No Bank Statements Merchant cash Advance
– Basic Expenses
– General Investments
A merchant cash advance is a common financing option where a financial services company gives a lump sum of money to a business. The business and financial service then enter into an agreement where financial services company will take a portion of credit or debit card sales to pay back the sum. The merchant does not charge interest on the cash advance. Instead, they charge a flat rate fee for the advance. The merchant can collect their money in a couple of ways including:
– Processing Payment Then Transferring The Remainder To The Business
– Debiting The Businesses Checking Account After Reviewing Processing Information
A merchant cash advance has a number of advantages over taking out a small business loan. A merchant cash advance will not hurt your line of credit. This means that you can keep your line of credit open for major investments such as purchasing property and equipment.
A merchant cash advance is very desirable for small businesses with little or no credit or bad credit. This is because the merchant collects money through the billing process, and so they will advance you money based upon your revenue. The merchant will often look at your clients’ credit when evaluating you for a cash advance.
Delancey Street is a leading merchant with them serving the Los Angeles area. This financial services company offers their clients the opportunity to secure up to ten millions of dollars in funding. They can process cash advances quickly with them distributing lump sum payments inside of twenty-four to forty-eight hours. Delancey Street prides itself in helping small businesses with them offering cash advances for the redevelopment of property, hiring new staff, and restocking inventory.
What Are the Benefits of a Merchant Cash Advance?
Business owners in need of quick funding may wish to consider a merchant cash advance or MCA. Not a loan, a merchant cash advance allows business owners to borrow against their daily credit card sales. The advance is repaid through a percentage of the credit card sales the business receives in its business merchant account. Business owners will find that the application process for this type of advance is typically quite simple and fast. In fact, when approved for an MCA, business owners can usually receive their funding within 24 hours following approval.
To determine whether a business owner is eligible for a merchant cash advance, the provider will usually evaluate the business’s daily credit card receipts to determine whether it is feasible for the advance to be repaid in a timely manner. The criteria used to determine approval for a merchant cash advance are typically different from those used by lenders and banks. It should be understood that due to this, the rates for a merchant cash advance will often be higher than traditional business loans.
The term “holdback” is one that business owners may find unfamiliar. This term is used to refer to a percentage of the business’s daily credit card sales. The provider takes this percentage, the holdback, as repayment for the advance. Depending on the provider, the holdback could range anywhere from 10% to 20% of the daily credit card sales. This holdback will apply until the advance has been repaid.
Due to the fact that the holdback is based upon the daily deposits in the merchant account, advances can be repaid faster when the business receives more credit card transactions. Should transactions dip lower than the amount expected, the withdrawal from the merchant account would also naturally be lower. This also means it would take longer to repay the advance unless credit card transactions increase.
Comparing Interest Rates and Holdback Amounts
It should also be understood that there is a difference between interest rates and holdback amounts. Factor rates are usually charged by MCA providers. Since merchant cash advances are not usually amortized as like with a traditional loan, the factor rate associated with a merchant cash advance could potentially range between double digits and triple digits.
Should You Choose a Merchant Cash Advance for Your Business?
Although a merchant cash advance can offer numerous benefits when a business owner needs cash without waiting, it is important to understand the costs associated with this type of advance. Since the requirements for a merchant cash advance are less stringent than those of a traditional business loan, you should expect to pay a higher cost for the advance. Even so, if you are a business owner who needs fast short-term funding, a merchant cash advance could be the right option to receive the capital you need.
You should also understand that since a merchant cash advance is not actually a loan, this means that providers are not obligated to report your timely payments to credit bureaus. As a result, even if you make your advance payments on time, doing so will not assist you in building your credit profile.
Possible Alternatives to Merchant Cash Advances
There are possible alternatives to merchant cash advances. Among those options is a short-term business loan. Business owners who have a strong credit profile may find they are able to take advance of a business line of credit to solve their short-term funding needs.
With this type of loan, business owners can obtain the funding they need and repay the loan within just a few short months. Additionally, depending on the terms of the loan, payments could be made on a daily or weekly basis. This makes it possible to spread the debt burden out over the month instead of making a single large payment. The payments made on a short-term business loan can also be reported to credit bureaus, which could help you to improve your credit profile.