A merchant cash advance is a lump sum payment that a business gives in exchange for an agreement. This agreement specifically requires repayment based on a percentage of future credit card and debit card sales. You may also use the term merchant cash advance to define the payments and purchases of short-term business loans and future sales receivables.
Companies that deal with merchant cash advances provide funds to businesses and receive a percentage of the credit card income of the business. They receive this percentage through a processor that settles credit card payments.
Most merchant cash advance processors use payment processors to initiate a payment, taking a percentage of the merchant’s card spending in the future. Here is a more detailed explanation of the merchant cash advance.
What is a Merchant Cash Advance?
A merchant cash advance may sound like a loan, but it is very different from most traditional types of loans. If you look at a loan, you notice that you have to follow a fixed term, pay at a fixed interest rate, and pay a specific amount regularly. A merchant cash advance, on the other hand, means that you have to sell your future revenue at a discounted rate to a lender.
Many businesses that cannot qualify for traditional financing often opt for merchant cash advances, since these companies offer a lump sum and a percentage fee. This means that you owe the company that lump sum of money and the percentage fee.
However, there is no fixed repayment term with merchant cash advances, meaning you do not have to give them a specific monthly amount like a loan. Merchant cash advance providers want a certain percentage of your credit and debit card terminal sales until you pay back the entire lump sum amount and the percentage fee.
The merchant cash advance providers can also ask for a portion of your sales for the credit card terminal. If your business makes sales through a credit card terminal, they will ask for a percentage of those sales. The merchant card advance providers will continue to collect that money until they receive the entire lump sum amount they provide.
Merchant Cash Advance vs. Bank Loan
The merchant card advances only concern the business owner’s average monthly sales through an existing terminal. If you do not own your business’s premises, then merchant card advances require the company to unveil the time left on the lease.
Merchant card advances do not offer finances according to the authorized owner’s credit score and do not require a personal guarantee in the form of collateral. The company applying for a merchant cash advance should be in business for at least nine months and must also have $5000 in sales each month.
This gives businesses an excellent opportunity to get started with capital, allowing them to have easy access to funds. In most cases, a company can receive the lump sum amount within a day, whereas traditional lending would require you to wait for months before you can get funding.
Unlike bank loans which involve filling out a lot of paperwork, advances can offer you money quickly to grow your business. All a company needs to do is supply bank statements, a few months’ worths of merchant account statements, and then get these documents reviewed, and you receive quick funding.
Merchant card advances are a great funding alternative for high-risk industries and startups. The terms of merchant card advances are also very favorable. You can get a loan or financing for five years, and factors such as low risk and good credit score can also get you more reasonable interest rates.
Merchant cash advances work incredibly well if a company has a good credit score and has relatively low risk. However, they can also be instrumental for companies that are high risk and have bad credit scores. Regardless of your credit score, merchant cash advances offer a fantastic financing solution.
You to enjoy a quick cash infusion that can be used for paying or hiring employees, inventory, advertising, expansion, remodeling, equipment purchases, taxes, paying bills, or simply for emergencies.
How do I qualify for a Merchant Cash Advance?
If you have operated your business for more than nine months and processed over $5,000 each month in Visa/MasterCard transactions, your business is eligible for our financing! All the lenders are looking at is the consistent flow of money into your business.
Will My Business Be Approved for a Merchant Cash Advance?
As long as your business meets the aforementioned criteria, you will be able to receive a merchant cash advance. The essential criteria is that your business has operated for nine months and has processed a minimum of $5,000 monthly.
Lenders are also looking at consistent money coming into a business. Merchant statements will also ensure that you are not getting chargebacks. This shows them that your business is processing money legitimately.
Merchant cash advance programs will also check your bank statements to ensure that you are responsible for managing them. They also want to see a positive cash flow of your business. You also need minimal non-sufficient funds so the merchant cash advances know that you are not overdrawing the account.
The above factors put you in a great spot to receive a merchant cash advance. You only need to be in business for five months, have $5000 in monthly sales through a Visa or MasterCard account, and have an organized bank account, and you can increase your chances of receiving this fund within a day or two.
How does a Merchant Cash Advance Work?
When a business is seeking to grow through investments, then merchant cash advances can be a great source of financing. It can also help a company get out of a tough spot. If a business approaches a lender for a cash advance, the lender asks for a few months’ worths of bank statements from the business. Upon receiving it, the application can only take a few minutes, and underwriting and capital transfer will only take a few days.
While you could get a commercial banking loan, they are complicated and time-consuming. If you have an urgent requirement for business funding, you will likely get a merchant cash advance.