What is a Merchant Cash Advance?

A Merchant Cash Advance provides immediate access to business capital.  This funding program is for business owners who accept Visa and MasterCard as a form of payment.

All retail, service and restaurant owners find themselves needing capital to grow and manage their businesses.  At times, these businesses may find it difficult to obtain a commercial loan from financial resources because of unacceptable debt to income ratios or low personal or business credit scores.

Healthy businesses can rely on the fact that their customers will continue to spend money at their establishments. A merchant cash advance may be an option as it is based on the future cash flow those customers will provide future cash flow.

Here’s how it works: A merchant will sell a pre-determined amount of future credit card sales, at a discount.  Then, over the following months, and as Visa / MasterCard sales are processed through a preferred merchant processor, a small percentage of the daily merchant batch is withheld to repay the advance.  As the repayment is a percentage of the merchant credit card volume, there is no set term.  Repayment is as quickly or as extended as the merchant’s future credit card sales activity supports.

Eligibility: Funding sources prefer businesses that operate in a face-to-face environment and provide the product or service at the time the credit card is charged.  Most retail, restaurant and service businesses qualify for the merchant cash advance.  Because the advance is based on future sales, the business will need to provide merchant and checking statements to confirm the history and help project the future sales; four to six months of statements are usually adequate.  If the business is seasonal and entering its busiest period, providing as many as twelve months is helpful towards producing the greatest advance amount.

Because the advance is based primarily on the future cash flow from the merchant customers, credit standards are not as stringent as  traditional bank sources.  However, the business and its owner must be free of open tax liens, judgments and in-process bankruptcies.  FICO credit scores 550 and above are generally accepted.

Purpose: Funds can be used for most any reason but the funder will be more inclined to speed the funding approval for business growth purposes like advertising, inventory, equipment, cash flow or taxes. Usually, the merchant will have quantified the value of the spending (increased sales, inventory purchase price savings, etc) and compared that to the cost of the advance.

Fees: The fee can range from 1.25 to 1.45 and is based upon: underwriting guidelines, length of time in business, length of lease, monthly credit card volume, average monthly sales volume and past business history. For example; at 1.30, the sale of $13,000 in future credit card sales would be discounted to result in $10,000 cash to you.

Editors Note:  Commercial Funding Network, Inc, arranges merchant cash advances for businesses offering Visa and MasterCard as a form of payment.  To get started, apply online for your business merchant cash advance or call 800-503-1972