Merchant Cash Advance

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What are merchant cash advances?

 

Merchant cash advances are sources of funding for small businesses not able to take out bank loans. These are most commonly used when a business is in immediate need of cash, but has a cash flow problem. In return for the cash, the lender of a merchant cash advance collects a percentage of the business’s daily credit card sales. There is no interest rate associated with merchant cash advances. Instead, the company lending the money collects a premium from the credit card sales of the company borrowing the money. Technically, these advances are not loans, but rather a sale of future credit card income.

 

How do merchant cash advances work?

 

Merchant cash advances provides Working Capital to business owners in need of additional cash flow . When a company is given a merchant cash advance, it agrees to return the money through its future credit card income. The lender collects a fixed percentage of daily credit card sales from the company. The lender keeps collecting the income until the advance is paid back.

 

The advantages of merchant cash advances

 

There are a number of advantages of merchant cash advances. The cash gets funded within 3-5 days with very little paperwork to process. Also, no collateral is required to secure the advance. There are no fixed payments and no interest rate, just a one time flat cost, the cost is a tax write off. There is no fixed time period to return the advance. The lender just collects a percentage of credit card sales until the advance is paid back. Usually, the advance is paid back within one year.