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Have you ever noticed that large businesses seem to have limitless abilities to make significant mistakes when designing and developing new products, while small businesses are routinely shut down because of relatively minor oversights?

There’s a relatively simple reason for this, and it’s leverage. The larger a business is, the more leverage room it has when it comes to securing the capital you need to carry you through a rough patch.

It isn’t necessarily fair that a large corporation can keep coming back after poor business decision after poor business decision, but the reality is that banks will continue to lend huge amounts of capital to major players making big mistakes, but aren’t willing to take a risk on a small loan for a well-researched start-up.

The Bank Said “No.” Now What?

The good news is that bank loans aren’t the only option open to business owners who are looking to secure long-term funding that will allow them to grow their company and expand their service.

Banks have a history of turning down loan applications for small companies and start-ups, but this has only served to create an alternative funding market where investors who are less afraid to take a chance on a business that hasn’t already exploded can help entrepreneurs get the funding they need.

This alternative funding options like merchant capital advances have provided much-needed seed capital for thousands of now-successful companies, so if the bank has just slammed the door in your face, don’t be discouraged: an even better funding opportunity might be right around the corner.

Funding the Little Guy

So how do merchant capital advances work, and why are they a good source of funding for scrappy new businesses that are staking out a claim to their own market?

A merchant capital advance is a funding agreement that allows a company to unlock a certain amount of funding for a certain fee, payable over the course of a standard period of time.

While the precise structure of merchant capital advances differs between funding partners, companies like SharpShooter Funding — one of the most successful providers of merchant capital advances in Canada — will offer an initial tranche of funding that will be paid back in monthly instalments over the course of six to twelve months.

The exact terms of the deal are flexible (payment extensions are possible, for example), but the underlying appeal of this kind of funding lies in its speed and transparency.

Alternative funders sometimes operate seven days a week, and can turn around some applications within twenty-four hours. This means that, unlike a bank, you don’t have to apply during business hours. It also means that if you urgently need extra capital to close a deal or handle an emergency, you can unlock the funding quickly.

While a lot of the dynamism in the modern economy comes from start-ups, the financial services industry has long privileged the largest corporations and the most established.

By providing reliable tranches of funding to businesses struggling to secure a bank loan, alternative funding companies are playing a vital role in rectifying this imbalance. So if the bank says “no,” don’t worry: you still have options.