Return On Investment for a Small Business Loan


When deciding whether or not to take on debt it is prudent to do a return on investment (ROI) analysis. We present an example below that shows how to calculate the return on investment for one of our unsecured business loans.

Example:

You own a shoe shop, and you have an opportunity to buy stock at a 50% discount for a total of $100,000. The catch is that you need to pay in cash upfront, and you need the cash in under a week. A typical bank loan is not going to help Assuming you can resell this stock for $300,000 for a profit of $200,000.

Merchant Cash will advance you that $100,000 in return for $125,000 of your future credit card receivables (actual rates may be higher or lower depending on your business circumstances). Therefore the cost of this advance is $25,000. The $125,000 will come about by a fixed percentage of your credit card receipts. As a simple example – if the rate of receipts is 10% and you have daily sales of $100, we would keep $10 and you would get the remaining $90. We would continue to do this until you had repaid the $125,000.

In this case the net profit is $300,000 - $100,000 - $25,000 = $175,000, and it is a sensible decision. You should always do this simple analysis before deciding on taking an advance.

It would never make sense to take an advance where the potential for extra profit is less than the cost of the advance.

If you don’t sell that stock as quickly as you hoped, there are no fixed payments in our unsecured business loan. You will continue to pay us 10% of your credit card / eftpos takings until you have paid us $125,000.

Apply now for an  Unsecured Small Business Loan. The application process is simple and we do not require mountains of paperwork. Approval can be made in as little as an hour, and funds in your account within 24 hours!

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