subject: Explaining a Merchant Cash Advance [print this page] Explaining a Merchant Cash Advance Explaining a Merchant Cash Advance
In today's economy, the banks have been in a stranglehold and businesses are suffering all over the country. When a business with decent credit used to be able to simply go to there bank for a loan, now businesses are being turned down left and right. Even if a business has perfect credit and impeccable sales and revenue, its still up to the banks discretion, and its usually no. If your business is offered a loan from a bank, its usually going to be at least a month before you see that money actually hit your account. You'll also have to put up a ton of collateral for the money as well as supply an incredibly inconvenient amount of documentation. That's where a Merchant Cash Advance can be a major advantage as far as working capital is concerned.
A Merchant Cash Advance, also known as Credit Card Factoring, is a way for a business to acquire a lump sum of future sales in advance. In a traditional cash advance, the cash provider is purchasing the business's future credit card sales for a discount (also known as a factor rate.) The lump sum (funding amount) is usually electronically deposited in your business bank account and then the total payback amount (the funding amount plus the discount) is paid back to the cash provider over an estimated, but not fixed, amount of time. This is paid back automatically via credit card sales. At the end of every business day, when the merchant batches out there credit cards, a set percentage of the sales (holdback or remit) is taken out and automatically deposited into the cash providers bank account and the rest into the business owners in a process called Split-Withholding. This percentage is also responsible for determining the estimated time it will take the business owner to payback to purchase. Benefits of a traditional Merchant Cash Advance
Money is not Personally Guaranteed. If your business goes under, your not liable.
Merchant can be funded in less than a week.
Merchant needs no collateral. Terms of the advance are based strictly off Merchant and Business bank statements.
Payback is a fixed percentage of sales, so when business is slow Merchant is paying back less, keeping cash flow.
Most types of businesses qualify
A great solution when a Bank is not willing to lend money.
Cash provider has a vested interest in your business to succeed. As your business grows so does the amount the cash advance provider is willing to advance.
Please click the play button below for a presentation demonstrating how a basic Merchant Cash Advance Works
