The best choice for fast financing solutions for small businesses
What is Merchant Cash Advance
A Merchant Cash Advance, or business cash advance, is initially a one-time payment to a business in exchange for an agreed-upon percentage of future credit and/or debit card sales. The term is now commonly used to describe a variety of small business financing options characterized by short-term payment terms (usually under 24 months) and small regular payments (usually paid every weekday or every week), as opposed to larger traditional bank loans with monthly payments and longer payment terms. The term “Merchant Cash advance” can be used to describe the purchase of future credit card sales receivables or short-term business loans.
Advantage:
Fast Approval and Funding
No collateral or guarantee required
Credit score requirements are not high
Application documents are simple
Repayment Methods
There are generally three different repayment options:
ACH : When structured as a sale, the finance company receives the credit card processing information and deducts its portion directly from the business’ checking account via ACH. When structured as a loan, the finance company records a fixed amount every day regardless of sales of the business. This is the most popular method of collecting funds.
Credit Card Sale Split : When a credit card processing company automatically splits a credit card sale between a business and finance company based on an agreed portion. This is usually the most common and preferred method of collecting funds for clients and finance companies because it is seamless.
Lockbox or Trust Bank Account : All credit card sales for the business are deposited into a bank account controlled by the finance company, and then the agreed upon portion is transferred to the business via ACH, EFT, or wire transfer. This is the least recommended method as it can cause a one-day delay for businesses receiving their credit card sales.
Industry
Loans and cash advances are drawn upon by small businesses when they believe that the opportunities presented by expanded financial assets will outweigh the costs. This means that small business owners’ emotions are critical to financial decisions. If small business owners are optimistic about the economy and growth, they will be more likely to expand, upgrade and invest. Fortunately, the Small Business Optimism Index shot up to an almost unprecedented high of 105.8 in December 2016. Digging the numbers, 32% of small business owners think now is a good time to expand. Most small businesses do not have the cash on hand to finance their own expansion and will have to rely on outside funding, such as Merchant Cash Advance