Merchant Cash Advance
A merchant cash advance is a unique type of financing available to certain businesses operating in partnership with card processing companies. Receiving a merchant cash advance means your business is given upfront capital in return for a portion of your business’s credit card sales. This is normally done through partnerships with card processing firms — they withhold a certain portion of sales revenue for a set amount of time.
What Makes a Merchant Cash Advance Different?
A merchant cash advance is different from any other type of small business financing you may see on the market. You are effectively selling a portion of your future card sales in exchange for access to upfront working capital. Instead of setting up a payment schedule, the lender will receive a portion of your credit card sales until the original balance is paid off. This restricts the ways that you can pay back the loan; unlike a traditional loan, you cannot pay the balance off using separate funds. Another clear distinction is the fact that these types of cash advances aren’t regulated the same way by the lending laws — for this reason some interest rates on merchant cash advances can be well above 35%. It is important to fully understand the costs associated with a merchant cash advance prior to undertaking one.
Is a Merchant Cash Advance Right for My Business?
Due to the high interest rates associated with a merchant cash advance, you may be asking whether it is the right fit for your business. The primary benefit of a merchant cash advance is for a business operating with poor credit. If you have large sales volume but unestablished or poor credit a merchant cash advance may help you receive the funding you need. So if you need access to working capital quickly, and know that your business has large volumes of regular purchases, consider a merchant cash advance when deciding how to attain additional finance for your business.
How Do I Qualify?
Although a merchant cash advance can be a good option for a business with limited credit history. There are a few requirements that most lenders have. Firstly, if your business has a recent bankruptcy on file it will most likely not be eligible for a merchant cash advance. In addition, if your business is less than a year old, or if you don’t have credit card processing facilities, you will also most likely be disqualified from applying for a merchant cash advance.
What Other Options Do I Have?
When considering what type of finance is right for your small business you should look at all of the options before making a decision. While in the past many small businesses have used merchant cash advances due to a shortage of options, lenders like us are providing new avenues for small businesses to attain working capital. Our online loans provide continued access to capital, and you only pay interest on the money that you access. In addition, there is no penalty for paying a loan off before its full term. We charge low and simple interest rates between 1% and 10% depending on the type of loan you access. On the other hand, many merchant service loan providers have APRs over 35%.
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