in a couple of days and even in a matter of hours. You can thus address your financial needs in good time and this can be especially appropriate if you want to exploit a business niche that you have just discovered.
MCAs can be useful when you have run short of working capital. You can keep your business running as there are MCA providers who could process the cash advance for auto dealer financing in a matter of hours.
- You will require fewer requirements during a MCA loan application
MCA providers mean well for many small businesses and they can be appropriate if you are in search of a source of auto dealer financing. You will only need to provide a few documents that will be used to assess your ability to sustain the repayment schedule. There are three key financial documents that you will need to provide during the application stage. In comparison to what the traditional lenders will require, MCA providers have inarguably reasonable loan application requirements.
It is good to mention that you can submit these documents via the online platforms that online MCA providers have established.
- No need for any form of collateral
MCAs are unsecured business loans; this implies that they’re loans which can be offered without providing any form of collateral. This is especially attractive to auto dealers who are sourcing for auto dealer financing since they won’t have to part with their expensive vehicles that are on sale. This form of alternative lending is offered with the revenue that your business can generate on a regular basis being the main source of security. If you are an auto dealer who doesn’t want to lose his/her possession in case of defaulting on repaying the loan, then MCA providers should be your preferred source of auto dealer financing.
- Businesses with bad credit can apply for MCA loans too!
While the traditional lenders will give businesses with bad credit a deaf ear, MCA providers have certainly provided financial solutions to such kind of businesses. All a small business owner needs to do is prove that their business can sustain the repayment schedule after submitting financial documents that back this. This comes as a relief as the financial past of a business doesn’t necessarily imply that they will default on repaying a loan. Settle on more responsive and understanding alternative lenders such as MCA providers if you have a history of bad debts and are in dire need of a cash advance.
- The sustainable repayment schedule
The repayment period is usually a headache for most of the businesses which seek for traditional loans. They are usually expected to repay the loan regardless of the performance of their businesses. The case is different if you choose on MCA providers for the provision of auto dealer financing. Reason being that you will be expected to submit a fixed percentage of your daily credit sales; this is convenient as you will still have relatively enough cash to sustain your business.
In conclusion, MCAs are a good solution to your auto dealer financing needs. MCA providers are responsive and quite prompt besides demanding for fewer documents during the loan application process. What is more is that a business with bad credit can apply for cash advance and you don’t need to provide any form of collateral to secure these alternative loans.