Merchant cash advances are progressively more widespread in society these days. The current economic status and tight credit needs are large contributors to the boost in cash advances. It is tough for entrepreneurs to get the working capital that they need with the more and more tough conditions for regular business loans. Business cash advances are an alternative means of getting funds for day to day business needs. So how does a merchant cash advance work? Let us explain
Merchant Cash Advances are an option provided by a financing agent to a small business owner that accepts credit cards, most commonly in the retail or restaurant business. The Merchant Cash Advance funding agent basically advances the small business owner a predetermined figure of money in exchange for a portion of their future credit card revenues.
For this illustration, let’s look at Jo’s Diner. Jo might not have enough funding ready to pay his staff or to buy new appliances for his kitchen. Say Joe is looking for 30,000 dollars and he reached out to a Merchant Cash Advance provider for the working capital.
The lender would look at Jo’s previous credit card volume and determine if he is eligible for the advance. They would figure out an interest rate for the cash advanced. The rate is usually more expensive than a normal business loan because the advance is usually provided to merchants that do not have the credit or collateral to get working capital from a conventional bank. If the cost for Jo’s advance is 30% then he would be getting the $30,000 and paying the agent $39,000 in future credit card transactions.
The lender would get repaid the nine thousand by taking a percentage of the daily credit card receipts the business takes in. Say the percentage the lender takes is 8% of daily credit card receipts and the business received $10,000 in credit card revenues 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 changes with the cash flow of the business. The percentage will remain the same so if your business has a slow day, you will be paying less. This is a major selling point for the advance product. Conventional bank loans have a set payment amount, which could be hard to pay during slow times. A merchant cash advance has the advantage to follow fluctuations in business cash flow.
A merchant cash advance is a important alternative to a business loan. Some will think 9,000 dollars is a steep amount to pay but the stipulations a entrepreneur must meet for a regular loan is becoming more and more tough to get. A business cash advance is a method of getting quick and easy money to meet business working capital needs.
Since early 2008 Daniel Samoohi has aided 1000’s of merchants find reputable providers in order to review offers for a Uk marriage visa merchant cash advance. He also helps start ups as well as established businesses find great deals for Uk marriage visa merchant accounts in order to accept credit cards as a payment method for their businesses.