How to choose a merchant cash advances provider

How to choose a merchant cash advances provider?

How to choose a merchant cash advances provider?

For a small business which may not qualify for a traditional bank loan, a merchant cash advance is one of the most suitable options to get quick cash. A borrower only needs to meet a couple of requirements to qualify for one. The fact that the approval rates for this financing plan are quite high makes it even more suitable for small businesses. Providers of merchant cash advances do not require your credit score – this lifts a big burden off the shoulders of many business owners who have poor credit scores. This plan has become a way for businesses to grow themselves and fund their own growth while continuing to make sales.


When you, as a business owner decide that it’s time to take your business to the next level, it is important you have a couple of things in mind. You have to understand that a merchant cash advance is not a loan. Thus, it is not regulated by laws which govern the issuance of loans and interest rates. This means that the interest rates for merchant cash advances could go as high as 200%. Which means that you need to have a lot of cash to pay back in less than about 24 months or so. It is always important to take into consideration while choosing the merchant cash provider you want to work with. Here are a couple of considerations:

1.  Research

 

do your research well

do your research well

You have to do your research well. You have to understand that apart from being cash advances that help businesses out, the providers are also running a business. Thus they have to make a profit while providing you with a merchant cash advance. You have to look at all the borrowing options you have. Be flexible enough, font sideline any company, and more so look closely into all the features of the company. The internet becomes a great tool for research. Look for a company that matches the financial situation of your business so that you don’t get a deal you cannot handle. Research is a very important step in getting what works for you.

2.  Understand the fine print

 

Read the contract closely before signing anything. You should understand that the contract describes all that you are getting into. It lays out all the fees, though some are quite hidden. It is your duty to read through the contract and understand everything. You do not want to start complaining about the hidden fees you don’t know about after signing the contract. 

3.   Weigh your options

 

Weigh your options

Weigh your options

Weigh all your options that are on the table. To get a reliable and credible merchant cash advance provider, you have to look at all aspects. Look for a company that is suitable for you in terms interest rates and payment options. The key is knowing how to protect yourself by having enough knowledge about what the whole plan entails, including rates, government regulations, among others. All these help you get the right provider and the right type of merchant cash advance that is truly helpful for your business.

 

Benefits of merchant cash advances

Merchant cash advances have become a lifeline for many businesses in the last couple of years. If you are planning to get a merchant cash advance but have doubts, this article may provide more information.

What are the benefits of the merchant cash advance?

benefits of the merchant cash advance?

benefits of the merchant cash advance?

1.  No credit check or collateral at stake

 

 Traditional bank loans will require you to have a good credit score before they approve your loan. The credit score may not even guarantee you a reasonable interest rate and worse, you are not even guaranteed for a loan. This means that if you have bad credit, you may not be able to get a bank loan at all. This could eventually mean that your business is at a risk if you cannot get the money your business needs urgently. This is when merchant cash advances rise to the occasion. Merchant cash advances providers are not interested in your credit score. They only deal with your business. Thus whether or not you get the cash advance all depends on the state of your business.

The plan also gives you peace of mind. This is because merchant cash advances providers do not look for collateral when granting you a merchant cash advance. This is because the merchant cash advance is not considered a loan. It’s an exchange of cash in exchange for future credit card sales and debit card sales. Thus in the case of things don’t go as planned, you don’t give in to stress yourself about the risk of losing your home or car or whatever is used as collateral. Your house and car are always safe when it comes to taking out a merchant cash advance.

2. Easy application

 

Easy application

Easy application

Merchant cash advances are just one of the easiest financial plans you can get as there is not much that is required to process the cash advance. Comparing this with a traditional loan, the merchant cash advance is pretty easy to apply. It takes weeks and probably months to apply for a traditional bank loan. This is because of the numerous background checks they make. All these will take more than a month to review. A merchant cash advance usually takes less than 24 hours to approve. You will get your cash advance in about 7-10 days.

If two merchants decide to take out a merchant cash advance and a bank loan respectively, the one who went with the bank loan will probably have a hard time before finally getting his money compared to the one who took out the merchant cash advance. A merchant cash advance is very convenient, simple and attractive to anyone who knows that time is money.

3. Quick access to cash

 

 Quick access to cash

Quick access to cash

The simplicity of the financing plan makes access to cash easy for a business. This is because of the simplicity if the paperwork that is needed for the application. While commercial companies offering loans are looking at tax returns, credit scores and all types of documentations and credentials, merchant cash advance companies just need the percentage rate at which the sales will be divided and the amount of time that will take for them to get their money back. It becomes possible to get your cash injected into your business in about a week or so instead of the months it takes for commercial loans to be approved. With merchant cash advances, you get the  money quickly to turn around your business.

The main benefit if this plan is the accessibility it provides. Many businesses can apply and benefit from it. As long as you are making sales, you are just as qualified as another person who applies for a merchant cash advance. 

4. High approval rate

 

High approval rate

High approval rate

This is largely because of the opportunities it presents to the users if this financing plan. Technically the business is judged by the average amount of money it makes monthly. This means you get the average for the previous year to determine the state of the company and the trend at which the company is moving. Due to this, the plan has been having a high approval rate especially from those who have benefited from it.

5.  Revenue-based collection

 

The merchant cash advance company only gets paid when their customer (your business) gets paid. The financing plan is designed in such a way that repayment money comes from credit card and debit card sales of the business. This if a business doesn’t make money, the merchant cash advance provider doesn’t get paid. It’s that simple. Thus, the business proprietor has nothing to worry about.

The commercial loans work in such a way that, for a loan lend to a business, there is the principal payment plus the interest. Now repayment comes as followed: you have to pay a monthly amount of cash to the lender each month, failure to which you risk hefty penalties and even worse, loss of your collateral item.

When it comes to merchant cash advance industry, you just need to keep your thoughts and concentration on making sales. The merchant cash advance debt will slowly repay itself. This allows you to keep a clear mind and focus on improving your business.

A merchant cash advance is one of the many business financing plans you can get. Typically, it helps you upgrade your business or help pay off other debts or help you solve all sorts of business-related problems. The most attractive feature is the repayment factors. They keep you focused on the business instead of worrying about repayment.

 

10 things you need to know about merchant cash advances

You may be a business owner with a struggling business and are probably looking for options to save your company from going down. The merchant cash advance option may have come to your mind but probably don’t have enough information. This article is dedicated to giving you useful information and taking you through a couple of important points.

1.  What is a merchant cash advance?

 

Merchant cash advance

Merchant cash advance

The merchant cash advance financing is a financing option that involves the loan of a certain amount of money into a business by merchant cash advance providers in exchange for future credit card and/or debit card sales. It is a financial plan that small businesses take up. Merchant cash advances help them get quick cash which their businesses need. In exchange, they sell a part of their future sales to the merchant cash provider. This means that if the business makes a sale, the sale is divided between the business and the provider company.

    The terms are agreed between the two parties but the cut is usually between 10-25% of the credit card sale going to the company while the remaining goes to the company. This becomes an easy way for the business to inject cash flow into its operation and then pay back as they continue conducting business.

2. Functions of merchant cash advances

 

A merchant cash advance is used by the business for all sorts of reasons. The business may decide to use the cash to pay their employees or repay a debt. Other businesses may use the cash advance for advertisements or fund a promotion campaign. Other uses may include the production of more inventory and stocking up products. 

The merchant cash advance is a helping hand for business owners during difficult financial situations. The cash advance becomes a quick solution for these problems.

3. Merchant cash advance is NOT a loan

 

Merchant cash advance is not a type of a loan. It is described as an exchange of cash the future credit card or debit card sales. It is not considered as a loan and thus treated differently. That is why merchant cash advance providers say that they are not regulated by the loan and interest legislations that have been put in place. Hence, the interest rates could go higher than you are normally used to. Another difference is that since it is not a loan, the interest rates are not calculated by the annual percentage rate. They are calculated according to the factor rate of the business.

4.   Fast approval

 

Fast approval

Fast approval

Merchant cash advance is processed within a short period of time. With all necessary documentations and credentials, a merchant cash advance could be approved within 24 hours. The deposition of the money into the business account may take up to a week. This is considered very fast compared to traditional loans which have to go through a series of processes before they approve your loan. A merchant cash advance gives you the fast cash for your business. Thus, it is very attractive to small business owners.

5. Pros of the merchant cash advance

 

Pros of merchant cash advances

Pros of merchant cash advances

A merchant cash advance has many advantages that attract a lot of people. They include the approval time z and the credential factor, among others

  •  A merchant cash advance does not require many credentials to apply. It’s all about the business and not about the individual. Thus there is nowhere the credit score of the proprietor of the business is in question. The plan solely deals with the business and not the owner.
  • The approval time for a merchant cash advance is just lessee than most other loans in the market. It takes a minimum one week to get the merchant cash advance for your business. It’s why merchant cash advances have become so popular.
6. Cons of merchant cash advances

 

The plan definitely comes with a few drawbacks which you have to be careful of. The drawbacks mostly affect the interest rate of this plan. The plan doesn’t have an annual percentage rate as it is not classified as a loan. It all depends on the factor rates. This means the rate of interest cannot be controlled. There is an important aspect which you may need to know. The percentage cut that is paid to the company for every sale is not the same as the interest rate. They are two different things and the charges are different band have to be paid. This may cause confusion for the business owner and thus cause frictions in the future.

7.  Other factors

 

This sort of financial plan is has a special characteristic. The amount of money from sales that are going to the company varies. This means you cannot plan for the money that is going to be paid from your business to the company. This plays a con card in this case. However, this characteristic has a flip side. This is because since the cash is not specified, it means that you are not affected as a business when it comes to the low season of your company. There is no specific amount of cash that is specified that your business has to earn each month. Thus, the merchant cash advance company will get paid when you make sales. This relieves your business from the pressure of having to attain a certain amount of sale each month.  

8. Company specifications

 

different companies will come up with different offers

different companies will come up with different offers

In order to attract businesses into their plans, different companies will come up with different offers for your businesses. Thus, you will have to a lot of companies offering merchant cash advances but are customized in different ways to suit different businesses. The key is always to take the plan that works well for your company. It’s all about looking at works with your budget and your sales projections.

9. No collateral involved

 

Merchant cash advance companies don’t need a collateral as this is not a loan. It is an exchange of future sales for a merchant cash advance. This, collateral becomes irrelevant. It’s all about the agreement put in place when the application of the MCA  was done.

10. Bottomline

 

It’s all about choosing what works for your business. This plan is very attractive as it’s very simple to understand. However, it has the downside of having very high- interest rates. However, if you can couple with them it’s a plan that could go a long way in making your business a success. It’s all about perspective; what you make of the plan.

Merchant cash advance: what it’s all about

Sometimes, your business may experience cash flow issues. It could be cash needed to pay your employees and suppliers, get new inventory or expand the business. As a business person, you want a fast solution, a way to pump money into your business quickly. Time is money in this case and so every minute counts. Traditional loans may take a long time to process, especially if we are talking about a large sum of money. Background checks will be carried out, then they will check your credit score and ask for collateral for the loan. The process could be too long and complex. Thus, you will look for better solutions that are fast and convenient for your business and safe for yourself. This is where merchant cash advance comes in.

Merchant cash advance is a purchase of a fixed dollar amount of your business’ future credit card or debit card sales receivables. What’s a Merchant Cash Advance? Let’s break this down for better understanding.

What is a merchant cash advance

What is a merchant cash advance?

What is a merchant cash advance?

What is merchant cash advance? Merchant cash advance started long ago, but it was structured differently. It would involve a large sum of cash payments that would be done to a business by a merchant cash advance company, in exchange they would get an agreed upon percentage of future credit card or debit card sales. This means that repayment would be done slowly. You have to realize that a merchant cash advance is not categorized as a loan.

Times have changed and now the merchant cash advances have been adjusted structurally to accommodate all sorts of business, big or small. Right now, the definition of a merchant cash advance is as follows: a merchant cash advance is an exchange of a specific amount of payment done to a business in exchange for future credit card and/or debit card sales. The payments are done in small portions over a short period of time as specified between the business and merchant cash advance company. This description has helped to bring the diversification of the business that looks for this financial plan as an option for their business.

The structural concept

The structural concept

The structural concept

Merchant cash advances are about the exchange of future credit card sales and/or debit card for instant cash. Basically, the owner of the business gets the cash injection and then as the business makes money the company that bought  the future sales gets back its money slowly.

Let’s see a simple example. A business decides to take out a merchant cash advance worth about $30000 in exchange for about $35000 future sales. As the business goes on making money, it has to pay between 10-25% of every credit card or debit card sale it makes to the lending company.

Payment is structured according to the agreement between the borrower and the lender. The business may decide to make a payment by the end of each business day. This means that calculations are done, and then the cut is made and sent to the merchant cash advance company. However, some businesses have adapted the technologically advanced payment mode. This involves partnering with payment processors. Thus, payment is done automatically and a percentage of the daily sales is transferred automatically to the merchant advance company.

The fact that this financing option plan is not described and characterized as a loan means that the providers of this service disregard any laws and legislations imposed on loans everywhere, citing the reason that the laws do not touch their financial modification. This ultimately means that they can set interests up to anywhere they deem profitable enough for themselves. After all, there is very little in place to stop them. However, they are quite reasonable as each deal they make all depends on the structure, sales and projection of a business. It’s all about what comes out of a business a certain time and how fast they will get their money. Instead of using the annual percentage rate to calculate interest, this plan uses specific business factor rates to calculate how much interest the company pays back.

Repayment options of merchant cash advance

Repayment options of merchant cash advance

Repayment options of merchant cash advance

This plan is mostly used by small business enterprises and companies that technically cannot qualify for a traditional loan. It is important to state that a merchant cash advance is always more expensive than getting a traditional bank loan. However, the business that uses like its convenience. The fact that the merchant cash advance company don’t go looking at the borrowing company’s credit score makes merchant cash advances even more attractive.

  When it comes to repayments, the merchant cash advance companies want to give their customers enough options to let them repay conveniently. The repaying options are:

  •         Slip withdrawal
  •         Lockbox
  •         ACH withholding

Slip withdrawal

This is the most popular way of repayment. Typically, this mode of repayment involves the automatic slip of sales. This means that if a credit card sale is made at the business which borrows the merchant cash advance, the payment is split such that 10-25% of the total sales go to the company while the rest remains in the business. The method is convenient for all types of businesses. Both parties get their money automatically with no conflicts or delays.

Lock box

This mode of repayment is also known as the trust bank account withholding. This entails the deposition of all sales made by the company into a bank account that is controlled by the cash merchant advance company. Then according to the agreed terms, the company sends the business’s portion of the sales through wire transfer into its deposit account. This option is the least preferred because it is prone to all sorts of delays.

ACH withholding

This mode is divided into two; it will either depend on if the agreement is “for sale” or “as loan”. As a sale, the company gets the credit card sales information and then deducts its portion for itself. When structured as a loan, the company will not regard if the business has made a sale. The company deducts a fixed amount of cash daily.