Did you ever think about how merchant cash funds came into existence, how does the process work, and who they benefit the most? This article sheds some light on the history of merchant cash advances.

Merchant cash advances have in fact been a popular lending method for a number of years and it is not a new concept. Businesses and merchant owners have been using merchant loans for years to meet their financial requirements. While the process may have changed a bit, the basic intents as well as implications remain the same. Earlier firms preferred to avail business loans from banks which quite often prove to be a lengthy as well as a complex process. With merchant cash borrowing being easy and simple, big and small firms started turning towards merchant cash advances.

Credit History of Merchant Owners
Businesses are often offered merchant loans based on their past as well future sales record. Rather than emphasizing on collaterals or cash-in-hand the lender analyzes the sales volume of a business merchant. It is always a plus for the businesses if they have a good credit payment history. This enhances their chances to receive funding for their business expansion.
Repayment of Merchant Cash Advances 
Lenders disburse the loan amount in exchange for future credit and debit card sales. Merchant owners aren’t required to pay any fixed amount. The repayment amount (generally a certain fixed percent of total credit/debit card sales) is directly collected by the lender from various credit card processors. Generally accepted credit/debit cards include MasterCard and Visa Card.

There are many occasions which sound business organizations which can use cash to propel their business growth; however, they aren’t able to qualify for traditional bank loans. Such business funding factoring agreements don’t’ require any rules of providing any collateral or security. They offer a lump sum amount to the merchant owners in exchange of their future receivables. For example, if a firm has sold $20,000 of its future sales, the lender will collect all its money from customer’s debit or credit transactions sales until it has collected the full amount of $20,000.