What is a merchant cash advance?
A merchant cash advance (or merchant loan) is the fastest way to get working capital for your business without the need for collateral and without going through a bank.
How does a merchant cash advance work?
Rather than going through a bank for funding, you go through a private investor. This private investor purchases a portion of your future unprocessed credit card sales at a discounted rate. The advance is paid back automatically using a small percentage of your daily credit card sales. The entire process takes about 5-9 days to get funded and 6-9 months to pay it back.
The business of loaning money is nothing new, but the idea of using a business's credit card processor to pay back a cash advance is. It makes it possible for those with bad credit to get funded even if they've been turned down by the bank. The business of offering a merchant cash advance is less than 10 years old. As a business, merchant loans have grown exponentially each year since. In that 10 years, it has grown from a 1 million a year business to a billion dollar business.
Because it is an unsecured loan and there are inherent risks to the investor; merchant loans are typically more expensive than bank loans for that reason. For the many businesses that are having difficulty acquiring working capital; it is money well spent.
As with any business decision, it is important to be armed with the facts. It is also important to ask questions and read all documents carefully before signing anything. Most merchant loan providers are very reputable, but there are always a couple bad ones out there. The Better Business Bureau is a good place to start.
How do you qualify for a merchant cash advance?
Getting a merchant cash advance is much easier than getting a bank loan. To qualify, all you need is the following;
- You need to be in business for at least 6 months.
- Your business must accept Visa and MasterCard as a form of payment.
- You must process at least $2,500 in credit card sales each month.
The application process is much easier than a bank loan.
- You just fill out a simple 2 or 3 page form.
- Provide 4-6 months of your merchant statements.
The entire process usually takes less than 10 days.
It is also important to note that rather that giving you a fixed payback schedule with a fixed monthly payment; a merchant cash advance payback is based on a percentage of your daily credit card sales. This is unique because it works with the natural flow of your business. On slow days; you pay back less. This flexible payback schedule takes some of the stress off your business on days when business is slow. This creates an atmosphere for businesses success. This way; everybody wins.
About the Author:
Chris Ronk writes articles about business loans and merchant cash advances for http://www.easymerchantcashadvance.com
