Pro’s and Con’s of Merchant Cash Advance Program

Business cash advance is another financing option available in the market today. Business with bad credit use cash advances to finance their business operations. Merchant cash advance is more of a purchase of future credit card receivables. The business sells a part of its credit card sales to the lender providing business/merchant cash advance in exchange of a lump sum of working capital to be used in your business. An agreed percentage of credit card receipts are automatically forwarded to the lender as per the terms and conditions. In order to be eligible for this kind of cash program, the business needs to achieve a minimum amount of credit card receipts per month. Therefore the amount of business cash advance is directly dependent on the amount of credit sales and credit score of a business. Every loan program has its own share of pros and cons.

The pros of Advance Cash programs are:

Easy Access of Capital- Merchant cash advance can be easily accessed. One can obtain a merchant cash advance within a week’s time without much of application provided all the terms and conditions agreed upon are fulfilled.

Dependent repayment- Repayment is dependent on the sales of the credit cards. Therefore the borrowers can manage their cash flow more effectively when the sales are low, hence providing greater flexibility. Again more than the credit score, this program gives more weigh tage to credit card sales, providing a better alternative lending to borrowers who may default in obtaining loans under the traditional lenders.

Attracts businesses that has bad credit- Merchant cash advance programs generally attract retail businesses who normally don’t qualify for a typical loan due to bad credit. There are different repayment methods of business cash advance program and the parties can decide upon which repayment method suits them best.

No fixed terms- There are no fixed terms for repayment. Usually daily repayment is done based on the daily card settlement. Lenders can agree upon a repayment options based on card sales volume, borrower capacity, business life cycle etc. A fixed fee is charged and then a percentage on the card sales.

Low Documentation- Merchant Cash advance programs have very low documentations compared to other loan programs and financing options. Often the client just provides six months of processing statements, bank and mortgage statement and drivers license.

Faster approval and funding- Majorly most cash advance programs takes around 10-15 days to approve and provide funds for the business. Dues to faster approval and funding Merchant cash advance programs are the need of the business hour today. Merchant processor can help you get the loan in 3 to 5 days if you are partnered with them.

No fees- Generally there are no late fees or penalties with the cash advance programs unless stated or agreed upon with the terms and conditions.

The cons of merchant cash advance programs are:

High Interest rates- Business Cash Advance programs are a sale of percentage of future card (debit/credit) sales. Hence these programs are not regulated by any state laws which limit lenders from charging inordinate rates of money. This allows them to operate in a highly uncontrolled market, charging high interest rates more than banks. Payments of Business Cash advance programs are generally made on fixed increments till the life of the loan as agreed upon in the terms and conditions between the borrower and the lender. Terms can range for 3-18 months as agreed between the two parties.

Daily repayment- The amount of the daily card settlement can be repaid daily or upon agreed terms depending on the business life cycle or on the volume of the merchant. Daily repayment can be cumbersome as you need to repay a set percentage amount of your daily card settlement.

For more information visit - http://www.biz2credit.com/get-a-loan/merchant-cash-advance.html