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Seeing a business' cash flow should give you great insight into their ability to repay. Just a few of the things you can calculate that a bank can't: microtren
by x0x0 11y ago
Seeing a business' cash flow should give you great insight into their ability to repay. Just a few of the things you can calculate that a bank can't: microtrends in income, repeat customers (and trends thereof), changes in transaction size as well as volume, etc. Plus it's easier to collect on that loan.
- TheSpiceIsLife 11y agoI don't follow why a bank can't see cash flow? I live in Australia, and here almost everyone is using PayPass by MasterCard or PayWave by VISA - both are contactless PINless card payments. All those transactions have to go in to the merchants bank account.
- x0x0 11y agoUm, sure -- but they get bulk deposited, not individual transactions. The merchant account is what sees the individual transactions, and that bank generally isn't the one businesses go to for loans afaik.
- TheSpiceIsLife 11y agoOh yeah, true. Excuse my ignorance. Although in Australia the merchant banks also do business lending.
- 7Figures2Commas 11y agoI consult in this space. A few points: 1. Square provides merchant cash advance. This is not a loan. 2. Payment processors like Square have knowledge of a company's credit card receipts but cannot determine a company's cash flow unless they obtain additional documentation from the merchant. Calculating cash flow requires not just incomings but outgoings of cash. Payment processors obviously don't have the latter. 3. Merchant cash advance is a last-resort financing option for small businesses. Despite your implied suggestion that merchant cash advance providers have underwriting advantages over banks, there's a reason merchant cash advance is frequently the most expensive form of small business financing.