Some professional predict the merchant cash advance lenders industry might grow into a 10 million dollar industry as credit restrictions tightened in the previous years. Choosing between firms when literally` thousands of providers turn up with a quick search for merchant cash advance might be hard. The article provides a few fundamentals on how a merchant advance transaction works.
You must be well established
The majority of merchant cash advance lenders will need to know how long you have been in business, the period in which you have been accepting credit cards and how long you have managed to maintain sales volume. This is to say that your business must have credible financial records with some thousand dollars in accepted credit card sales from clients to obtain the best rates from providers.
You must be approved first
One of the primary reasons why so several business owners favor business cash advance is it has a fast and easy approval procedure. However, you should be extra careful. Never should you accept the advance terms or amount just because your application was approved on the first trial. There are service providers who are unscrupulous in such a way that they collect default charges and penalties, recommending a business that they are sure won’t manage to repay the advance cash borrowed.
How service agreement works
The merchant cash advance lenders will explain all the details the moment your loan is approved. You would pay back the advance amount in daily automatic transfers from your merchant account at an agreed percentage of your daily sales.
Since merchant cash advance is not a loan with lending or usury laws, the providers have all the freedom to charge high-interest rates on advances given to businesses with alternative means of funding.
Repaying of the advance starts immediately
Just the same as in a traditional loan, you begin repaying your advance as soon as you get the cash. Ahead of signing the service agreement, ensure that your current sales volume can support the repayment.
Consequences once you default
If you fail to repay the advance, a provision in the service agreement will govern your potential defaults. If you notice that you are unable to repay the merchant cash advance lenders as agreed, make sure you understand what will happen. In some occasions, business has been forced to put liens on business equipment, levies on the personal account of the business owner, or withdrawal funds straight from your business checking account. For that reason, you should be more vigilant when giving out such details.
Terms that you can negotiate with the lenders
Obtaining a cash advance from a provider, you are familiar with, and trust is a better preference than going to a lender you hardly know. Note that some of the credit card processing companies also provide merchant cash advance services as well; your existing merchant service provider can give you better rates.
Just the same as in a traditional loan, if your business has a clean financial and sales history, you will be in a better position to negotiate with the providers. It is a good idea to view the ratings of a potential lender at Better Bureau to find out if any grievances have been presented to the federal trade commission. Make sure you collect references whenever possible.