Merchant Cash Advance » Op-Ed

Merchant Cash Advance Tips

Merchant Cash Advance — Wed, 05 May 2010 14:01:19 +0000

Here are a few tips to consider when entering a merchant cash advance agreement:

1. Read the contract – Always, and I repeat, always fully read the entire contract including the fine print. As business owners, you are very busy, but do not sign anything until you have read the contracts and fully understand everything stipulated. Ask your merchant cash advance provider these questions, but always confirm by reading the contracts. This is good idea not only for a merchant cash advance, but also a good rule for any contract that you sign in life. If there are any questions in the contract, ask your merchant cash advance provider, and then ask your lawyer to confirm.

2. Understand the program – Ensure that you understand exactly how much you are paying back to the lender, and what percentage the lender will take from your credit card receivables. Make sure that this percentage is consistent with business performance, i.e. if you drop below a certain value for Visa/MasterCard sales a month that the cash advance provider won’t take a higher percentage of receivables. If the advance is variable, then understand the risk involved.

3. Fees – Often there are fees attached to the merchant cash advance. These fees can be charged by both a direct lender, and also by a broker. Many merchant cash advance providers will charge fees on the UCC filing, switching processors, Lockbox account setup, service fees etc. Ask the merchant cash advance provider if there are any additional fees. Again, these fees should be outlined in the contract

4. No attached collateral – A merchant cash advance is NOT a business loan. It is actually a purchase and sales agreement. This is why merchant cash advance companies can pretty much charge whatever “interest rate” they want for the money. As such, it is generally accepted that in the industry there is no collateral attached to the advance. Make sure that there are no variables – i.e. minimum payments, consequences if failure to make payments etc. Ensure that there is no collateral attached. I have seen a few contracts from companies that contain stipulations about
appropriating the merchant’s property if there is failure to make
payment or if the business fails. If there is an additional collateral addendum and
stipulations, make sure that you understand all of them.

5. Do your homework! – Inquire with multiple companies about obtaining a merchant cash advance. Do not submit paperwork to too many companies, as too many credit inquiries will lower your credit score, and can possibly scare other cash advance companies from working with you. Read forums about the industry and about the companies. You will be surprised how much information you will find on the internet about cash advance companies. There is no shortage of companies out there, but understand which company you are dealing with. Are they a broker? Are they a direct-lender? Don’t take the salesman’s word for it – do the research yourself.

TARP Money for Small Business Loans

Merchant Cash Advance — Thu, 28 Jan 2010 21:48:59 +0000

U.S. Senator Benjamin L. Cardin proposed a bill that would provide direct loans to small businesses. The bill proposes to use $20 billion in TARP money on small businesses. TARP program was initiated by the Obama administration and is largely accredited with saving large US banks from bankruptcy. The bill would also create a tax credit for small businesses with up to 25 employees offering health insurance to staff.

The legislation comes through as many small businesses which have made it through the economic recession are attempting to climb back on their feet by unsuccessfully accessing money through local and large banks. The funding for the program would come from implementing temporarily a surcharge on individuals with incomes over $500,000 and couples over $1,000,000.

It doesn’t seem that the real problem in today’s economy is a lack of money. Banks have received billions of dollars in bailout money. Rather than a shortage of money, it seems more likely that large institutions are simply mismanaging their money, and in addition are not interested in investing in small businesses as they are riskier investments. We saw this past year that corporate America was bailed out by the government, but small businesses were allowed to go bankrupt. A bank’s investment is far more secure with a large institution.

For this reason we will see a growth this year in merchant cash advances. A merchant cash advance provider will loan a lump sum of unsecured cash to a merchant who is processing Visa and MasterCard sales. The merchant pays a flat rate fee for the money which is typically more expensive than a traditional bank loan. The lender collects his money back by taking a percentage of the merchant’s Visa and MasterCard sales.

To learn more about merchant cash advances click here!

To read the original Baltimore Business Journal article click here!

Small Business Owner Declined Bank Loan

Merchant Cash Advance — Tue, 15 Dec 2009 14:41:51 +0000

Yet another example of a small business owner who was declined by her local bank this December, Hope Gillerman was denied a $100,000 bank loan from Park Avenue Bank. Ms. Gillerman owns a small business which sells aroma therapies in Union Square New York City. Her company has yet to show a profit, but she has had growing sales over the past year.

In truth it is reasonable for banks to be hesitant to invest in these types of small retail businesses in the current economic crisis. Banks have other fish to fry, like billions of dollars worth of loans to pay back TARP government money, and defaulting mortgages. Why should a bank invest in a risky small business that has not turned over a profit yet?

This is precisely the type of business that should seek out a merchant cash advance. New retail shops, restaurants, and salons that are looking to expand and infuse working capital into their businesses aren’t going to be able to receive financial funding from banks. There is simply too much risk that these businesses won’t be able to pay back a loan over the course of a few years. There is a greater chance that these types of businesses will no longer be there in a few years.

Ms. Gillerman could obtain a significant amount of working capital for her business by applying for a merchant cash advance. A merchant cash advance is a short term “lending” program, whereby the private lender purchases the merchant’s future credit card receivables at a discounted rate. The amount of money the merchant qualifies for is based on how much they process in Visa/MasterCard generally over a span of one year. From this the private lender can predict how much the merchant will be processing in the future, and can build a program whereby he can expect to be paid back within usually four to nine months. The funding is more expensive than traditional bank loans, but it can help many businesses who are seeking to expand, pay dept, or just have some extra cash when businesses is tight.

To read the original New York Daily News article click here!

To apply for a merchant cash advance click here!

Government Bails Out Corporations – Small Businesses on Back Burner

Merchant Cash Advance — Fri, 04 Dec 2009 14:37:53 +0000

Despite the fact that small businesses comprised 65% of the new jobs in the United States in the last fifteen years, employ half of the United States workforce, and account for over 30% of the nation’s exports, they have received less than $400 million of the Obama administration stimulus loans while a few large corporations such as Citigroup Inc. and General Motors received a whopping $50 billion.

Small businesses produce 13 patents for every 1 created by large corporations, clearly showing that the 29.6 million small businesses are the driving mechanism of innovation in the United States. Furthermore, small businesses face much higher risks, as their operational costs are higher, banks charge them more money, landlord costs are higher, and government regulations cost them $7,647 per employee, compared to $5,282 for large corporations. Out of every six small businesses created per year, five will close down.

It’s true that the Obama administration is trying to push forward a health care reform package that will provide citizens with affordable health-care, giving employers’ incentives to hire – but there is a catch as employers will have to pay into the program. It seems that the government bailout incentives have only widened the chasm between large and small businesses, which is a problem as large businesses don’t fuel the majority of the economy. Furthermore the government has decided not to bailout CIT Group INC., one of the largest investors in small businesses, and instead to bailout Citibank, Bank of America CORP and GE Bank.

It seems that small businesses will have to rely more on private investors to expand their businesses. Many have turned towards family members, friends and relatives to receive their funding. Other have turned towards unconventional methods of obtaining capital like merchant cash advances, a form of funding that purchases credit card receivables.

To read more about merchant funding click here!

To view the original Wall Street Journal Op-Ed Article click here!

Banks Continue to Tighten Lending

Merchant Cash Advance — Thu, 19 Nov 2009 17:04:56 +0000

The Federal Reserve issued their findings in a quarterly report on November 3^rd, 2009, that banks are continuing to tighten their lending criteria to businesses and to individuals.

Banks have done this primarily in four different ways:

1) Criteria for receiving loans and credit cards are higher for existing and new customers.

2) Reduction in credit limits

3) Increase in interest rates

4) Increase in minimum credit score for qualification

Not only have small and large banks made it more difficult for businesses to qualify and receive loans, but the actual cost of the money has increased as well.

This is more evidence for why there is such growing demand in the merchant cash advance industry. Merchants cannot receive extra working capital from their banks which they have relationships with for over twenty years. The question is, is this business practice reciprocal? Why should customers give business to banks whose main purpose is to provide merchants and individuals with loans? We see more and more merchants and individuals moving banks in search of obtaining capital. Also merchants are seeking other forms of finance including equipment loans, other types of business loans like SBA and bridge loans, commercial mortgage loans, and of course merchant cash advances.

In addition, it would be wise for merchants who are behind on their credit lines, bank loans, and bills to catch up and keep their credit in good standing by taking out a merchant cash advance against their business and pay a fixed percentage on the money they obtain. The influx in cash will provide the merchants with working capital, and they will be able to pay off bills and remain in good standing with their banks. Since the criteria for qualification for a merchant cash advance is much lower, merchants have better chances of being approved than for a bank loan. Furthermore unlike a traditional bank loan, a merchant cash advance does not appear on the merchant’s credit report and thus cannot harm it if paid back slowly.

To see the official Federal Reserve report click here!

High End Retail Stores Slash Stock to Artificially Create Demand

Merchant Cash Advance — Thu, 19 Nov 2009 16:04:01 +0000

Saks Fifth Avenue and Neiman Markus have been cutting inventory this year in order to bounce from last year’s disastrous amounts of excess merchandise that was sold at up to 70% of retail price. The consumer market was hit so hard, that stores were still overstocked by the end of seasons and were forced to slash prices of merchandise in order to sell them.

This year, however, high end companies such as Saks and Neiman Markus have a new strategy: if you don’t buy early, you just may not have it for the holidays this year. The large department stores came under sharp criticism last year from designers who claimed that high end stores were creating a consumer discount eye that began to question the actual worth of retail items.

While a typical business cash advance is geared towards small to medium size business, one can’t help but ask how this affects smaller businesses. Will automobile repair shops have to purchase fewer inventories in order to push consumers to fix their cars? Will restaurants have to run out of certain dishes in order to push customers to eat out? Not likely as these industries usually don’t operate on an exclusivity basis like high end stores. It seems that smaller businesses unless operating in a niche market, have to keep their stores constantly stocked with an abundant array of items in order to compete in the market. A business cash advance is a viable way of receiving the proper funding to keep retail stores supplied.

To see original article click here!

Best Ways to Invest this Upcoming Holiday Season

Merchant Cash Advance — Thu, 19 Nov 2009 16:02:48 +0000

Whether you are a restaurant, a retail store, a floral shop or a contractor, you are definitely looking to take advantage of the upcoming holiday season. Here we give some general tips of how merchants can use their business cash advance to expand and take advantage of the increase in consumer traffic.

1) Purchase inventory: Merchant’s who have fallen behind in inventory won’t have the amount of supply to meet the demand. Creating a wealth of inventory will generate more business. You need to spend, in order to make.

2) Marketing: A great product is of no use if nobody knows about it. Use a merchant cash advance this holiday season to advertise to target consumers. Make your brand known by investing in a website. Pay for a good web-design, SEO content (search engine optimization) and Google Adwords for keyword searches. A great website is a wonderful way of educating your potential and existing customers about your products and promotions.

3) Expand: Make renovations to an old kitchen by improving stoves, ovens, counter space, refrigerators and sinks. Build out on your restaurant creating more space for new customers or renovate existing tables, tile floors, and painted walls. Purchase new equipment to get jobs done faster and with higher quality results. Put a down payment on a new location!

4) Employ: Pay and train those extra hands who will be serving your customers. In this face paced economy, with wireless phones, internet, IPhones and Blackberries, customers aren’t going to want to wait for service. Rather than loose those customers, invest in some extra employees who will be able to service your business and help you sell, expand, and grow.

5) Working Capital: Have access to that extra working capital right after the holiday season when business may slow down. Some extra cash in the bank account to pay for sudden emergencies or just to have that extra security relieves stress and ultimately improves merchant business activities.

Ultimately all of these for mentioned suggestions are meant to help your business grow. A merchant cash advance can be a more expensive form of financing (although many times merchants and individuals get caught up in paying high interest loans that take years to pay off) than traditional bank loans. It’s always advised to plan ahead and invest the business cash advance in a way that will help your business grow.

Homeowner in Philidelphia Suburb Faces Eviction

Merchant Cash Advance — Thu, 19 Nov 2009 16:00:47 +0000

Christopher Hall, a homeowner of many years, faces foreclosure on his home where his grandfather and mother lived. It was the home Mr. Hall grew up in and the home in which he raised three children as well. In August 2008, Mr. Hall was laid off from his roofing job along with forty other employees, as the contractor went bankrupt. Mr. Hall has not been able to make a mortgage payment for over a year, and now his lender, Bank of America is threatening to auction off his house.

However, thanks to a new litigation passed recently in Philadelphia, homeowner occupied houses may not be foreclosed on before a meeting between the lenders and the homeowners to try and reconcile the payments. Furthermore, homeowners are given counseling and sometimes even representation. The deals struck are usually refinancing plans in which the homeowner lowers his monthly payments. In the event that a refinance plan cannot be made, the owner is given cash for signing over the deed or vacating the property.

The United States has been struck by a housing crises. Many times merchants are concerned with the cost of a business cash advance, and compare the rates to a bank loan. In reality, this is an unrealistic comparison, as business cash advance financing is a completely unsecured loan. It does not affect credit score whatsoever. Furthermore, merchants who choose business cash advance financing do not have to worry about incurring bad debt on the advance unlike so many Americans now who are behind with traditional bank loans and mortgages. The advance is only paid back as fast as the merchant processes Visa and MasterCard.

To see the original New York Times article click here!

KIA launches Plant in West Point Georgia

Merchant Cash Advance — Thu, 19 Nov 2009 15:55:38 +0000

The textile industries packed up and left West Point Georgia years ago, and what was once a bustling factory town quickly became a ghost town.

That is until today, as the first SUV’s rolled off the factory line from Kia’s new plant. The new Korean automaker’s factory has already hired its first 1,200 employees, and is currently in the process of hiring the second round of 1,200. All in all, the plant is expected to hire over 3600 employees, and is predicted to attract another 7,500 employees from supplier companies. With that, the economic boost that the Kia factory is expected to give to the local town of West Point is $6.5 billion by the year 2012.

Entrepreneurs have started to capitalize on this fresh economic opportunity as new restaurants serving exotic cuisines have already opened in West Point including sushi and Korean food. What does this mean for the merchant cash advance industry? Only good news, as retail stores and restaurants could highly benefit from the quick cash influx that is generated by a merchant cash advance. These locations will need to expand and remodel fast to compete in the aggressive market, and direct private lending may be the only solution as banks are continuing to tighten up their credit lines.

Click here for Fox News’ full article!

Debt Consolidation

Merchant Cash Advance — Sat, 10 Oct 2009 17:49:59 +0000

There are many solutions for small business owners and merchants to consolidate debt. Merchants often have to work with seasonality, and in those down times they can get behind on bills and vendors. One way merchants can consolidate their debt is by using a merchant cash advance to pay off those high interest credit cards. Instead of making multiple payments, its much easier to be able to pay off all those bills, and just make one automatic payment.

There are also other resources where small business owners can search for a solution for their debt help.

Debtconsolidationcare.com is well known as a debt community site that can help with debt related problems and also can get debt help advice from debt community member. The members actively participate in the site to resolve all queries related to debt help, and users will find numerous articles as well.

One of the most popular section this site is the Debt consolidation program. It is a debt glossary that is ideal for quick reference. A good debt consolidation program can save one thousands of dollars in interest, and provide a solution for credit card payment and it is very helpful for credit card users.