A Merchant Cash Advance Explained
Similar in nature to a small business loan, a merchant cash advance is funding a
merchant gets for different purposes that will need to be repaid within a six to 8 month duration depending on how much financing is obtained. Merchant cash advances are becoming increasingly used as conventional banks are toughening their required conditions for small business loan approval.Distinct to conventional bank loans, merchant cash advances do not need good credit. As a matter of fact, if you were turned away by the local banks and require access to money in a fast amount of time, a business cash advance may be a perfect answer. As a merchant would expect, the requirements placed upon such cash advance programs commonly include more costly interest rates since the advance company is taking on a greater risk.
Almost all arrangements let the merchant tie the repayment schedule to revenue levels of the business. This is very useful to a entrepreneur that has significant changes in income from month to month. Payment is ultimately tied to Visa-MasterCard purchases, allowing for smaller payments during bad months. This feature is very useful to those entrepreneurs who are seasonal in nature because a set payment each month is not required.
Merchant cash advances can be of particular use to those entrepreneurs who have not been in existence for long. To get a conventional bank loan or a loan from the Small Business Association, a merchant may be stipulated to submit verification of collateral, an extensive business history and a credit report with exemplary scores. When a entrepreneur is just beginning in business, this may not be possible, especially in today's economic times.
Still,caution is recommended when in the market for a business cash advance. It is not uncommon to find ballooning payment programs, application costs and a mandatory switch to a specific credit card provider. Reviewing the fine print of any arrangement is a must. For those small business owners who find themselves in need of funds and have few other options available, the business advance can be especially helpful as opposed to waiting months for a conventional small business loan you most likely won't get approved for.
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