A Merchant Cash advance is a scarcely used financial practice
that provides needed funding to merchants via their credit card
processor. Few business owners realize that they have this option and go
directly to family or a bank when they need cash 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 a bit like selling futures. You, as the merchant, agree to sell future credit card revenues at a discount to the factoring company. The funds is provided now in exchange for future revenues in the next several months.
These agreements are usually for the near term, rarely more than 1 year, and are a great way for a company with a proven credit card sales track record to attain needed funding.
Unlike a traditional loan, in which the repayment schedule is set for the life of the loan, a factoring arrangement takes into consideration the fact that in almost every business there are busy months and bad ones. Your payment is directly tied to your credit card receivables, as a portion, not a set fee.
If you have agreed to pay a 10% daily capture and you charge $8,000 one month, your payment that month comes out to $800. In the next month you may receive 10,000 dollars and pay $1,000. This flexibility is a very useful option for a growing company.
Another benefit of a merchant cash advance is the quickness,short time in which the working capital turns up in your possession. While a bank may take several weeks of decision making and tell you how you utilize the working capital when and if they give it to you, with a factoring agreement, you will have the money in about a few working days, and you can apply it to whatever you deem fit.
The idea behind factoring is a bit like selling futures. You, as the merchant, agree to sell future credit card revenues at a discount to the factoring company. The funds is provided now in exchange for future revenues in the next several months.
These agreements are usually for the near term, rarely more than 1 year, and are a great way for a company with a proven credit card sales track record to attain needed funding.
Unlike a traditional loan, in which the repayment schedule is set for the life of the loan, a factoring arrangement takes into consideration the fact that in almost every business there are busy months and bad ones. Your payment is directly tied to your credit card receivables, as a portion, not a set fee.
If you have agreed to pay a 10% daily capture and you charge $8,000 one month, your payment that month comes out to $800. In the next month you may receive 10,000 dollars and pay $1,000. This flexibility is a very useful option for a growing company.
Another benefit of a merchant cash advance is the quickness,short time in which the working capital turns up in your possession. While a bank may take several weeks of decision making and tell you how you utilize the working capital when and if they give it to you, with a factoring agreement, you will have the money in about a few working days, and you can apply it to whatever you deem fit.