It's Referred To As A Merchant Cash Advance But Is It Really A Business Loan?
There are a number of routes to acquire working capital for your business
, but not all of them involve a bank loan. A merchant cash advance is really a form of factoring. Factoring is a method whereby a business sells its future credit card receipts to a factoring company - the factor - at a discounted price in exchange for cash with which to fund the business as soon as possible.In today's business climate it is no surprise that a lot of new businesses are having a very tough time acquiring normal business loans through a bank. The banks are overly tight-fisted with their capital right now. Luckily business cash advances through factoring agreements are still available and the qualifications are considerably less harder than those located at the local bank.
To acquire a business cash advance, many companies need a business to have been open for at least a year and accepting credit cards for at least six months. Since repayment of the financing is directly tied to credit and debit card receipts, evidence of this revenues is also necessary.
A portion of these future credit card receipts is agreed upon as the daily repayment capture, simplifying the financial hardship for the business in a slower period. Unlike a bank small business loan, the daily capture capability allows business owners to pay back at their own pace instead of being responsible for set monthly payments that could result in the business going out of business.
Because this money is not acquired in a traditional loan, if the merchant fails to meet the stipulations of the agreement, for example, using different merchant accounts to process payments, they are still held personally liable for the amount left over.
Nevertheless, for many young businesses, this method of obtaining funds is still optimal. Flexible repayment terms, fast access to needed cash and simpler acquisition of said financing, makes a merchant cash advance a great option for many entrepreneurs.
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