The merchant cash advance industry has grown in the last decade as more and more business owners are turning to alternative funding methods. A merchant cash advance is not a business loan, but a method of financing whereby a business owner agrees to sell his future credit card receivables at a discounted rate. The merchant has several ways of paying back the advance (not all companies offer this) including split funding from their credit card machine, ACH and lockbox methods. The business owner is not required to pay back the advance under a time period, but pays back the advance by diverting a percentage of his monthly credit card sales to the merchant cash advance company.
“This is a particularly interesting time,” says a merchant cash advance funding specialist at http://www.merchantcashadvances.org. “As we see the economy bouncing back, and more businesses looking to expand and build again, they will need to find funding sources. Family will only go so far, and banks are just not lending to the risky businesses that typically come to us.”
The merchant cash industry has a strange cloud around it of rumors and uncertainties, and by some has even been labeled as over priced. The question for merchants and business owners alike is what are the best funding options for them, and what is actually a realistic option.
Some businesses seek a merchant cash advance as a desperate measure to get themselves out of a tight spot. Since the merchant advance is not an actual business loan, this means that there is no collateral attached to it, and thus it is an unsecured advance and is not tied to any personal or business assets. The merchant is obviously expected by the contract to pay back the advance, but the payback can get tricky when a business falls short and closes up its doors.
Merchant cash advance companies don’t just lend out money to any business, and although the underwriting process is much quicker than a traditional bank loan, the actual process is quick however extremely rigorous. If a business is experiencing extremely bad cash flow issues and has multiple tax leans out on it and the likes, then this is obviously an indication to the underwriters that something is off balanced and the business is in trouble. As the advance is an unsecured one, the merchant cash advance company is not looking to invest its money in an already risky sector in something that seems inevitable that it is going to fail.
All in all, while competition is tough, many businesses are looking for cash to expand or purchase new inventory, and this is precisely the type of businesses that any solid merchant cash advance provider is interested in investing in. A large benefit of this unsecured method of funding is that it opens up another door of financing for a business. Granted the advance is short term, and is geared towards plans of 6-12 months, the merchant cash advance can really help a business when it needs that extra cash flow to expand, pay off bad debt, purchase new inventory or hire new staff. As in all things considered, businesses need to decide if this is the right financial method for them.
In addition to a regular merchant cash advance program, there are also starter programs out there which are geared towards newer businesses (3 months old) who are looking to infuse cash into their businesses. These programs tend to be less flexible and have a fixed payback rate and fixed funding amound
“We have many customers who love our product and continue to take it out. Many of these companies have been able to expand to new locations and end up making a lot of money off of the money they take out. That’s what this is all about. We’re here to help companies make money.”