subject: When Banks Close Their Doors, Merchant Cash Advance Opens Windows [print this page] Merchant cash advance industry is growing fast in the financing industry. When banks refuse to grant loans to a number of small businesses, many end up looking for ways to get their hands on the much needed cash.
Getting to Know the Cash Advance Industry
Merchant cash advance industry has seen great growth especially during the last few years. With banks getting stricter, a lot of businesses like restaurants, who are out rightly refused of loans, go to merchant cash advance providers. Merchant cash providers clarify that they are not here to compete with banks but are tapping on the business generated by the banks' refusal to grant loans to certain businesses coming from certain industries. They are simply sating the financing need that traditional providers like banks do not accommodate.
How the Machinery Works
Merchant cash advance is making financing acquisition for businesses a lot easier. Some of its advantages are short processing time of just a few days, minimal paper work, no mortgages, liens, or collateral requirement. And the best part that most business finds friendly, repayment gets done based on the business' performance during the business period. This specific feature makes merchant cash advance the better alternative for many establishments due to the economic uncertainties many are facing at the moment. No fixed amount is demanded as payment of the loan. The advance gets paid on the basis of volume of sales or transactions during the given business period. The total amount due may be more than what the traditional providers' charge, but that only serves as a compensation for the risks the cash advance providers took in granting the loan.
Who could apply then? Businesses with credit card facilities. Some providers require a minimum of three months worth of credit card sales as basis for computation of the loan amount. The provider will come up with the total amount due and the debtor will pay from a percentage taken out of each credit card sale or transaction.
Moves for Regulation
This new industry promising as it is, is also vulnerable to unscrupulous players- creditors and debtors alike- out to just maximize the opportunities in the industry. In response to this concern, the North American Merchant Advance Assn was formed. This association aims to provide guidance and to 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.
