Small business owners who can’t secure financing from traditional lenders or who can’t wait that long often turn to alternative funding options like Zinch. The online lender offers flexible funding programs with fast turnaround.
However, determining the best alternative lending options can be challenging. We can help you decide if Zinch is the best option for your business funding needs by covering the benefits, drawbacks, and application process.
Specifically, we’ll answer these questions and more:
Zinch (formerly Merchant Capital Source) is an alternative online lender offering small business loans. Its fast and convenient financing solutions aim to make financing inclusive and help small businesses thrive.
The company began as a merchant cash advance provider in 2004. Over the years, it added a business loan offering as well. Its stated goal is to focus firmly on offering solutions that are easy to understand.
Zinch is based in Huntingdon Beach, CA.
The lender offers two financing solutions for small businesses: Zinch Flex and Zinch Loans. Let’s look at how each program works.
The Zinch Flex product is a merchant cash advance (MCA). This type of funding solution is technically not a loan; it’s a business-to-business transaction where the MCA funder purchases your future receivables at a discount in exchange for an immediate cash advance.
Unfortunately, the lender doesn’t publish cost information. However, most MCAs use a factor rate to determine costs. Factor rates are typically expressed as a decimal and range between 1.05 – 1.5.
Calculating your costs with a factor rate is easy, but they tend to be expensive. Say you received an MCA for $150,000 at a factor rate of 1.2. Multiply the advance by the factor rate to determine the repayment amount:
$150,000 x 1.2 = $180,000. You’d pay $30,000 for the advance. While you can think of that as “interest,” it’s actually the MCA funder purchasing $180k of receivables for $150k.
MCAs carry flexible payment terms because the amount you repay comes from your daily credit card sales. High sales days will equal a higher payment, while low sales days equal a lower payment.
The funding agreement should outline the percentage of daily sales the company retains. It’s sometimes referred to as the holdback or discount rate.
The Zinch Loan has the same features as its MCA product, but it’s a business term loan. It operates like a traditional business loan where the business receives a sizeable one-time disbursement and repays it plus interest and fees in fixed payment terms.
Like its MCA product, the lender doesn’t provide interest rate ranges or potential fees. You should receive your rates when you apply. Carefully read any funding agreement or contract before signing to ensure you understand the costs and that your business can afford repayment.
One of the main benefits of the lender is that it has low minimum criteria to apply. Since its products are revenue-based, how much your company earns is the primary determining factor for approval.
Small business owners of all credit levels can apply. While the lender’s underwriting process involves reviewing your personal credit, it is not a determining factor in approval decisions.
The only other set minimums you must meet are:
As mentioned, the lender doesn’t provide information on costs. While you’ll get a breakdown of rates and fees after applying, there’s no way to estimate the costs before applying.
The company’s website says it bases your rates on the following factors:
The lender doesn’t set restrictions on how you can use the funds. Small businesses can use the money for most business purposes, including purchasing inventory or equipment, renovations, advertising, debt consolidation, or paying taxes. You can use Zinch funding to pay off existing debt if you have an existing loan.
One of the company’s primary focuses is on renewals and repeat business. It states that 70% of its customers are repeat customers.
The lender offers a business loan affiliate program. ISOs and business loan brokers can sign up to offer their small business clients its products.
Applying is quick and easy, and you can complete the entire process on the same day. Follow these steps to apply.
You can start the process by completing the online form or calling the company. Either way, you’ll connect with a Zinch representative to discuss your needs. You must also submit business bank statements for the previous six months.
If approved, the lender will send you customized funding proposals. The representative will discuss the financing options and help you choose the best one.
After reviewing the proposal, you can sign the documents online to agree to the funding structure.
Once you sign, you should receive your funds within 48 hours.
Zinch, Post Funding:
The lender sets up automatic payments, so you won’t have to worry about scheduling or missing payments. It doesn’t indicate the payment frequency, but most short-term financing requires daily, weekly, or semi-monthly payments.
There are no prepayment penalties. It might also be possible to get an early payment discount. However, you must indicate that you want to pay early so it’s reflected in the contract.
You can request more funding at any time during repayment. The lender indicates it prefers to wait until the current balance is at least 50% paid off before extending renewals.
The primary advantage of Zinch is that it provides fast access to working capital. Business owners get a quick and easy application with minimal documentation requirements.
The lender aims for a speedy turnaround on approval decisions and provides fast funding once approved. You can apply with any credit score and only need six months of business history to be eligible.
It offers both fixed and flexible payment options. Fixed payment options with its term loan allow for easier planning and budgeting. Flexible payment options with the merchant cash advance mean your repayment amount fluctuates with your revenue.
One of the most significant drawbacks to the company is the lack of transparency on costs. It doesn’t provide any ranges or amounts for interest rates, factor rates, or other costs.
In general, alternative business lending is more expensive than traditional bank or credit union financing. Merchant cash advances, like Zinch Flex, are one of the most expensive business funding products available.
The extra cost is for the speed, convenience, and accessibility of online business loans. However, we can’t compare Zinch to similar alternative funders since it doesn’t provide cost information.
Zinch also has limited funding options. You can only choose between the MCA and a short-term loan. Both products only provide up to $250,000.
Pros:
Cons:
Yes, Zinch is a legitimate online direct lender. It’s Better Business Bureau (BBB) accredited and has an A+ rating on the watchdog site. It’s also a verified company on Trustpilot.
The lender doesn’t have many online reviews, but the ones available are primarily positive. It has a 4.9 out of 5 rating on over 480 Trustpilot reviews.
The positive reviews talk about the ease of the process and the service team offering solutions when other funders turned them down. One customer called it super easy. Several users mentioned how the lender’s speedy decisions and funding helped them when their businesses needed it.
Many of the lender’s consumers mentioned their representative by name. Several reviews were from repeat customers that have renewed with the company for years.
The negative reviews are largely from customers denied during the underwriting process after initially qualifying. Several low-rated reviews complain about high rates. A few of the 3-star reviews talked about delays during underwriting and approval.
The lender will examine your business’s revenue, credit history, and other factors during underwriting. Several issues could trigger a denial.
If you were declined, the denial letter should explain why. You can call the lender directly if you need more information.
Fortunately, there are many alternative lenders and marketplaces available if Zinch doesn’t work out for you. Merchant cash advances are one of the most accessible business funding products online, and there are many options for business term loans.
You might also be interested in one of the following small business loans:
Zinch is best suited for credit-challenged small business owners seeking fast funding for $250k or less. The lender’s easy application process and quick turnaround on approvals and funding can help when you have an urgent need. It’s also a direct lender, so it services all financing.
Established businesses with excellent credit can likely find more advantageous business loan options. You must find a different lender if you have less than six months in business or earn less than $10k per month.
Based on user reviews and the available information, we rate Zinch at a 3.8 out of 5. The lender has an excellent online reputation and can provide fast funding, but its limited products, low borrowing amounts, and lack of transparency on costs are significant concerns.
Disclaimer: The Zinch trademark is owned by Zinch LLC, and its use herein is for reference purposes only, and it does not indicate sponsorship or endorsement from Zinch LLC.
