Small business owners can be hesitant to utilize the alternative lending industry because they don’t understand the terms being used. But receiving extra working capital is a common way for businesses to get ahead or even stay afloat by increasing their inventory for seasonal rushes, aiding in expansion, updating technology, and more.
To help with that intimidation, we’ve put together some of the most common funding terms you’ll come across when proceeding with an alternative lending contract and compiled them in our second installment of our Funding-tionary!
Consolidation Deal – FundKite would make an offer to purchase an existing position, or several existing positions, and have the merchant net in excess of 50% of the amounts being purchased. For example, a merchant has two positions with an outstanding debt of $50,000. In order for this program to work, the merchant would need to qualify for a minimum of $100,000 so that after the $50,000 in positions were purchased, the customer would still net $50,000. FundKite buys out up to 5 positions.
Reverse Consolidation Deal – In cases where a merchant has taken on several positions that make his daily payments difficult, this program allows for a decrease in daily payments at the time when payments are most problematic and re-stretches out the daily payment over a longer period of time. For more on our reverse consolidation program, read our other article.
Positions – Any lender debting money to the merchant is considered to have a position out on them. The number of positions you have determines if you are more likely to qualify for consolidation or an additional position.
COJ – A confession of judgement is a merchant’s legal statement that they agree to pay off their funding and will be in immediate default if they don’t. This notarized document can be taken to court to ensure the funder gets their money back.
Collateralized – This type of funding requires some form of security for the funder incase the merchant defaults. For example, if the merchant can no longer make payments, the funder can go after the assets pledged in the contract, such as the merchant’s house.
Uncollateralized – Here there is no type of object or loan put up as security. If the merchant does not meet payments, the funder would go after their vendors to get paid first. FundKite is uncollateralized.
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