Business Cash Advance (Merchant Cash Advance)

business 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. Apply for a Merchant Cash Advance here 

This type of financing requires that you have an operating Merchant Account.

The Criteria To Qualify For A 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: $6,000 or $10,000/month depending upon source.

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 Cash Advance here.

Two Alternatives To Business Cash Advance (Merchant Cash Advance)

Business Money Source offers two other alternatives to obtaining working capital that are considerably less expensive than a merchant cash advance.

Both may be slightly more difficult to qualify for but if your business can obtain one of these alternative types of financing, the repayment costs will be greatly reduced.

You can find more information on this website under the Short Term Financing and Unsecured & Bridge Loan tabs or:

1) Go to Short term secured and unsecured business loans

2) Go to Business Line of Credit (BLOC)

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