Merchant cash advance is considered to be a blessing to the business owners because it helps them to obtain cash immediately during a financial crisis. Merchant cash advance is not considered to be a loan because it is an advance obtained by using a credit card. Before opting for Merchant Cash Advance, should be known by you to get a better understanding.
How Does It Help?
With the help of merchant cash advance, you can easily obtain an advance amount on your Bank account on a regular basis. The merchant cash advance is based on the sales or revenue which the company would be generating in the future.
The providers who offer merchant cash advance evaluate the risks and credit card requirements differently than the traditional money lenders. The providers try to assume whether the business will be able to pay back the loan on time before they grant the funds. It is advisable to get an idea about Merchant Cash Advance, beforehand.
The rate of interest on merchant cash advance is higher than the interest rates for the other loans. In many cases, it is observed that the provider approves the loan which would not be approved by the traditional money lenders. Before opting for Merchant Cash Advance, you can get an idea about the rates of interest.
How Does it Work?
The business owner and the provider sign an agreement regarding the amount of money which would be taken as advance, the payback amount and the holdback percentage. As soon as the agreement is made the advance amount is transferred to the bank account of the business owner.
Every day, a pre-agreed percentage of the revenue is withheld as the holdback amount. The holdback amount is withheld till the time the business owner is able to payback the entire advance amount. Since the repayment is done on the basis of the daily balance in the account of the business owner, he is able to pay back the advance if he has more transactions in his business. In case, the number of transactions on a given day is less, then the amount which is debited from the account will be less.
Repayment of the Advance
When a business owner opts for merchant cash advance, he might have to pay twenty to forty percent of the amount that he has borrowed. You should get an idea about the repayment policies before opting for Merchant Cash Advance.
What Does Hold back Percentage Depend On?
The holdback percentage depends on the amount of funds which is received by a business. It also depends on the amount of time which would be required by the business to pay back the advance amount. The holdback percentage also depends on the size of the receivables.
Is It Right For Your Business?
You can opt for the merchant cash advance when you need some cash urgently. Many business owners opt for merchant cash advance because the requirements to get the merchant cash advance granted are much easier in comparison to the traditional loans.
You should always try to know all about Merchant Cash Advance, before you opt for it.