A merchant cash advance is a scarcely utilized financial practice that gives needed cash to merchants via their credit card processor. A very little amount of merchants realize that they have this option and go straight to family or a bank when they need money to pay for expansions, repairs or upgrades of their stock and equipment. If you are a business in need of money fast, you should look into factoring as well.
The idea behind factoring is something like selling futures. You, as the business owner, agree to sell future credit card revenues at a cheaper price to the factoring company. The money is given now in exchange for future revenues in the next several months. These arrangements are usually for the short term, rarely more than one year, and are a viable way for a company with a verifiable credit card sales history to attain needed working capital.
Unlike a conventional loan, where the repayment term is set for the duration of the loan, a factoring agreement takes into consideration the fact that in almost every business there are great months and slow ones. Your payment is directly tied to your credit card receivables, as a portion, not a set number.
If you have chosen to pay a 10 percent daily capture and you charge $8,000 one month, your payment that month comes out to 800 dollars. In following month you may charge 10,000 dollars and pay $1,000. This flexibility is a wonderful option for a growing company.
An extra benefit of a merchant cash advance is the quickness,short time in which the cash turns up in your bank account. While a bank may take several years of deliberation and dictate how you use the cash when and if they give it to you, with a factoring agreement, you will have the cash in about a few business days, and you can apply it to whatever you deem fit.
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