A merchant cash advance loan company can be of great benefit to a business that is urgently looking for funds. Merchant advance companies provide small businesses with merchant cash advance which can be used for equipment financing, purchasing of inventory, construction financing, or even meeting up with payroll obligations. The good thing about a merchant cash advance is that it can be used for whatever the business sees fit; there is no monitoring as is the case with loans from commercial banks.
Merchant cash advance is something that has become more and more popular with small business owners at present. Just a few years ago there were probably not more than a miserly handful of companies that could be rightly described as a merchant cash advance Loan Company. The situation is somewhat different now that there are more than one thousand merchant advance providers littered across the United States alone.
The success of merchant cash advance as an alternative source of business funding is something that has been quite remarkable. In fact, merchant cash advance has been described as a disruptive innovation in the lending sector. But, regardless of what anyone thinks, it is quite clear that merchant cash advance companies have come to stay.
At least this much is understood by commercial banks that are looking for every way possible to somehow keep up with the innovative pace of merchant vendors who have brought such luscious fluidity to the lending sphere. Part of their strategy has been to launch online lending programs that could have some semblance to a merchant cash advance. While that is one way to keep up with the competition brought about a cash advance loan company, suffice it to say that it has impacted the merchant funding industry in any significant way.
Merchant cash advance companies have also been criticized for the relatively higher cost at which loans are made available to small business owners. At first, such arguments might seem plausible. But, when one considers that a merchant cash advance is likely the riskiest lending venture there is, one can understand why it is that a merchant cash advance loan company would want to charge considerably higher. Even at that, the most critical thing about merchant cash advance is the quality of service businesses receive. Before looking at some of the benefits of merchant cash advance let us take a look at what it is.
Taking a closer look at merchant cash advance—what is it?
One thing that should be fundamentally spelled out about merchant cash advance is that it is not a loan in the outright sense of the word. For a loan transaction, is one in which the business agrees to unconditionally pay back an amount of money which it has borrowed from a lender at some specific time in the future. The main point in this definition is that the business agrees to pay back the same amount in addition to interest unconditionally.
It is something that distinguishes a merchant loan offered by a merchant cash advance loan company since the borrower, in this case, is under no obligation to pay back the loan. The reason for this is that a merchant cash advance is a business-to-business commercial transaction in which a merchant agrees to exchange using sale its future receivables to a merchant cash advance provider at a price (notably discounted) so as in return acquired a fixed sum of money.
Since it is a sale of future receivables, the repayment of the advance is tied to the future credit card sales. And if it happens that for some reason the business is unable to make sales, or it falls into hard times and folds up, the business cannot be held liable to personally repay the advance—in which the cash advance loan company suffers a loss. It does not mean that merchant cash advance provider is subject to whims and caprices of the business owner. For, in reality, the merchant agrees to refrain from intentionally committing acts which could serve to jeopardize the agreement and cause the cash advance loan company to lose what ought to be due to it.
How does the merchant cash advance lending process then work?
If a business is in need of a cash advance, it has to contact a merchant cash advance provider, preferably one with an office in the same city as the business. This, however, might not be necessary since some merchant cash advance transactions can be completed online. There are things which a business has to come to terms with before signing the merchant agreement with the cash advance loan company.
One of this is the factor rate while the other is the retrieval amount. On the one hand, the factor rate is the amount by which the actual advance is multiplied to arrive at the total amount the business will repay. On the other hand, the retrieval rate is the amount of the daily credit sales of the business, in percentage, that is remitted to the cash advance loan company. As soon as an agreement has been reached on these tow all-important issues, the business proceeds to sign the cash advance agreement, and the cash is issued to it almost immediately. So the daily payment continues until the advance has been fully repaid.
Reasons to give merchant cash advance a shot
Any business that is seeking funds to urgently bring itself back to life would do well to contact a merchant cash advance loan company. First thing first: a merchant cash advance provider offers the fastest and the easiest way of obtaining a cash advance. Cash can be made available to a business in a matter of hours if the amount is not too big; when it is, it could take a few days for it to be issued.
Meanwhile, the issue of collateral and credit score does not come up when dealing with merchant cash advance. Businesses without collateral, as well as those with poor credit scores, can apply provided they meet other minor criteria. Above all, a merchant cash advance cannot impact the credit score of business since providers do not report to credit bureaus.
For all of these, it is not a riveting shock that small businesses are now affectionately embracing merchant cash advance providers as a good source of business funding.