A merchant cash advance was originally structured as a lump-sum payment to a business in exchange for an agreed-upon percentage of future credit card and/or debit card sales. The term is now commonly used to describe a variety of small business financing options characterized by short payment terms (generally under 24 months) and small regular payments (typically paid each business day) as opposed to the larger monthly payments and longer payment terms associated with traditional bank loans. The term "merchant cash advance" may be used to describe purchases of future credit card sales receivables, revenue and receivables factoring or short-term business loans.
Merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income, directly from the processor that clears and settles the credit card payment. A company's remittances are drawn from customers' debit- and credit-card purchases on a daily basis until the obligation has been met. Most providers form partnerships with payment processors and take payments directly from a business owner's card-swipe terminal.
These merchant cash advances are not loans—rather, they are a sale of a portion of future credit and/or debit card sales. Therefore merchant cash advance companies claim that they are not bound by state usury laws that limit lenders from charging high interest rates. This technicality allows them to operate in a largely unregulated market and charge much higher interest rates than banks.
This structure has some advantages over the structure of a conventional loan. Most importantly, payments to the merchant cash advance company fluctuate directly with the merchant's sales volumes, giving the merchant greater flexibility with which to manage their cash flow, particularly during a slow season. Advances are processed quicker than a typical loan, giving borrowers quicker access to capital. Also, because MCA providers like typically give more weight to the underlying performance of a business than the owner’s personal credit scores, merchant cash advances offer an alternative to businesses who may not qualify for a conventional loan. An example transaction is as follows: A business sells $25,000 of a portion of its future credit card sales for an immediate $20,000 lump sum payment from a finance company. The finance company then collects its portion (generally 5-10%) from every credit card and/or debit card sale until the entire $25,000 is collected
* If a Merchant processes $10,000.00 per month in credit card sales, we will advance the Merchant up to $12,500.00 today to be paid back over the next 6 months. The Merchant pays back a total of $16,875.00 on the $12,500 advance. The Merchant never needs to write a check, the way we get paid back our payback amount is by taking a percentage split of the Merchants daily batches.
(* Results vary between company and industry)
If a Merchant processes $100.00 in credit cards for the day, we will take 25% of the total sales for the day ($25.00) towards paying back the advance. If the Merchant processes $1000.00 the following day we will take 25% ($250.00) towards paying back the advance and the Merchant will received the other 75% until the total payback as been retrieved. If the Merchant is closed for the week, we do not call the Merchant looking for a check, basically when the Merchant reopens for business the following week business will move as usual and when the merchant generates sales, we will get paid back our percentage. Since this is not a loan but an advance, there is NO interest rate attached to the Advance. What we do is buy a Merchants future credit card sales for a discount today….Meaning we will buy a companies future credit card sales today for a cash
discount today and the Merchant will pay us back over the next 6 months out of their daily credit card transactions.
What we do is revenue based financing. That means we can help businesses get funding based off the merits of their business as opposed to a loan which is personally guaranteed.
We review the performance of the business over the last 3 months and we analyze the way the deposits come in, we will then generate an approval based of the monthly average deposits, example if a merchant does an average of 10k in monthly deposits we can advance him say 8k today and he will pay us back 11k over 3 months. Cash advance. We advance businesses cash based of what they are expected to bring in over the next 3 months.
Payback can be done 2 ways.
One option is a daily debit (we will debit the account Monday through Friday for a small amount till balance is paid in full)
Second option is a Credit Card split: If you are accepting CC for a majority of your monthly deposits we can get you approved on for a split deal which will give us 25% of every dollar you collect, helping you pay back the balance as you earn. You don’t accept money that day you don’t pay back that day.
* We advance a Merchant $10,000.00 today and the Merchant pays us back $13,500 over the next 6 Months. We take 25% of the
Merchants Daily Visa/MasterCard Sales until the advance is paid off. What we are doing is buying a Merchants future $13,500 in credit cardsales today for only $10,000 in the form of immediate cash.
A few benefits:
- Fast approvals and offers due to in-house lenders.
- BAD CREDIT - OKAY! - Your credit score does not determine your approval.
- Access to alternative funding sources due to our volume and rapport within the industry.
- Funding is wired directly into your account within 24-72 hours of receiving approval and signed contracts.
- 3 to 24 month terms available dependent on industry.
- Funding available from $2,000 to $3 million (dependent on monthly income).
- Renewals or Refinancing available after 40% of balance is paid off.