When you start looking for merchant cash advance companies to provide your company with a much needed infusion of working, liquid capital, your account history, your past debit and credit card receipts, your bank statements, other documentation will be examined, as will your credit rating, your tax history, and your business’s sales and past performance. If your company is doing well and you have enough evidence that you will generate future sales that provide incentive for the merchant cash advance company, you will likely qualify, and you be able to get the money you need relatively quickly. Working with a merchants cash advance company, however, has both positives and negatives. Among other things, you have to make sure you evaluate the available merchants cash advance companies in order to choose the right one, and to get the service you deserve (not to mention the best possible rates).
Meredith Wood, writing for Fundera, writes “While merchant cash advance companies have gotten a bad reputation, you may find that a merchant cash advance is the best option for your business as it can provide you with quick access to cash when your business is in need. So how do they work? A merchant cash advance company will give you a cash advance based on your business’ monthly credit card revenue. You will then pay back this initial sum plus a fee by giving the provider a fixed percentage of your credit card sales each day until repayment is complete. Because repayment is tied to your daily sales, you can pay back the loan more quickly during busy times or more slowly during sluggish periods. Approval can be within two days or less, typically, and does not require collateral or strong credit. Choosing among merchant cash advance companies is an important step in the process to ensure you’re getting the best terms for your business. You should seek to evaluate merchant cash advance providers along three key criteria: fees, track record, and customer service.”
Wood explains that when you look at merchants cash advance companies, the first thing you have to examine is the fees that will be changed for the advance. These fees can vary widely, and what we’re talking about is a percentage of, say, daily credit and debit card sales, reducing your future receivables accordingly for the duration of the time you have the cash advance outstanding. Merchant cash advance companies are happy to exchange these relatively high rates for the cash advance it takes to keep your company running, but you need to compare from among these companies to ensure that you get the best possible deal.
“You will also want to look at the track record of merchant cash advance companies,” Wood goes on. “You should be able to ask for references to confirm that they are reliable. You should also receive a copy of your contract to ensure that they adhere to the agreed upon rates and do not charge extra fees. It is imperative that they are 100% accurate in documenting transactions and the amount they withdraw daily. Finally, as a business owner and potential client, you deserve great customer service. The employees should be knowledgeable and ready to efficiently handle your questions and concerns. You should expect to have polite and professional communications with all company representatives. They should be available to answer questions and resolve issues during and occasionally after the business day. Even if you are looking for access to cash quickly, it pays to do your research. Take the necessary steps to evaluate merchant cash advance companies to ensure you’re getting the best deal for your business.”
One of the things you need to consider is that cash advances are relatively easy to get. Yes, they aren’t just giving them away, and yes, you have to prove to the merchant cash advance companies that you can potentially repay the funds, but it’s still much easier to get a merchants cash advance than it is to get a more traditional bank loan or other form of financing. Because of this, you have to look at merchant cash advance companies with your eyes wide open, and pay attention to what you’ll be paying, the fees involved, and whether the company is policing its own behavior. John Tozzi, in Bloomberg, commented on this very practice.
“Advance providers say they’re doing more to self-regulate,” he writes, “but a merchant’s best protection is to understand the terms of the contract before signing up. If you’re considering a merchant cash advance for your business, how can you evaluate the provider? Even the largest providers, who say cash advances have gotten a bad rap, concede that some companies or independent brokers have been too eager to sign up merchants who aren’t a good fit for the product. Cash advances remain a niche product, but some analysts say the industry is growing by double digits and could reach $10 billion in advances. …Advance providers offer small business owners up-front payments in exchange for the right to collect a portion of their future credit-card sales. The quick, unsecured funds come at a high price: providers typically charge premiums of 30% or more of the amount advanced and collect it in a matter of months. They usually sell to retail, restaurant, and service companies with high credit-card volume, and because the advances get paid off as a set percentage of credit-card sales, merchants repay less in slow months—a flexibility providers say is a key selling point.”
Tozzi goes on, “Cash advance providers say they offer capital to companies that banks won’t lend to, and that advances are expensive compared to loans because they assume the risk that a business may go under or not repay as quickly as expected. …Companies exploring merchant cash advances should first determine whether they’re dealing with a broker or an actual advance provider by asking for a copy of the contract, not just the application, Goldin says. The contract will have the name of the actual provider and spell out the terms of the advance. Business owners should also find out how long providers have been in business and ask to talk to customer references. The cash advance industry has been taking steps toward self-regulation. …But right now, merchants have to vet cash advance providers on their own, because once they sign a contract they have little recourse if things turn sour. Cash advances are not covered by lending laws because they are structured as sales of future income. Business-to-business transactions are exempt from federal consumer protection laws like the Truth in Lending Act, the Electronic Funds Transfer Act, and the Fair Debt Collection Practices Act…Merchant cash advance companies hope that their own steps to rein in bad practices will make that unnecessary.”
Karla Navarro, meanwhile, has very positive things to say about merchant cash advance companies and the services they provide. “A merchant cash advance is an alternative approach to accessing cash for your business. While traditional business loans can affect a business credit rating, a merchant cash advance is a sales transaction and therefore stays off the credit report in most cases. Merchants who take a cash advance also avoid the risk of losing collateral, a common issue in traditional loan default situations. Merchant cash advance loans [even though these are not actually loans] are usually painless, straightforward processes from start to finish. Traditional lenders evaluate (among other things) financial statements, tax returns, credit reports and business plans. Merchant cash advance providers consider only simpler criteria: monthly credit card receipts or positive cash flow and length of time in business. …Because there is so little paperwork to process, MCA working capital loans offer a fast turnaround. While traditional loans can take weeks or even months to process, MCA funding is typically available within a week of submitting the application. This fast response can be an important asset if the business needs immediate funding to pay off a creditor or take advantage of an unexpected opportunity. MCAs rely on real business performance and positive cash flow rather than credit and financials to evaluate applicants. This flexible approach allows most any stable business to qualify for a loan. Advance amounts typically depend on the business’s average monthly revenue (positive cash flow) or monthly volume of credit card receipts.”
Navarro stresses that chief among the advantages of any merchant cash advance companies’ product is that the merchant cash advance companies don’t get paid until you do. “While the loan requires a fixed monthly payment, MCA collection amounts usually fluctuate based on the merchants sales volume. In high volume months, the lender retrieves a higher monthly sum; in leaner times, the lender scales back its share proportionally. This percentage-based collection policy allows the MCA lender to support the business success rather than draining its funds.” She emphasizes that a merchants cash advance is a cash flow infusion and therefore a very attractive alternative to more traditional, more conventional loan products. Especially in this very tight credit market and while the economy remains in turmoil despite several years of nominal advances, these credit alternatives become ever more important to maintaining the solvency of a business.
Vendorseek, accordingly, highlights multiple advantages of merchant cash advance companies, “Cashflow is king in the world of small and mid-sized businesses. Cash is vital to maintaining inventory, paying suppliers, and growing the business. With the recession putting a damper on credit markets, businesses are looking elsewhere for cash. The new solution: merchant cash advance. …A merchant cash advance (MCA) offers an alternative source of business funding to entrepreneurs who lack the credit rating or collateral to secure a commercial bank loan. Unlike a loan, merchant cash advance funding is the purchase of a portion of a business future credit card sales at a discount. Businesses benefit from a lump sum paid at the outset of the agreement. In return, the MCA provider buys the right to retrieve a portion of the business credit card sales each month–usually around eight percent of total receipts. …Merchant cash advance funding offers an attractive alternative to business loans. [These benefits include the fact that there is no credit or collateral at stake.] … A merchant cash advance is a safe approach to accessing cash. Whereas commercial loans can affect a business credit rating, a merchant cash advance is a sales transaction and therefore stays off the credit report. Merchants who take a cash advance also avoid the risk of losing collateral, a common issue in commercial loan default situations.”
The piece goes on to point out that merchants cash advance companies offer a painless, straightforward process from start to finish. “Commercial lenders evaluate financial statements, tax returns, and business plans. Merchant cash advance providers consider only two simple criteria: monthly credit card returns and length of time in business… Because there is so little paperwork to process, merchant cash advances offer a fast turnaround. While commercial loans can take weeks or even months to process, MCA funding is typically available within a week of submitting the application. This instant response can be an important asset if the business needs immediate funding to pay off a creditor or seize an unexpected opportunity. [Approval rates are also high because] MCAs rely on real business performance rather than credit to evaluate applicants. This pragmatic approach allows any stable business to qualify for an advance. Advance amounts typically depend on the business average monthly revenue in the previous year.”
When you look among merchant cash advance companies, you need a reliable, reputable firm that can answer your needs and tailor a solution to your specific financial parameters. Infiniti Funding can be that firm. Contact us today and let us help you. All you have to do is communicate with us and let us ease your mind, explain the requirements, and begin the process. Infiniti Funding can be your financial solutions provider. Contact us today and find out just how Infiniti Funding can help your company.