Six Key Factors That Determine Your Merchant Capital Deal Size and Pricing
At Merchant Capital, we customize funding solutions to fit the unique needs of your business. Here's how we determine your deal size and pricing:
1. Your Margins
When we price a deal, we first look at your business margins. The size of your facility is based on these margins. The larger the facility, the more competitive the pricing. For instance, if a gift shop has a 100% margin and borrows R100,000 to invest in stock, they will have R200,000 worth of product. Subtracting the cost of funding (e.g., R30,000), leaves the business with a R70,000 profit.
2. Your Credit Profile
We assess your business and personal credit scores through a custom credit matrix. The higher your score, the better your rates (cost of funding), and the larger facility we can offer. Your personal credit score influences the size of your deal.
3. Sensitivity to Term
Unlike traditional banks, we offer flexible terms based on your business needs. If your business has a six-month buying pattern, we can structure funding accordingly. You'll be presented with three quotes: short, medium, and long-term options. The longer the term, the smaller the impact on daily cash flow.
4. Sensitivity to Cost
Longer repayment terms lead to higher funding costs, while shorter terms reduce costs. Understanding the relationship between the cost of funding and its impact on daily cash flow is crucial for your business.
5. How Your Business Receives Payments
We ensure that the repayment plan fits your business’s income pattern, whether it's daily or weekly. For businesses with daily payments, we might set up a daily debit order. Merchant Capital offers three repayment options: split processing (a percentage of each card swipe), daily debit orders, or weekly debit orders.
6. Cash Flow
It's essential to manage cash flow when structuring your deal. If you borrow R200,000 at a cost of R50,000, and your business generates more than R50,000 from using the funds correctly, then the funding will result in a profit. Always use funding for growth activities, such as buying bulk stock to get supplier discounts and increase turnover.
The Bottom Line
We customize your funding to suit your business needs. If used correctly, funding can significantly enhance your business's performance. Speak to your Merchant Capital sales executive to explore your options, and together, we can create a bespoke funding solution that aligns with your growth ambitions.
