Loan against POS
Small company operators in India face significant difficulties in obtaining capital for their various company operations. Due to a lack of collateral, exorbitant interest rates on business loans, and extensive paperwork requirements, businesses and startup owners are forcefully seeking other financing sources.
A loan against POS is one such alternative credit option available to small enterprises in India. Compared to typical company loans, a merchant cash advance (MCA) has several advantages, including a higher approval rate, more flexible payback terms, and faster access to funding. However, few individuals are familiar with MCA
What is Merchant Cash Advance?
The phrase indicates a cash advance loan on future credit and debit card swipes that small business owners can obtain from lenders. It is a comparatively recent source of finance for entrepreneurs. Although merchant cash advances have been accessible in the United States, Canada, and other industrialized countries for an extended period, they have only lately gained popularity in India as a quick and hassle-free technique for generating capital.
How Will It Work?
After you apply for and receive approval for an MCA, the lender offers you a flat payment. Automated debits subsequently repay the loan against the EDC machine from your credit or debit card sales. The payback time might be a minimum of 90 days or a maximum of 30 months, depending on the credit/debit card purchases.
Your typical monthly credit/debit card sales Typical monthly credit/debit card sales determine the cash advance amount. Lenders offer credit card machine loans between 100% and 400% of your card sales volume. The lender will request your credit card sales statements for the previous three to six months to evaluate your eligibility.
Merchant Cash Advance Features
Numerous businesses in India, even small enterprises, accept credit or debit card payments. Essentially, a loan against a card swipe machine isn't a loan; instead, it is an advance payment from lenders.
You seek a lender for a merchant cash advance like a borrower. The lender considers your business’s typical monthly revenue generated via credit and debit cards and then lends you the appropriate amount. You may then repay the loan whenever you earn money from consumer credit, and debit card swipes.
Here are some features that loan against swipe machine provide to small businesses:
Simple, No-hassle Application:
Unlike typical credit card terminal loans from banks, merchant cash advances are relatively simple to apply for. You can obtain your cash within a week with little paperwork and quick qualifying. Indifi, for example, offers same-day clearance.
Amounts up to Rs. 1 Crore:
Traditional banks are not as lenient when it comes to swiping loan amounts—adding to it the masses of documents and evidence of credit score that you must present, which all add to the application's length. FlexiLoans, conversely, allows you to borrow up to Rs. 1 crore, based on your monthly card settlement and capacity to repay over 36 months.
Low Credit Scores Don't Matter.
It is one of the most significant roadblocks faced by small enterprises. To qualify for bank loans, you require an excellent credit score. The qualifying requirements for merchant loans advanced at well-known online lending companies such as FlexiLoans are straightforward.
The following are the general prerequisites for eligibility:
- Only one year of operating experience
- Monthly Credit/Debit Card swipes of at least INR 20,000
- Monthly total sales from the business of at least INR 100,000
- At least six months' worth of credit/debit card swipes at your business
- Applicant’s aged must be above 21 years
Unlike traditional business cash advance loans, merchant cash advances do not need the submission of security such as real estate or other assets.
Rapid Funds Access
The great aspect of merchant cash advances is that you may obtain funds instantly without waiting for lengthy approval. Additionally, you may spend the funds received from merchant cash advances as you like because there are no limits on what you may or may not do.
How to Apply for Merchant Cash Advance with FlexiLoans
Online Application: Log on to the FlexiLoans website and complete the application form by correctly filling in the relevant information. FlexiLoans will use these details to assess your eligibility for MCA.
Upload the Required Documents Online: Ensure to upload all the required documents online, namely, KYC documents, current account bank statements, and business KYC documents.
Credit Analysis: FlexiLoans will assess your business results and operations to calculate the loan amount you'll be eligible to borrow and the interest rates that will apply. Our loan officers will assist you in understanding the bid and making the right decision.
Loan Disbursement: FlexiLoans shares the loan agreement after verifying the documentation and approving the loan. The account gets funds within 48 hours of approval.
Repayment of Merchant Cash Advance
Daily deductions as a percentage of daily revenue is the method to repay the loan. It is one of the simplest financing options since it avoids the tedious process of EMI repayments.
Eligibility Criteria for Merchant Cash Advance
|Age of business (from the date of registration)||1 year|
|Monthly business sales||Minimum ₹1,00,000|
For quicker loan approval, we have kept the MCA guide short. The followings are the requirement
- An individual must be 21 years of age when applying for card machine loans and not more than 60.
- MCA is available to individual corporations, sole proprietors, LLPs, OPC, and private companies involved in trading, production, or services.
- The applicant must have worked in the industry for three years and have at least five years of experience.
- Offers MCA to those businesses running for at least a year and have monthly total sales of at least INR 1,00,000.
- If the company has been in service for even more than three years, you can apply for an MCA.
- We would also ensure that there are no errors in previous accounts and, as such, the company is tax compliant.
Finally, verify that the paperwork is in order well in advance of applying for a merchant card loan with us and hold it in digital format to be submitted during the application process.
While merchant advance loans are not appropriate for every company owner, they can be beneficial to some.
The Pros of Merchant Cash Advance
a. Flexible repayments
It depends on daily or weekly credit card sales for your company. The remittance mechanism is among the primary benefits of getting an MCA. A firm must make the specified payment with a standard term loan. This is regardless of whether its customers have paid their invoices or not.
This might hamper businesses that have late payers or variable financial flow. As previously stated, a loan against an EDC machine uses a proportion of your Business's credit/debit card sales to pay off your loan. As a result, if you have a poor month of sales, you will not pay as much as you would during peak seasons.
b. Automated purchases are processed.
After POS loan remittance, payment deducts from your company's accepted credit transactions automatically. This eliminates the need for you to take time out of work to make the payments, and there is little risk of incurring late penalties. If you frequently fall behind on payments, it might be reassuring to know that you handle your cash advance payment.
c. Funds are received expeditiously.
When applying for merchant services loans with a bank, the procedure might take weeks or months to complete. If your firm needs immediate working capital, you generally cannot afford to go through a lengthy financing procedure just to discover that you are ineligible for a business loan. Funds are frequently available in less than a week with a loan against a POS machine, and many lenders like FlexiLoans may close disburse loans in less than 48 hours
d. No need for collateral
Even if you have assets, you may not be able or willing to pledge them as security for a company loan. With a merchant cash advance, lenders often request merely a portion of your business's projected sales revenues as security, which preserves the availability of all other corporate assets for those other uses as needed. FlexiLoans provides business loan without collateral.
Documents required for Loan against POS
|Personal KYC||PAN card|
|Residential Address proof (Any one)||Rent agreement, driver's license, Voter's ID, Ration card, Aadhaar Card, Passport|
|Banking||Last six months' current account bank statement receiving card payment settlements|
|Business KYC (Any one)||GST registration certificate shops and establishment certificate|
|Financial documents (For loans greater than 10 Lakhs)||Last two years’ audited financials or the last two years’ ITR GST Returns of six months|