Small business owners who need capital quickly always have access to the merchant cash advance providers that are eager to fund them. This decade-old industry has grown significantly in the last couple of years to more than 60 providers according to observers, and the tight credit environment is fueling demand. However, a lot of business owners do not know how this kind of financing works. Knowing how they operate will enable people to determine how these loans will help their business.
A Smart Alternative to Business Loans
Before explaining how it works, people should first know what this type of loan is really about. A merchant cash advance loan is an alternative form of financing for a business that needs quick access to capital but does not have the capability to obtain it through conventional loans.
Eligibility is based on a company’s ability to pay off a loan through its credit card sales in the future. The Huffington Post reports that 81 percent of clients in businesses paid for their products and services with plastic last year. In today’s economy that is rife with strict lending standards, they are frequently the only option for a company with limited collateral or poor credit.
Even if a business qualifies for traditional loans, merchant cash advance loans offer faster closing times. This allows company owners to seize limited-time opportunities, discounts and offers before they expire. This can increase their profit margin even after taking into account the fee for the advance. Fast funding is the key to staying profitable and agile.
To see how much your business qualifies to receive, visit expresscapital.com.
How It Really Works
After becoming familiar with merchant cash advance loans, a lot of people are curious about how they really work. The first step involves the business applying for a merchant cash advance. They generally hear back from the lender about whether their company qualifies for this loan within 24 hours.
After obtaining their application, the business cash advance company quickly provides the business with a quote for how much money they qualify for along with the rate of repayment. Once the necessary documentation is received, the finance company advances the business up to a quarter of a million dollars in cash. However, this amount varies depending on how much money the business generates from month to month. An agreed-upon small percentage is deducted from the company’s future credit card transactions until everything is paid in full.
Because the entire process is electronic, there is no need to write the cash advance company a check for repayment. The percentage of credit card receivables agreed upon is deducted automatically in a process that is known as credit card factoring.
The Benefits
This simple process has a lot of benefits compared to traditional lending modalities. There is no limit as to what the funds can be used for. If a business takes out a traditional loan, there are often a lot of conditions as to what must actually be done with the money. If a short term emergency occurs, the business is free to use the advanced money for other purposes.
Another advantage is that merchant cash advances adhere to the uneven nature of finance. Expenses are not constant in business, and the same is true with the liabilities that a particular company has.
Merchant cash advance loans react faster to these situations than traditional loans. Aside from that, the application process for a merchant cash advance loan is easier, faster and does not require nearly as much background work as a traditional loan. If a person has fully separated their business expenses from their personal ones, the merchant cash advance loan process can be taken care of even faster.
In addition, a merchant cash advance loan does not create new debts for a company. Because it is based on money that is already coming into the business, businesses incur no new debts. This helps in both saving money and keeping a company’s finances organized.
