Business Cash Advance (Merchant Cash Advance)

A business cash advance is one way for small and mid-size businesses to acquire working capital for those businesses with a poor credit rating or have a weak financial statement. A merchant cash advance is a financial instrument that allows a retailer to sell a portion of his future credit card and/or debit card sales. This type of funding, also called credit card receivable financing, can be viewed as a “hybrid” of factoring. Factoring is the process of selling a business’ accounts receivable of goods or services that have already been sold. A merchant credit card cash advance is the sale of future sales. In both cases, you get a lump sum of cash to finance your business operations.

Is A Business Cash Advance The Same As A Business Loan?

A merchant cash advance is more of a temporary funding solution for your business. This funding is technically not a loan since it is the purchase of your future credit card and/or debit card sales. The funding source recovers its’ money by withholding a percentage of each day’s credit/debit card sales of the business. The amount withheld, called the holdback or retrieval rate, is usually between 10 and 20 percent of the daily sales. The advantage to this method or “repayment” is that the merchant is not locked into a fixed payment amount. On days when your business is slower than usual, you won’t have as much money withheld from your credit card sales. Conversely, on days when business is brisk, the merchant account provider will withhold more of your revenue.

This type of financing requires that you have an operating Merchant Account. You may apply here to GotMerchant.com if you do not have one:

Merchant Accounts & Credit Card Processing
Accept credit cards for your business!

The criteria to qualify for this merchant account cash advance includes:

Minimum time that you have been in business: usually six months to two years.

Minimum time your business has accepted credit cards: usually six months.

Minimum amount of credit card sales volume: $3,000- $5,000/month.

The general term is six months to one year. Most merchants have repaid the full amount borrowed within one year. Most credit card funding sources will advance you 100 – 150% of your monthly credit volume. The factor rate (the counterpart to interest on a loan) is the cost for getting the cash advance. This rate may be anywhere from 1.08 to 1.32 per cent/per day.

Apply for a merchant account with a provider that has been in business since 1998. Click on banner below:

Sign up for the free BM$ Success Newsletter and keep up with funding opportunities for your business.

More on cash advance qualification critera

Click here to leave business cash advance and return to Working Capital.

Click here to leave business cash advance and return to business-money-source homepage.

SBI!