Managing a business is a serious responsibility and one of the biggest challenges is looking for viable financial resources. Indeed, the challenge of funding a business isn’t just in the beginning.
Even if you have successfully launched your business and survived the first year or the first few years, you will still be confronted with expenses and without sufficient budget, it would be impossible to keep the business going.
The good news is that there are a number of financing options available to business owners. In this article, we will be focusing on merchant cash advance – how it works and how your business can benefit from it.
What is Merchant Cash Advance?
Merchant cash advance is an available option for merchants who accept credit card payments from their customers. Merchant cash advance is the process of selling your credit card projections to a lender to be able to get the immediate cash needed.
For example, let’s say that you are able to make a minimum of $3,000 worth of credit card sales each month. If you need cash in a hurry, you can take out a loan from a merchant cash advance company worth $3,000 or higher and pay it back using your in-coming credit card sales. Afterwards, payments from your incoming credit card transactions will be sent to the merchant cash advance provider.
Of course, there is a fee in exchange for this service. Usually, merchant cash advance companies will only provide 80% cash from the credit card sales and release the remaining 20% of the sales once the complete payment has been received.
Generally, merchant cash advance is an option for businesses that have been in operations for at least two years. Most cash advance or factoring companies also require a minimum quota in credit card sales.
If you do not meet the required quota, you may not qualify for this type of financing. Hence, you should check first the policy of the factoring company before applying for a merchant cash advance loan.
Does this business financing option require the submission of collateral? Not at all. A merchant does not need to provide any form of collateral or personal property as a guarantee for the cash advance. This type of loan is guaranteed with the business’s credit card sales so it is not your conventional lending program.
Merchant Cash Advance – Beneficial for Business
Processing a merchant cash advance is quick and convenient as application can be done online and once approved, the requested cash advance can be expected within 3 to 5 days, depending on the lender.
If you own a business but do not have a merchant account yet, then you must consider applying for one. By accepting credit card payments from your customers, your business can dramatically increase your sales within the following months and strengthen your company’s reputation.
As soon as you start credit card merchant processing, merchant cash advance will be a great opportunity for you to acquire financial assistance at any time you need to.
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About the Author:
Melanie James has spent the last 14 years working with businesses to implement quick, effective and inexpensive changes to their businesses to increase productivity and their bottom line.