Small Business Funding can provide immediate cash flow, strengthen your Canadian Business and/or working capital for your Canadian Business. When used properly, this can allow a business to improve sales and profit. A Canadian business gains an advantage when they get immediate cash that can be used to purchase inventory at a substantially less price. Suppliers sometimes offer a small discount (around 2%) when they get paid immediately (or usually within a 10-day period.) In this case, it can work out that the discounted supplies and subsequent profit made from them offset the cost of borrowing money. When this strategy works in a Canadian business’s favor, they have gained financial power. The bottom line is that it’s up to the business seeking financing to get all the necessary information, read the fine print and to develop their strategy from there.
Canadian Applicants for Small Business Funding will submit merchant account statements and business bank statements so that the Small Business Funder has a good idea of sales history, seasonal ups and downs, and cash flow activity. All of these affect repayments.
One of the most highly touted advantages is
that it said to be a fast and easy application process. In fact, most Small Business
Funders offer online applications. Approval rates tend to be high and the
turn-around time on applications can be as short as a few business days. Bank
loans, in comparison, require a lot of lead time and have a complex application
process, heavy documentation and strict lending restrictions.
The amount of personal and business
information that is examined when applying for Small Business Funding is much less than a bank loan application
demands. Credit ratings are often not checked since providers are not assessing
your creditworthiness like a bank would when assessing a loan application.
Retail merchants have long been considered
risky by the banking industry. Failure rates are very high for small retail
businesses, service companies and restaurants.
Verification of the approved Canadian business location is commonly requested: this may be in the form of a property lease or mortgage. This is done to ensure that the business is legal, stable and that all information is accurate. Further documentation such as a void cheque from the company bank account, a Canadian business license, and personal documentation such as a Canadian photo ID may be requested. There have been reported cases where tax returns and financial statements were asked for.
Besides online applications, SharpShooter Funding uses phone interviews; ultimately, this type of Small Business Funding need not be done face to face. The application process begins with basic information to see if the business ‘pre-qualifies’ for funding. If so, there will be an offer for how much funding the company qualifies for and the repayment terms which include an estimated time frame and a daily percentage rate (daily, weekly, bi-weekly or monthly, not annually) SharpShooter Funding will take out of future credit card sales. The timeframe has to allow for variations in sales volume.
Applications are one to two pages long. Relevant business and personal information will be requested. Contact information for the business’s bank, vendors or landlord may be required. A credit review will likely be asked for. Recent (from 1-12 months’ worth) of bank statements will be requested in order to assess average daily sales.
Before funding is put into place, the Small Business Funder and Applicant (Merchant) must establish a method of transmitting credit card revenues. This is where the merchant account processor comes into play. There can be restrictions around the merchant account processor used.
Although many companies claim that a credit check is not an issue when it comes to getting Small Business Funding, it’s common for many Small Business Funders to request business and personal credit information (which may include credit rating or credit score.) Issues likely to result in a declined application include tax liens, court cases or outstanding judgements, current or prior bankruptcy filings, foreclosures, lapse in mortgage payments and more.
SharpShooter Funding will seek an interview when an application is under consideration or about to be approved; often, this is done by phone. The provider is likely to vet references such as the business bank, business property landlord and perhaps vendors, in order to verify information. Sometimes the references need to be put into writing, other times a verbal reference is acceptable.
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