Maximizing Merchant Cash Advance Benefits

The cash advance industry is taking great strides in its growth and is one of the best performing participants in the financing industry

. Traditional loan providers like banks are refusing to grant loans to a number of small businesses. This lead to many small business looking for other loan options.

Getting to Know the Cash Advance Industry

Merchant cash advance industry has grown greatly especially during the last few years. When traditional loan providers got pickier, a lot of entities like restaurants, who are out rightly refused of loans, ended up knocking on the doors of merchant cash advance providers. But merchant cash providers are making it clear that they are competitors of banks. Instead, they are complements to the banks. They are simply answering the unmet demand generated from the banks' loan refusal to certain businesses of certain industries.

How the Machinery Works

Merchant cash advance has made obtaining funds for businesses a lot easier. Processing time is limited to just a few days, with minimal paper work. There are no mortgages, liens, or collateral asked of. Repayment gets done on the basis of a business' performance during a certain period. This feature has made merchant cash advancing a lot more attractive to many establishments given the uncertainties most businesses are facing today. No fixed amount is demanded as payment of the loan. The cash advance gets paid based on the volume of sales or transactions the business had during a certain period. The amount paid serves as a compensation for the cash advance provider given the risks taken in granting the loan.

Businesses with credit card facilities may apply for merchant cash advances. There are providers requiring as little as three months worth of credit card sales as the basis used to compute how much a debtor could get. The provider computes how much the debtor will pay for the advanced funds and this payment will be taken out as a percentage on each credit card sale or transaction.

Moves for Regulation

Though promising and full of potential for further growth, this industry is also vulnerable to unscrupulous players, who could be either creditor or debtor. These people are just after maximizing the opportunities in the industry regardless of who they will take advantage of. To answer this concern, North American Merchant Advance Assn was formed. This association will provide guidance and will help influence the merchant cash advance industry through leadership, education, and sharing of information.

Merchant Cash Advance at Present

Despite of the mixed response and views of various sectors on this new and promising industry, the current economy has provided a very fertile ground for merchant cash advance to flourish. More businesses are in need of cash for working capital infusion purposes and to help them stay afloat. With banks shortening their leash, merchant cash advance has become one significant alternative.

by: Jeff Jackson

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