There are two sides to the merchant cash advance industry 1) the funding side, 2) the processing side. In a merchant cash advance a merchant agrees to sell his credit card receivables at a discounted rate. The lender purchases the credit card receivables and collects a percentage of the credit card receivables until the factored amount is paid back.
In order to collect this money the merchant cash advance company must have an agreement with the credit card processing company that it can split the funding with them. In split funding the merchant will batch out of his machine, and the batch is processes by the credit card processing company. That company will “split the batch,” meaning it will deliver the percentage due to the lender, and the percentage due to the merchant. In addition, the credit card processing company will take its percentage that it is charging the merchant for processing Visa, MasterCard, American Express and Discover (in merchant funding, only the Visa/MasterCard sales are split). Credit card processing is an extremely competitive business these days, and there are many processing companies out there. It is generally not difficult to negotiate rates on the credit card processing side.
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To learn more about methods of funding click here!