subject: Business Cash Advance [print this page] New financing approach for small business is most innovative - it is named in several ways such as business cash advance, merchant funding, merchant account cash advance or merchant cash advance - provides credit card sales to retail and service business owners and easy acess to finance as working capital.
Businesses need available funds to continue operating. Working capital - the oil that keeps businesses running smoothly. It is essential to keep operations going and stay ahead of your competitors.
We need cash inflow for elements like bill paying, inventory, marketing, and paying the employees. Digging themselves into a hole that becomes more and more difficult to get out of is generally the result of businesses that try to function with a defiicit.
An older, more traditional business financing method is accounts receivable financing. (particularly receivables factoring and asset based lending) and PO funding-- take out the majority of the companies which don't give consumers any invoices. In the late 90's, business merchant cash advance was introduced to fill the vaccuum.
How Does Credit Card Merchant Cash Advance Work?
A business cash advance isn't technically a loan, because it is a cash infusion that is paid off with your sales transactions fees. Credit card factoring offers businesses a large payment in anticipation of a share of future credit card sales.
Rather than using a discount factoring in the face value of credit card receipts via invoices, the merchant business cash advance will be factored using the client's daily sales.
For example, a business cash advance provider might offer to deposit $8,000 into your bank account today in exchange for $10,000 in future sales. The provider will directly collect a set percentage out of your daily credit card sales until it recovers $10,000 - the $8,000 originally advanced and a $2,000 premium. Collection is never likely to affect your business since it is allocated upon time frames- which in a way would positively affect your cash flow and payments. Payments vary according to the months revenue.
In comparison to a bank loan or business line of credit, that has a firm date by which repayments has to be made with fixed payments, a business cash advance affords tremendous flexibility. You have no due date, no fixed payment.
The fine print? When compared to bank loans or business lines of credit, on a year-to-year basis, business cash advances are quite expensive. Make sure you understand what the costs are so you can determine if merchant cash advance is a solution for your small business.
If I have a business, what amount of Merchant Cash Advance would I be able to qualify for?
A business cash advance is based on the monthly credit-card sales history of your company, so the larger the average credit card sales volume, the greater the advance you will be allowed.
For larger companies advances can be $150,000 or more but $20,000 to $50,000 is the industry norm.
Who utilizes credit card factoring?
Merchant Cash Advance funds everything retail, be it clothing apparel, health clubs or restaurants. - and service companies that have been in business for at least one year and which average at least $3,000 in credit card sales per month.
For newer companies with less than $3000 in monthly receipts, providers will be few, but more providers enter the field every day. Small business financial consultants are good people to go to for loan advice.
Whats The Best Way To Locate A Business Merchant Cash Advance?
Though still not well known or understood, merchant cash funding has grown substantially in recent years, with the tightening business credit environment driving demand.
It will take time and effort to locate a suitable provider , but you can choose to hire a loan broker or small business finance consultant instead. As is the case with traditional receivables factoring, you may use the services and industry contacts of a consultant at no additional cost, since they are compensated directly by the financing provider.
It is good for businesses when banks say that having a credit card is part of the financing mixture for the business. Especially in the small business financing arena, it has no equal as an alternative to the relatively slow, cumbersome and inflexible bank loan or business line of credit.
In the current business climate, it is next to impossible for a potential business owner, who just so happens to have little or bad credit or no viable collateral, to find someone willing to extend them a loan. Merchant cash advance credit card factoring gives a business owner a flexible method of cash flow management, allowing you to build your both your business and your cash flow, all while creating opportunities for traditional means of corporate financing.
