A Quick Guide to Merchant Cash Advance
When small businesses need funding they can obtain one through a merchant cash advance. Having a predictable credit card sales volume is one of the main criteria to receive merchant cash advance. Factoring in your sales volume is important and this is done every month to determine your monthly sales and it also defines the amount of risk associated with the merchant’s credit card processing. The risk factors that have been spoken of are most important to the bank, when there is a high incidence of charge backs in high volume merchant accounts. This high sales volume heightens the amount of risk attached to these factors because there is larger amount of money in play through fines and sanctions, thus inducing higher stakes. But having said that, when your business has a smooth proof of steady credit card sales volume, the provider in most cases will purchase a fixed dollar amount of your future credit card receipts at a discount. Hundreds of dollars will be paid to your business and on your future credit card sales the provider will receive a fixed percentage of it. This means that when you have been approved and funded with almost no paperwork involved, the provider in return will be receiving a percentage of your daily credit card sales for the lump sum advance. This is not complicated at all.
There can be many benefits in finding the right Merchant Cash Advance provider. One great benefit of merchant cash advance is that you can get the money for your business quickly, usually from three to fourteen days when the application process is completed. You can spend the proceeds from a merchant cash advance given by most providers in whatever you think is best for your business. Although the cost of this cash advance may be slightly higher, it give more opportunities for business owners that that of traditional providers.
A business has eight to nine months for repayment of merchant cash advance on the average. But the term can be as short as four months or as long as eighteen months. This depends on the type of business that you are in. But it works this way, the higher the fixed percentage of your credit card sales you would want to pay the lender, the shorter will you repayment time will be.
You should carefully consider what is best for your business when it comes to selecting payment options because it is either you pay out a higher overall cost or suffer a tighter cash flow.
To know whether to get a merchant cash advance or not consider if the repayment of the loan which is daily credit card sales will affect your cash flow greatly because if indeed it will , then this funding option might not be the best for you.