subject: Merchant Cash Advance Provider Guideline Checklist [print this page] With the economy teetering on the edge after the sub prime mortgage meltdown, small business owners are finding it tougher than ever before to qualify for a traditional bank loan. A merchant cash advance may be a great solution. A fast turn-around time, viable cash advance funding of up to $250,000, and a flexible repayment plan are all motives for going after this different path for the working capital your business requires.
Still, a merchant would do well to look at more than just the funding they can obtain. The North American Merchant Advance Association (NAMAA) has a list of best business practices that they endorse for merchant cash advance companies. If the agent giving you a business cash advance does not adhere to these practices, it is possibly best to look elsewhere. The guidleines are as follows:
-Provide transparent disclosure of charges - NAMAA does not condone closing fees as part of the application process of merchant advances but recommends that any of these costs be lucidly explained and disclosed. The total payment figure should be entirely explained and hashed out prior to putting the final touches on the agreement.
-Give lucid disclosure of recourse - Technically, merchant advances aren't considered loans; instead they are regarded as a purchase of future Visa-MasterCard sales. As such, the small business owner can be held personally in debt for any cash not returned if the entrepreneur opts to violate the contract.
-Be sensitive to a small business owner's business cash flow - A basic contract involves that the entrepreneur repays a specific percentage of credit and debit card sales on a day to day basis.
-Marketing materials disclosure - All marketing materials should make it clear that the contract is one of factoring, not a loan.
-Monitor your Sales Agents/Brokers - Merchant advance providers should ensure that their sales agents or brokers are appropriately representing the product.
-Adequate payoff of outstanding Merchant Cash Advance Balances - if a small business owner opts to take an additional merchant advance with a new company the new lender should immediately repay the previous balance instead of trusting the entrepreneur to cover the balance.
by: Rodney Rabah
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