Merchant Cash Advance| Business Cash Advance

Business Funds, Fast & Easy

Will a merchant cash advance be easier to get than a bank loan?

clock November 9, 2011 07:41 by author Rob

What if you own a dry cleaner and need to expand or maybe add a new press for your location but don’t have the funds to do it?  Where do you go?  A few years ago the answer for most would have been pretty easy, go to the bank.  Well that decision is not very easy today and can be a bit more complicated.  Banks still aren’t lending freely.  It seems the lessens learned from a very loose credit policy have stuck with the banks and they aren’t going to forget anytime soon.  So what do you do if you need funds? 
Some may still qualify but for the vast majority they won’t.  If you have a credit score approximately 740 and higher, been in business for at least two years, and can show a profitable business, you have as good a chance as anyone.  If you are like many others who have been hit hard by the recent economic downturn, your credit has been hit hard and may be closer to 500. 
A merchant cash advance is an option not offered by banks but by alternative lenders.  Technically it is not a loan but what they consider an advance of credit card receivables.   These funding companies know you have something relatively predictable and that is your credit card receipts.  Most businesses are pretty consistent in their volume.  Advance companies will give you an amount based on a percentage of monthly volume, usually 100-125%.  These funding companies will collect the money by taking a small percentage, up to 24%, out of your daily charges to repay the money.  Typical advances 
are paid back in 6 months but some as long as 12.  There are many advantages to getting an advance versus a bank loan. 
No personal guarantee
limited paperwork
minimum credit requirements, above 500
In business for 1 year
Funding in as little as 7 days

A merchant cash advance can be a great way to finance your next project with relative ease.  So if you have a project that needs attention, don’t give up after talking with your banker.  There are options available to you.



If I can get a bank loan, should I still consider a merchant cash advance?

clock July 22, 2010 15:52 by author Rob

Maybe.   Let me explain why I said that.  A merchant cash advance was created to fill a void that banks have created by not lending to small businesses.  Business cash advance companies are taking on more risk and as a result they charge more for the money than a bank typically would.  I am going to say something that many in the industry may think but would never dare say because it goes against the whole notion of why they are in business.  But the fact is, all things considered equal, cheaper money is better than expensive money.  So if you can qualify for a bank loan, have the patience to deal with a bank, and can wait 60 days for your money, then get a bank loan. 


So why would I opt for a merchant cash advance if I have good credit?  There are a number of reasons you can still have good credit and yet still may not be able to get bank financing.  Maybe you don’t have the patience or need the funds quickly.  Maybe you have an opportunity that is very limited that will pass if you don’t take advantage of it now.  Or let’s say you have a restaurant where the grill just stopped working and you are too new of a business to get equipment financing.  The process to get the funds is much easier than any bank loan.  Typically you can have the funds in as little as three days.   Another reason to consider a business cash advance is if your credit is good enough to qualify for a bank loan but you don’t have your current tax return completed or maybe you haven’t been in business long enough.  Banks typically want to see two years of returns meaning you have to be in business for two years.  


Having said that, if you have good credit and I mean above 670.  Your options are greater for getting an advance that won’t cost you as much.  The key is finding someone honest enough to present it to you.  Unfortunately the principle hear works like the car industry.  If the finance manager at a dealership can charge you more for the loan, they make more money.  If the advance rep sells you at a higher rate, it could be because he will get double the commission.  I will tell you that someone with good credit should be able to get funded at a factor of around 1.25 and a payback of 12 months, not six.  


So if you need to go the route of a Merchant Cash Advance then go in knowing what your options are.  Ask a lot of questions and see if you can find answers that make sense.  But know one solid truth, if you have good credit the cost of money should be cheaper than if you don’t. 

 



Merchant Cash Advance...other things underwriters look for

clock July 13, 2010 21:02 by author Rob

 

So you are thinking about a business cash advance but want to know very simply, will I get approved? Funding companies look at things differently than a bank for many reasons. I will give you a glimpse of how they think. Other than credit there are many things they look at. Here are some items most companies will look at.

  1. Merchant Statements: Companies will require between 4 months and 12 months of merchant statements. Your processing history will give them an idea as to how consistent the volume is and what they can expect in the next 6 to 12 months. Underwriters are looking at a number of factors including average ticket, number of batches per month, and number of charges per month. Almost all companies typically like to see a minimum of 14 batches per month although one I know of doesn’t look at this at all. So if you are a marina that processes its slip rentals on the first of every month, most won’t like it but one will. They also want to see how your volume is trending. If they look at last February and compare it to this February, how does it compare? If your volume is down 50%, that may concern them. If it is a slight decline, flat, or growing then they may be ok with what they see.

  2. Bank statements: They will look at bank statements to see a number of different things. If you have a number of NSF’s, that is not a good thing. If you had a tough time 5 months ago but have since cleared it up, they will often times take that into account. They will also look at average balance to see if it looks like you are on the brink of going out of business.

  3. Lease agreement: All companies will want to see the lease for your business and make sure you will still have a place to do business during the repayment period. If the landlord doesn’t renew your lease and kicks you to the curb, you are effectively out of business and can’t repay the advance.

  4. Landlord interview: All companies will perform a landlord interview and make sure your rent is current and that your lease is the same as you sent over. If your lease is late, you may still get funded but they may make a stipulation that you must pay the landlord first, with the remaining funds going to you.

Underwriting guidelines are significantly different for a merchant cash advance and much more lenient than a bank. If you need funds for your business, strongly consider a business cash advance.  

 



So you own a business and need money? Does this sound familiar?

clock July 6, 2010 19:04 by author Rob

OK. So you own a restaurant or retail business and you need funding. You walk into the bank and tell the banker your story. You tell him your credit has suffered a bit recently and your sales have declined a bit from last year but you need money. At this point the banker breaks out into laughter like he just heard Robin Williams doing his monologue at the Oscars. Maybe this is exaggeration and certainly not funny especially since the life of your business could be hinging on whether or not you get this funding. What is laughable is that banks keep saying they are lending money and business owners keep saying otherwise.

Restaurant funding is getting increasingly more difficult to obtain especially if you approach a typical bank. We have all heard in the news that banks have been given billions in bailout funds to secure and stabilize the banking system which in turn should encourage banks to lend again which would stimulate the economy. That is great in theory but the reality is that small business owners and especially restaurants can’t get financing from a bank. Recently I was told by a bank representative of a very large National bank located in N. Carolina that starts with a W, that in order to get a loan you needed a 740 credit score or higher. Compare that to two years ago when 640 was acceptable. He also told me that they would have to provide two years of tax returns and needed to show increasing sales year over year. That alone alienates about 90% of all businesses in the US. How many had an increase over last year? Two years ago you could get a loan with stated income which means you didn’t have to prove it and no tax returns. Wow, have things changed. If you are going to try the bank loan route, be prepared to bring your tax returns, personal financial statements, great credit, your first and second child, and a lot of begging. And after giving it your best shot, you too may very likely go to the mailbox in three weeks and open the dreaded letter with the word Declined stamped on it.

So what do you do if you own a business, your name is not Gates, and you need to fund expansion, buy inventory, or whatever else you do in the normal course of running a business? There is another option. It is called a merchant cash advance or business cash advance and is becoming an extremely popular option largely due to the fact that banks are just unwilling to lend money. Not to mention the fact that it is also a much easier process. There is very little paperwork and the benefits are many. There is no personal guarantee required, no collateral, and poor credit above 520 is typically ok. Oh, and you can get the funds typically within 7 days. There are lots of differences between companies so make sure you choose wisely and don’t put your dreams on hold. If you need retail or restaurant funding, do what many already have, consider a merchant cash advance.



Looking for Business and Merchant Cash Advance

clock July 6, 2010 17:31 by author Rob

If you are in business for yourself, accept major credit cards, and have been looking for fast small business loans, there may be another answer. It is becoming an ever increasing popular alternative to a bank loan. Qualifying for a bank loan more often than not resembles the little dog in a tutu at the circus jumping through hoops.

Fortunately for the dog, he usually gets a nibble of something good for his efforts. Often with a bank we are left with nothing except exasperation after spending hours meeting with the banker, filling out paperwork, calling our accountant to prepare financial statements, providing tax returns, and the list goes on to only get the dreaded decline letter in the mail four weeks later. It could be out of convenience, frustration, or for the fact that banks are declining most applications, that merchants are turning to merchant cash advance companies for alternative funding.

It can be called several things including a business cash advance but in general how they work is the same. Specifically how they work is very different, but that is for a later discussion. I will give you an example in a very general way. If your business accepts credit cards as a form of payment then you have a source of revenue that has assumedly been going on for a while and if history is a good indication of the future, it will continue. The funding company will look at your previous month’s statements. Some request four months but in today’s economy it is very common to expect them to ask for twelve months. The more comfortable they feel that you will still be around and that you can repay this, the more likely they will provide you with the funds you need. How does it work?

The actual description that companies use is “a cash advance is a purchase today of future credit card sales at a discount”. Got it? Sure. Let me put it in simpler terms. Let’s assume you have a job making 50,000 per year but you have something that you want to do that requires cash immediately. Let’s say you need 10,000 tomorrow to put a down payment on a dream house that you absolutely have to have. You explain this to your best friend and he is willing to give you the 10,000 right now but you will have to repay him 12,500 over six months. And instead of you having to write him a check, your employer will deduct a small percentage of your weekly check that will go directly to him. All those little deductions will add up to the 12,500 you agreed to pay back. Once it reaches that total the deductions automatically stop. That is it! That is how simple in concept a cash advance is and may be a solution to your needs.

If you are at a breaking point with your bank and need a simple alternative, strongly consider a merchant cash advance and leave the dog tricks for the circus.