subject: Business Cash Advance - Quick And Easy In Today's Tough Environment [print this page] A Business Cash Advance is becoming progressively more widespread in society these days. The existing economic status and airtight credit standard are huge contributors to the increase in funds advances. It is hard for entrepreneurs to get the money that is necessary with the progressively more strict stipulations for normal business loans. Business cash advances are a different way of attaining funding for normal business requirements. So how does a business cash advance operate? Let us explain
Business cash advances are a service provided by a lending company to a merchant that receives credit cards, usually in the retail or restaurant business. The merchant loan lending company basically advances the merchant a predetermined sum of cash in exchange for a percentage of their future credit card sales.
For instance, let's take Jo's Diner. Jo might not have enough funds available to pay his staff or to buy new appliances for his kitchen. Say Joe is looking for $30,000 and he contacted a Merchant Loan provider for the money.
The lender would look at Jo's preceding credit card volume and find out if he qualifies for the advance. They would come to an interest rate for the money advanced. The rate is usually higher than a conventional business loan because the advance is usually provided to small business owners that don't have the credit or collateral to get working capital from a normal bank. If the cost for Jo's advance is thirty percent then he would be getting the 30,000 dollars and paying the agent thirty nine thousand dollars in future credit card revenues.
The agent would get the $9,000 by taking a portion of the daily credit card revenues the business takes in. Say the part the lender takes is 8% of daily credit card sales and the business received ten thousand in credit card sales for the day. The merchant cash advance lender would receive $800 (8% of the $10,000). This process would continue until the agent received the entire $39,000. This payment process fluctuates with the cash flow of the business. The percentage will remain the same so if your business has a bad day, you will be paying less. This is a big selling point for the advance service. Normal bank loans have a flat payment amount, which could be hard to pay during slow periods. A merchant loan has the advantage to follow fluctuations in business cash flow.
A business cash advance is a helpful substitute to a business loan. Some may believe $9,000 is a large sum to pay but the stipulations a small business owner must meet for a traditional loan is becoming more and more hard to obtain. A business cash advance is a method of receiving fast and easy money to meet business working capital needs.
by: Daniel Samoohi.
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