subject: Is A Merchant Cash Advance Right For You? [print this page] A merchant cash advance is a little known financial practice that provides necessary working capital to business owners through their credit card processor. Very Few merchants realize that they have this choice and go straight to family or a bank when they need funds to pay for expansions, repairs or upgrades of their stock and equipment. If you are a business in need of funds fast, you should look into factoring as well.
The concept behind factoring is a bit like selling futures. You, as the business owner, agree to sell future credit card sales at a discount to the factoring company. The money is provided now in exchange for future sales in the next several months.
These arrangements are most commonly for the near term, rarely more than 1 year, and are a great way for a merchant with a proven credit card sales track record to obtain needed cash.
Unlike a traditional loan, where the repayment schedule is set for the entirety of the loan, a factoring arrangement takes into consideration the truth that in almost every business there are great months and bad ones. Your payment is directly tied to your credit card receipts, as a portion, not a set fee.
If you have chosen to pay a ten percent daily capture and you take in $8,000 one month, your payment that month comes out to 800 dollars. In following month you may charge $10,000 and pay 1,000 dollars. This flexibility is a wonderful thing for a growing company.
An additional benefit of a merchant cash advance is the quickness,short time in which the working capital turns up in your hand. While a bank may take several weeks of deliberation and tell you how you utilize the cash when and if they give it to you, with a factoring arrangement, you will have the working capital in about a few business days, and you can apply it to whatever you see fit.
by: Daniel Samoohi.
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