SMEs to borrow against card sales with Linked Finance
Digital lending platform Linked Finance has launched a new lending product that allows businesses to unlock their daily cashflow from card payments as a source of financing.
Merchant Cash Advance will allow businesses to borrow a lump sum and then repay it gradually through a percentage of their daily card receipts. This provides businesses with the flexibility of varying their repayment level depending on the level of daily turnover: as business grows, they repay more, faster; during lulls, they repay less.
The solution is perfectly suited to companies that receive a significant proportion of their sales through debit or credit card payment, either in-store or online, such as retail stores, beauty salons, restaurants, pubs, and services such as gyms, where memberships are processed using card payments.
An advance can be used for a wide range of reasons to support business growth, including regular cash flow, stock purchasing, hiring new staff, office expansion, and purchase of equipment.
Linked Finance sees demand coming from the growing number of online only retailers in Ireland, who typically only take payment by card. During the pandemic there was a step change in online retail trends with e-commerce revenue for retailers up 159% in 2020.
Payment by card is a growing trend as we move closer to a cashless society, and according to the Central Bank of Ireland over €61 billion was spent at point of sale on cards in 2021, up 18% on the previous year2. Transaction volumes with up by 21% with over 1.5 trillion payments made on the 7.5m credit and debit cards that exist in Ireland.
The repayment of a Merchant Cash Advance is hassle-free as it will be automatically deducted ‘at source’ from card payments through Linked Finance’s partnership with payments software firm Fire. Fire was chosen as the partner due to their track record and speed of settlement, allowing Linked Finance to deliver the best possible experience for borrowers. It represents two successful Irish fintech businesses coming together to disrupt the incumbent operators. Businesses do not need to change their bank to avail of this new line of credit, a changeover of the merchant settlement account only is required.
Advance sizes can range from €10,000 to €150,000 with repayments made over a period of up to 12 months, and interest rates starting at 4% per annum. Borrowers will be assessed under Linked Finance’s lending eligibility review and receive a decision in under 24 hours. Businesses must have been trading for 2 years and have over €100,000 in annual turnover.
Merchant Cash Advance will provide Linked Finance’s 27,000 lenders a new option to support SMEs on Linked Finance’s online marketplace, with approved loans offered for lenders to participate in from levels as low as €50 in the same way as our term loan product.
“With the rapid increase in our use of cards for payment, today’s launch of Merchant Cash Advance offers SMEs a flexible way of accessing cash that can be repaid in a way that is directly tied to the business’s trading trends,” said Niall O’Grady, CEO of Linked Finance. “It is a proven success story for international online retailers, so we are delighted to bring it to it to the Irish online retail sector particularly hospitality and services , . Daily repayments are made automatically out of card sales, leaving business owners free to focus on growing their business.”
Merchant Cash Advance will be offered alongside Linked Finance’s core term loan offering, which last year issued loans worth over €36 million, an increase of 80% on 2020. Since its establishment in 2013 Linked Finance has grown rapidly to deliver over €182 million to over 3,000 ambitious local businesses in every county in the country.
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