Merchant Cash Advances

[jesmith7]

Does anyone still use them? Let me know about your experiences.

[Blue Hen]

Does anyone still use them? Let me know about your experiences.

Jesmith7, I have worked in the Merchant Cash Advance industry for many years. With that said, I will try to answer your question as best as I can without inserting a plug for any service I am associated with.

If we use the strict definition of Merchant Cash Advance which is a purchase of future credit card sales, then approximately $1-$1.5 billion of these types of transactions are conducted annually. If you use the broader definition of it, then you'd have to figure all non-bank business loans under 18 months are Merchant Cash Advances. Tens of thousands of businesses utilize these programs for cash flow, bulk discounts, expansion, or emergency repairs.

There has been a steady increase in the acceptance and use of non-bank financing over the last 10 years. If Merchant Cash Advance is something you are considering, I offer these tips:

1. Do not use the financing to catch up on rent, pay off bills, or to try and save a failing business. Even if you find a company with comparatively good rates, a short-term repayment period will make it tough to turn things around in time.

2. Research the company you are working with. Are they a broker, funding provider, or hybrid of both? These days, many lenders require the brokers to take partial liability on the loans. This helps to keep brokers vested in the long term success of their clients. The broker is less likely to overcharge you or disappear if their capital is going into your hands.

3. Make sure the amount of money you sign for is enough to get your work done. Many lenders dangle the prospect of additional funds in as little as 60 days after the the initial funding. Some come through. Some don't. Some might force you to refinance the original deal, rather than just add it on. Get what you need the first time and anything you decide to pursue later can be used for other projects.

4. You may have to change your merchant service provider. If you do, make sure you know exactly what your new rates will be, if there is a set term for the contract (2-3 years is standard), and if your current provider is going to charge an Early Termination Fee. You can negotiate these items so don't be shy about it. Tell your broker or lender that you want them to pay for the Termination Fee if there is one and get it in writing. Don't be fooled by overly simple merchant rates. If you're told your new merchant account swipe fees will be 1.39% for every card or something, be alarmed. Visa and MasterCard have hundreds of rate categories. It is common practice for merchant service providers to charge on a tiered rate system (3-4 rate tiers) or on an interchange-plus basis. Interchange-plus is a fixed percentage above Visa and MasterCard's vast array of interchange fees. Neither is more or less expensive than the other and there are pros and cons of each system. Just make sure you know exactly what you are getting.

To conclude, yes people are still using Merchant Cash Advance, probably more than ever before. These days though there are many programs that enable repayment via fixed bank account withdrawals, rather than a hold on merchant account transactions. Decide how you would to like to structure it and then go out there and find a company that will do it how you want.

[Seth_Mossberg]

Jesmith7, I have been in the Alternative Finance industry for many years and have experience with Merchant Cash Advances as well as other programs like Revenue Advances and Small Business Lines of Credit. That said, not all Merchant Cash Advances are equal so the devil is in the details. The payback rate, length of the advance and the amount they capture from your processing are all things to consider before moving forward with an advance. Above that you should have a solid plan of action to utilize that injection of capital to better your business. Simply put, only take the funds if you are confident you can earn a return above the cost of paying the advance back. You would think that would be obvious but I can't tell you how many businesses I speak with that get in over their heads and look for a second advance to bail out their initial mistake.

Do your homework and know exactly what the terms are before signing anything. I hope this helps.

[Blue Hen]

Did these answers help you out jesmith7?

[Hannah1]

I think Sean Bash put up some great points!I definitely agree that you should thoroughly research companies before using them, there are plenty of merchant cash advisers out there, there are some who's priority are focused on small businesses. For many businesses who are just starting out I would be surprised if they weren't using some sort of loans company, or merchant cash advance company for help. Make sure the company is a registered one with the Office of Fair trading and holds a consumer credit licence.

[Triandome]

Started to incorporate Merchant Cash Advances in my business in 2009, as I was getting more and more e mails and calls from business owners (especially restaurant owners) inquiring about this industry. Am glad to say that I have a couple of companies I use to assist my clients with this type of financial transaction. But even more happily I have not had one complaint during this time from any client who has used the recommended companies for this type of transaction.

[phanio]

To the question of does anyone still use them. Merchant cash advances or business cash advances are probably the most use (behind credit cards) method of working capital financing that most businesses in certain industries like retail and service businesses use these days. For some businesses, this is their only option for working capital. But, not only are their merchant advances based on credit card receipts but there are now revenue based loans that focus on all forms of payment or even bank statements loans that focus on daily cash flow. Know that not all businesses qualify for these products and if you don't, also know that there are many other ways to finance your small business.

[Alisha]

If we use the strict definition of Merchant Cash Advance which is a purchase of future credit card sales, then approximately $1-$1.5 billion of these types of transactions are conducted annually. If you use the broader definition of it, then you'd have to figure all non-bank business loans under 18 months are Merchant Cash Advances. Tens of thousands of businesses utilize these programs for cash flow, bulk discounts, expansion, or emergency repairs.

There has been a steady increase in the acceptance and use of non-bank financing over the last 10 years. If Merchant Cash Advance is something you are considering, I offer these tips:

1. Do not use the financing to catch up on rent, pay off bills, or to try and save a failing business. Even if you find a company with comparatively good rates, a short-term repayment period will make it tough to turn things around in time.

2. Research the company you are working with. Are they a broker, funding provider, or hybrid of both? These days, many lenders require the brokers to take partial liability on the loans. This helps to keep brokers vested in the long term success of their clients. The broker is less likely to overcharge you or disappear if their capital is going into your hands.

3. Make sure the amount of money you sign for is enough to get your work done. Many lenders dangle the prospect of additional funds in as little as 60 days after the the initial funding. Some come through. Some don't. Some might force you to refinance the original deal, rather than just add it on. Get what you need the first time and anything you decide to pursue later can be used for other projects.

4. You may have to change your merchant service provider. If you do, make sure you know exactly what your new rates will be, if there is a set term for the contract (2-3 years is standard), and if your current provider is going to charge an Early Termination Fee. You can negotiate these items so don't be shy about it. Tell your broker or lender that you want them to pay for the Termination Fee if there is one and get it in writing. Don't be fooled by overly simple merchant rates. If you're told your new merchant account swipe fees will be 1.39% for every card or something, be alarmed. Visa and MasterCard have hundreds of rate categories. It is common practice for merchant service providers to charge on a tiered rate system (3-4 rate tiers) or on an interchange-plus basis. Interchange-plus is a fixed percentage above Visa and MasterCard's vast array of interchange fees. Neither is more or less expensive than the other and there are pros and cons of each system. Just make sure you know exactly what you are getting.

To conclude, yes people are still using Merchant Cash Advance, probably more than ever before. These days though there are many programs that enable repayment via fixed bank account withdrawals, rather than a hold on merchant account transactions. Decide how you would to like to structure it and then go out there and find a company that will do it how you want.

Dear @sean bash, I am appreciate with your experience.
These above four steps are very important for merchant.
IMPORTANT! if we go different payment channel get separate terms and conditions according their company policy. Should be judge company stability and priority in service,charge return money.If a merchant became defaulter then what's action company take against him and provide support at this situation.