Can Repayment Terms Tied to Revenues Work?

New York Times blogger and loan broker Ami Kassar, has penned an article advocating a new type of small business loan product.

Loan repayment would be based on a percentage of revenues, similar to daily merchant cash advance repayments, not a set monthly payment.

Now Ami is not Pollyannaish noting regulators and small business lenders would have to think “outside the box” to get something like this to market, “In the new model I am proposing, because the lender is assured of a piece of the entrepreneur’s future earnings regardless of whether the current business succeeds, the lender should be willing to be more flexible with terms and rates.”

My takeaway is that any discussion along the lines of thinking about new small business lending products for Main Street is a positive one.

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