Merchant cash advance opens door for retailers and it's growing at an incredible rate. This growth is occurring because traditional financial institutes are once again falling down in the services that they offer smaller retailers.
The merchant cash advance is very unique and a way of lending most retailers aren't familiar with. Rather than being a loan, it's actually the purchase of an asset so it has a lot of different terminology such as discount rate or retrieval rate rather than interest rate. It uses a completely different contract and it involves a sale that hasn't yet occurred.
A provider of merchant cash advances gives merchants like yourself a lump sump of cash upfront. For that cash, you the merchant agrees to pay back the principal plus a fee by giving the lender a percent of your credit card and debit sales until the balance is paid. The percentage of credit card and debit sales varies from 5 to 25% and the time to payback is usually 8 to 18 months.
The lender usually requires you to use an approved card processing system because your advance percentage is deducted from each batch you process. There are a few merchant cash advance providers that don't require their system so if this is important to you just shop around until you find a lender that offers this option.
The merchant cash advance is much different than traditional loans. Loans are just that loans - you borrow a certain amount of money with a specific interest rate and with a fixed payment for a fixed period of time. A merchant cash advance on the other hand is a cash advance with the assumption that you will have ongoing credit card and debit sales and the repayment is a percentage of those sales. It's a very unique form of borrowing that's got plenty of value and in many cases is much more functional than traditional loans.
With a merchant cash advance most times the cash is quickly available and with few hoops to jump. It's also an excellent choice for merchants that have trouble qualifying for traditional funding. This form of borrowing is cash flow friendly - when sales are up you pay more but if you have slow periods you'll pay less.
Finally, there is a better way to infuse cash into your business. Merchant cash advance is simple, effective, and will open doors for business.