Retail merchants and e-commerce sellers sometimes can’t access traditional small business loans to grow their businesses. If you’re using the Lightspeed commerce platform, you might have a new funding solution available with Lightspeed Capital.
The new program provides qualified Lightspeed Payments customers with an opportunity to get a merchant cash advance. However, it’s an invite-only application and might not be the right funding structure for every small business owner.
This review can help you decide if Lightspeed Capital is a good move for your business by covering the benefits, drawbacks, and application process. Specifically, we’ll answer these questions and more:
Lightspeed Capital is a unique business funding opportunity for specific eligible Lightspeed Payments customers. Lightspeed is a one-stop commerce platform for retail, eCommerce, restaurants, and golf courses. Its products include point-of-sale, Payments, inventory management, marketing, reporting, and more.
The company is the direct funder of the Lightspeed Capital product. It’s designed to empower Lightspeed merchants to invest in their business growth and development by providing access to capital.
The Lightspeed commerce platform is available across the globe. It launched in 2005 and is headquartered in Montreal, Canada, with US offices in New York, NY, and Providence, RI. It began offering Lightspeed Capital to US merchants in 2021.
Lightspeed Capital is a merchant cash advance (MCA) that provides a lump sum of money, repaid with a percentage of your daily sales. Merchant cash advances are not loans. Instead, it’s a business-to-business transaction where the MCA funder (Lightspeed in this case) purchases future receivables for the advance amount, which is the purchase price of the receivables.
The company doesn’t publish borrowing ranges, fixed fee ranges, or terms. However, it states there are no deadlines to repay the advance – it depends on your sales.
Since it’s not a loan, MCAs don’t have an interest rate. Instead, MCAs use a fixed flat fee, sometimes called a fixed capital fee or factor rate. The fee is a percentage of the advance amount, which gets added to the principal to become the total repayment amount.
Lightspeed Capital provides the following sample MCA offer a user might receive:
Cash advance amount: $20,000.
Flat fee: $3,400.
Total amount owed: $23,400.
Payment rate: 11%.
As you can see, the flat fee is 17% of the advance. That’s the same as a factor rate of 1.17. The payment rate is the percentage of your daily sales that go towards repayment. Other MCA funders call this the remittance or holdback rate. Actual fees depend on your MCA structure and agreement.
In this example, 11% of the daily sales are remitted to Lightspeed until the total $23,400 is repaid. There’s no way to reduce costs by paying it off early since the fee is applied initially and becomes the new payment total.
The company actively monitors Lightspeed Payments accounts for when they become eligible. Merchants need at least six months of payment history to qualify.
Since repayment comes from your daily sales, traditional factors like credit score are not considered. The program seeks to help merchants that can’t qualify for traditional small business loans.
It bases eligibility on your business performance, including sales history and tenure with Lightspeed. It will notify you with an invitation to apply when you’re eligible. Invitations are only good for 30 days.
The company doesn’t perform a credit check on Lightspeed Capital applicants. It’s unsecured financing, meaning it doesn’t require collateral.
Business owners can use the funds for any business purpose, project, or expense. Examples include purchasing bulk inventory, hiring and onboarding staff, expanding product offerings, and marketing campaigns.
As mentioned, you must be a Lightspeed customer, and the program is designed to help businesses that can’t get a traditional small business loan. However, merchant cash advances can be an expensive way to fund your business. Ensure you have a repayment plan.
Lightspeed Commerce includes a partner program, but it’s unclear if partners can help their clients obtain the merchant cash advance. ISOs, business loan brokers, and other partners should contact the company to ask about any business loan affiliate program.
The Lightspeed Capital team pre-screens for eligibility and creates an MCA offer tailored to the business. It will alert you by email or BackOffice notification to apply.
Applications are by invitation only. However, it states that current customers can email [email protected] to ask about eligibility.
Here’s how the process works.
As mentioned, repayment comes from your daily credit card payments. It’s unclear if the 11% from the example offer is just a sample payment rate or the standard rate it uses.
There is no monthly total due, nor does it set terms. The payment rate continues to deduct from your sales until the total repayment amount is paid in full.
This differs from some MCAs that set a specific term. If the amount is not repaid via daily sales by the end of the term, borrowers must make catchup payments, but with Lightspeed Capital, there is no set term. That means you don’t have to worry about late payment penalties.
The company doesn’t indicate if there are any prepayment penalties or early payment discounts. It does state that borrowers can request additional rounds of funding after paying the MCA in full.
One of the primary benefits of Lightspeed Capital is that it could potentially provide business funding to small business owners who can’t qualify for a loan. There’s no minimum credit score, credit check, or revenue requirements.
Merchant cash advances generally have fast approval and funding times. Once approved, you can get your Lightspeed Capital funds as soon as two business days.
Eligibility is based on your business performance, especially sales history. That means you could become eligible if you’re successfully driving sales using the Lightspeed platform.
Nearly every merchant cash advance doesn’t require collateral, including Lightspeed Capital. It’s a viable funding product for small business owners who don’t have business assets to pledge as collateral.
A unique aspect of the Lightspeed Capital merchant cash advance is that it doesn’t have a set term. It’s an open-ended date, and repayment comes from sales, so repayment is directly tied to sales performance. A slow day or week means you won’t have to pay as much, making it a more affordable structure.
Merchant cash advances are among the most expensive business funding options. That’s the tradeoff for the lowered qualifications and fast funding times.
Another drawback is that MCAs use a fixed fee instead of an interest rate, so there’s no way to save if you pay it off early. It also makes it difficult to compare costs with a loan that uses an APR.
Lightspeed Capital MCA applications are by invitation only. There’s no way to apply directly.
Merchant cash advance products take repayment directly from your daily sales revenue. While that helps ensure you never miss a payment, it can also strain your cash flow.
Pros:
Cons:
Yes, Lightspeed Capital is a legitimate merchant cash advance product from the massive commerce and point-of-sale platform.
We couldn’t find online reviews specifically about the Lightspeed Capital product. All the available reviews are for the general commerce platform, which has mixed reviews.
Lightspeed Capital will notify you if you’re eligible. You have two options if you don’t have an invitation to apply. You can continue selling on the platform and wait for an eligibility notification or apply to a small business lender or marketplace that accepts direct applications.
Fortunately, many alternative lenders are available. You shouldn’t have any issue finding a merchant cash advance provider as it’s one of the most accessible funding products.
You might also be interested in one of the following small business loans:
Lightspeed Capital is best suited for qualified Lightspeed Payments customers who need fast working capital. It doesn’t require a credit score check or collateral, so it’s also a good fit for credit-challenged business owners without high-value assets.
Established businesses with excellent credit, high revenue, and assets to pledge as collateral can find more advantageous and less costly business loans. However, it provides fast funding, and the open-ended term is attractive.
Based on the available information, we rate Lightspeed Capital at 3.4 out of 5. It’s worth considering if you’re already using Lightspeed, but the costs of merchant cash advances and being an invite-only product limit its usefulness for small business owners.
Disclaimer: The Lightspeed Capital trademark is owned by Lightspeed Commerce Inc., and its use herein is for reference purposes only, and it does not indicate sponsorship or endorsement from Lightspeed Commerce Inc.
Fraud Disclosure:
Please be aware that individuals have been fraudulently misrepresenting to business owners (and others) that United Capital Source, Inc. (“UCS”) can assist small businesses in receiving government grants and other forgivable business loans, when in fact those grants or loans do not exist or are not available. These individuals have ulterior motives and are engaging in the unauthorized use of the names, trademarks, domain names, and logos of UCS in an attempt to commit fraud upon unsuspecting small business owners.
UCS will never communicate with a prospective client on Facebook, Facebook Messenger, or any other type of social media. Further, any email communications will always come from an official UCS email address and not a Gmail, Yahoo, or other email domain. If you believe you have been contacted by someone posing as an employee of UCS, please email [email protected].
