subject: Looking For Extra Working Capital? Try Merchant Cash Advance [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 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
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.
