July 25, 2024

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Merchant Cash Advance – Funding Solution For Small Business

Merchant Cash Advance – Funding Solution For Small Business

More and more small business owners are looking at merchant cash advance as a viable source for operating capital and cash flow. Although, the economy is somewhat recovering from the worst downturn in the last 80 or so years, business lines of credit, especially loans for operating capital have all but dried up and disappeared. Not only the banks have tightened the reigns on handing out loans to small businesses, customers have also wisened up to the new realities of our time and have tightened up on the money belt. This is where merchant cash advance comes in.

What is a Merchant Cash Advance?

A merchant cash advance is different from a traditional small business loan. With a traditional small business loan there are many disadvantages such as lack of flexibility, long waits for approval, interest amounts, access to paid portion of the loan, possible binding covenants, and the fixed charge the bank usually requires. With a merchant cash advance, these issues are eliminated from the scenario. The application process is quick and you get access to the funding in as little as five days.

How does it work?

Basically, a merchant cash provider will purchase a percentage of your future Visa / Master Card / Amex / Discover / Diner receipts and advance those funds to you up-front. You use the money without restriction. The merchant financing provider then deducts a small percentage daily from your future credit card sales. There are no fixed monthly payments; instead a portion of your monthly credit card transactions is deducted until your advance is paid back.

What are the qualifications?

The main requirements for a merchant advance are to meet a certain amount of credit card transactions, since this is the form of repayment; to have been in business with credit report history for at least 12 months; and to have a premises lease with at least 12 months remaining.

What can you do with the money?

With a cash advance you can purchase new equipment, fund payroll, pay taxes, expand your marketing, purchase supplies, catch up on rent or other bills, take advantage of expansion opportunities or you can use the money for any other purpose – it’s entirely up to you!