It is Referred to as a Merchant Cash Advance but is it Actually a Small Business Loan?
By: Daniel Samoohi
Submitted: 2010-08-25 13:22:07 | Word Count: 399
There are many ways to acquire working capital for your business, but not all of them involve a bank loan. A merchant cash advance is actually a type of factoring. Factoring is a practice whereby a small business sells its anticipated credit card sales to a third party - the factor - at a discounted price in exchange for working capital with which to fund the business as soon as possible.
In today's business climate it is no surprise that a large number of new businesses are having a very tough time getting approved for conventional business loans through a bank. The banks are overly tight-fisted with their funds at the moment. Fortunately business cash advances via factoring agreements are still available and the items need to qualify are much less stringent than those located at the local bank.
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To acquire a business cash advance, typical factoring companies need a business to have been open for at least a year and processing credit cards for at least six months. Since repayment of the funds is directly tied to credit and debit card sales, evidence of this income is also needed.
A piece of these future credit card receipts is agreed upon as the daily repayment capture, easing the financial burden for the company during a slower period. Unlike a conventional small business loan, the daily capture capability allows business owners to pay back at their own pace instead of being liable for fixed monthly payments that could result in the business going out of business.
Because there funds not attained in a traditional loan, if the merchant fails to meet the conditions of the agreement, for example, using different credit card services to receive payments, they are still held personally responsible for the balance.
However, for many early businesses, this form of obtaining funds is still optimal. Flexible repayment terms, fast access to necessary cash and easier acquisition of said financing, makes a merchant cash advance a smart option for many entrepreneurs.
Author Resource:-
Since early 2008 Daniel Samoohi has assisted 1000's of business owners in finding trustworthy lenders in order to compare quotes for a merchant cash advance. By making providers compete with each other, Daniel aids businesses in finding great deals for merchant cash advance.
