Merchant cash advances are increasingly widespread in society these days. The current position of the economy and airtight credit expectations are huge contributors to the increase in capital advances. It is tough for merchants to get the working capital that they need with the increasingly stringent conditions for traditional business loans. Business cash advances are an unconventional avenue of getting working capital for day to day business requirements. So how does a merchant cash advance function? Let us explain
Merchant Cash Advances are an option provided by a lending agent to a entrepreneur that processes credit cards, usually in the retail or restaurant business. The Merchant Cash Advance funding institution typically advances the entrepreneur a predetermined amount of money in exchange for a portion of their future credit card transactions.
For instance, let’s check out Jo’s Diner. Jo might not have enough funds ready to pay his employees or to buy new appliances for his kitchen. Say Joe needs $30,000 and he called a Merchant Cash Advance provider for the money.
The agent would assess Jo’s previous credit card statements and determine if he is eligible for the advance. They would determine an interest rate for the funds advanced. The rate is usually higher than a traditional business loan because the advance is typically provided to entrepreneurs that don’t have the credit or collateral to get funds from a regular bank. If the fee for Jo’s advance is 30% then he would be getting the thirty thousand dollars and paying the agent $39,000 in future credit card receipts.
The lender would get the 9,000 dollars by taking a portion of the daily credit card transactions the business charges. Say the part the lender takes is eight percent of daily credit card volume and the business received $10,000 in credit card volume for the day. The merchant cash advance lender would capture $800 (8% of the $10,000). This process would keep going until the lender received the entire $39,000. This payment process fluctuates with the cash flow of the business. The percentage will remain the same so if your business has a bad period, you will be paying less. This is a big selling point for the advance product. Regular bank loans have a fixed payment amount, which could be hard to pay during slow times. A merchant cash advance has the feature to follow a change in business cash flow.
A merchant cash advance is a helpful substitute to a business loan. Some will think 9,000 dollars is a expensive amount to pay but the conditions a small business owner must meet for a traditional loan is becoming increasingly difficult to attain. A business cash advance is a method of getting immediate and easy money to meet business working capital needs.
Dating back to early 2008 Daniel Samoohi has helped 1000’s of business owners find trustworthy lenders in order to compare quotes for a merchant cash advance. He also aids start ups as well as established businesses find great deals for merchant accounts in order to accept credit cards as a payment method for their businesses.