A Quick Guide to Merchant Cash Advance
When small businesses need funding they can obtain one through a merchant cash advance. The main criterion for receiving a Merchant Cash Advance is to have a predictable credit card sales volume. This sales volume is factored in every month to determine not only your monthly sales but also defines the amount of risk that is associated with a 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. The risks are higher when the sales volumes are high and there is a larger amount of money being used through fines and sanctions which induces 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. It is just that simple.
The benefits of finding the right merchant cash advance provider are many. One is that it is typically a very fast way to get money for your business, with completion of the application process in anywhere from three to fourteen days. Proceeds from a merchant cash advance from most providers can be spent on whatever 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.
On the average, the repayment time frame for merchant cash advance is eight to nine months. However, the shortest time for a term is four months and the longest is eighteen months. It is dependent on the type of business 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.
It is therefore wise to consider what is best for your business when it comes to selecting your payment options since this will involve either paying out a higher over-all cost or suffering a tighter cash flow.
You should consider that in a merchant cash advance you will be paying off your loan with your daily credit card sales which can affect your cash flow, before getting one.
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