What is a Merchant Cash Advance?
Finding the right financing solution for your business can be a very stressful process. Particularly in the business world, it can be difficult to get all of your fiances to align at the same time. In addition to regular expenses for things like inventory and insurance, there are a lot of problems which arise that require an immediate resolution. Fortunately, there are a few solutions that can help your business out of a tough financial situation. Here is one of the most common.
A merchant cash advance is similar to other types of loans in many ways. A lending institution loans money to a business after a short approval process. Then, the business is given the requested funds in a lump sum payment. Once the money is loaned to the business, the business will start paying the lender back until the loan is repaid. As a business owner, you are probably already quite familiar with this process. Click here to read more.
The lending process is pretty straight forward regardless of the type of loan you choose. However, there are some special aspects of a merchant cash advance that are different than other loans. First, the loan is not paid back with interest in the standard sense. Instead, the merchant pays the lender a percentage of sales from their credit card transactions. Typically, that percentage is a portion of the merchant's credit card sales. Also, this percentage is repaid daily instead of monthly, which is common for other types of loans. 12-24% is the usual percentage for this rate.
Businesses prefer these types of loans for several reasons. First, the process is much swifter than other loans. The money is available almost immediately after approval and the entire process can take less than 10 days. This is attractive for merchants who have cash flow issues as it provides them with a quick liquidity that they would not have otherwise had. The longer you have to wait for a repair or other solution to be resolved, the more money your business loses.
These loans are also preferable because the payback is based on the rate of sales for the day. Thus, if the business is having a slow period, its loan payment is automatically adjusted accordingly. Retail businesses and restaurants find this aspect of merchant cash advances to be particularly attractive. This is also helpful for businesses that rely heavily on tourist traffic during the high season. Visit the site for facts.