Merchant cash advances help business owners open doors to better types of financing opportunities. The business cash advance industry is growing steadily. This ever-increasing growth is due to traditional bank loans not meeting the demands of small business owners.
Business cash advances are a unique financing method. It is a credit card future sales purchase, not a loan, so we have to use specific language consistent with the credit card future sales purchase, such as refund rate and discount rate rather than credit rate. interest commonly used in bank loans. Merchant cash advances are a lot like factoring, but are based on a sale that has not yet been made.
A commercial cash advance lender gives business owners a cash advance amount up front. In exchange, the business owner agrees to repay the principal amount plus the fee, giving the lender a daily percentage of his visa and master card sales until the repayment is complete.
The daily recovery percentage will not exceed 10% of the daily gross sales, the daily percentage is based on the monthly sales volume of credit cards and the amount of cash advance required. The repayment term is structured for a period of 6 to 9 months, but it is not fixed and there will be no penalties if it takes longer.
Business owners generally must change the credit card processor because the advance is automatically refunded as a percentage of the proceeds of each batch, but the fees will be the same, if not better. Only a small number of merchant cash advance lenders do not require the merchant to change their credit card processing company. Most of the time this will not be a problem at all, as the rates will be matched.
Business cash advances differ greatly from traditional bank financing programs. In essence, a commercial cash advance lender purchases a small percentage of future Master Card and Visa sales, and the business owner pays this as a daily percentage of those sales.
Obtaining cash from the bank can be difficult for most business owners, but particularly for retail businesses, restaurants, store franchises, or seasonal businesses. These merchants primarily use credit card processing, which makes a merchant cash advance program a great financing opportunity for them.
What are some of the benefits?
Money is available much faster than with a bank loan. Unsecured merchant cash advances are especially an excellent option for retail and Merchant cash advance, not only because this type of business can hardly be financed by the traditional bank, but also because of the immediate liquidity and the simple process.
Many merchant cash advance lenders advertise that money will be available in as little as 10 days and, unlike bank loans that have a fixed interest rate, the amount owed and the due date are set every month, regardless if your sales go down. In contrast, with a cash advance from a merchant, the recovery comes from credit card receivables in the future, without straining your business cash flow.
Quick cash advance programs for merchants are conducive to cash flow, especially during slow seasonal periods.
Traditional bank loans require a fixed set of payments each month, whether the business made a sale or not. But if you choose a merchant cash advance, the payments are calculated as a percentage of credit card sales, and if sales are growing, the repayment could be faster, but if the business owner experiences any disruption or downtime of sales in the business, payments will fall with it.
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