Merchant Cash Advance FAQ

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It takes money to make money, and sometimes businesses experience an unwelcome interruption in their cash flow. You just don’t quite have enough to cover it all, and you need some short-term assistance to make it over the rough patch. Traditional loans are not always feasible, but the good news is, they are not the only option for obtaining the cash you need. Merchant cash advances are one such option that may be suitable for you. Here are some frequently asked questions about this financial product.

What is a Merchant Cash Advance?

A merchant cash advance involves a business purchasing a set amount of your future credit card sales in exchange for extending you a lump sum of money upfront. As you can see, this type of loan provides you with quick access to capital, allowing you to meet your pressing financial obligations.

Securing funding through this avenue is very different than a traditional loan in many ways. There is no business plan to present, good credit is not necessary, you typically get funding within 7 to 10 days, the loan application is much simpler and you typically do not have to provide personal guarantees or collateral.

How is the Loan Paid Back?

The lender will establish a percentage of credit card sales to be forwarded to them automatically each day, until the loan has been paid back. Often times, lenders allow for adjusting the rate if you experience a slowdown in cash flow. With this method, you do not have to worry about sending out payments, it is all taken care of for you, nor are you locked into a fixed monthly payment that you are responsible for no matter what type of revenue you are pulling in at the time.

What Can You Use the Advance For?

You can use the money for anything you want, whether it is paying taxes, maintaining payroll, remodeling or marketing.

How Much Money Can I Borrow?

There is no cut and dry answer, and the amount will depend on a variety of factors, including the lender. Ultimately, the amount of money for which you qualify depends on how much money you are bringing in through credit card sales. If you bring in 20,000 a month, you may be able to borrow up to that amount.

What are the Qualifications?

Like the amount of money you are able to borrow, the qualifications to get a cash advance will vary between lenders. Generally, you will need to produce a minimum amount of credit card sales within a set timeframe. For example, a lender may require at least 5,000 in credit card sales a month for the last two months in a row.  It usually also requires that you process credit card sales at least a set number f days throughout the month. Lenders may also require not having declared bankruptcy within a certain time frame before applying, and if you rent, being current on payments and having a certain amount of time left on your lease.

Credit is typically not a factor in getting approved, since lenders are evaluating your application based on the history of sales for your business. Plus, they are automatically getting a piece of your sales each day from the credit card companies, not relying on you to send a check each month or have the available funds in your checking account for automatic withdrawal.

About the Author:Kelli Cooper is a freelance writer who enjoys blogging about all things business; she recommends visiting Advance Funds Network to learn more about merchant cash advances.

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