What is an asset based loan? An asset-based business line…
ACH, which stands for automatic clearing house, withholding is another method that is used. In the ACH withholding option, the credit card sales information is shared with the provider and then the provider wires out the agreed upon percentage from the pressure washer’s checking account.
Overall, the Split Withholding is the most widely used and popular option. It keeps the repayments going in real-time and it doesn’t require a delay.
The real-time nature of it obviously benefits the cash advance provider, but it’s also good for the business as well. In this option, the business owner never sees the cash in any of his accounts which makes it seem like he never had it to begin with.
This new form of financing is a great way for businesses to get short term cash for their needs. It’s quick and easy to setup.
The growth and sustenance of a small business depends on the cash flow and starting capital. Therefore, a cash advance provides some money in advance against the basis of credit card sales which shall undergo processing in the future. It’s not a loan, however, the merchant providing the money shall assess the number of credit card sales you have had in the past and process the sum they give you as an advance on those sales.
The lump sum amount is automatically repaid daily, and a certain percentage is charged denoted as `Holdback.’ This amount is dependent on the period of repayment, the amount of credit card sales, the magnitude of your advance and the size of the business. Usually, the repayment period spans over a certain period, and they begin as soon as the money is received.
Merchant cash advance are not suitable for every caliber of a business. Although they are most appropriate for the business that requires quick access to cash and has solid credit card transactions history. Henceforth, they are a seemly fit for a new company that has streamlined cash flow such as restaurants that have not been in operation for long periods, but have a stable income.
Nevertheless, a merchant cash advance is not considered as a loan because it’s not assigned a termly percentage rate, instead the business proprietors pay a `factor rate’ agreed upon on collection of the funds usually ranging between 1.1 and 1.5 expressed in decimals. This makes the merchant cash advance look appealing. However, it’s important that you consult a financial advisor to assist you in understanding the often misinterpreted factor rate. The keynote is to negotiate a lower holdback amount that will be sustainable in the long run at the end of the year be able to balance the annual percentage rate.