What Is A Business Cash Advance And How To Get It?

A Business Cash Advance is usually referred to as working capital obtained by selling future credit card receivables. While the most common industry reference for this is a Merchant Cash Advance, it is important to realize that, both terms mean the same thing. If a borrower has been denied of a bank loan, pursuing a business cash advance is an excellent alternative.

Originally structured as a lump sum payment to a business, a merchant advance occurs in exchange for an agreed upon percentage of future credit card and/or debit card sales. Nowadays, this is commonly known to describe small business loans that are repaid within 18 months or less.

Therefore, cash advance for business provides funds in exchange for a percentage of the business’ daily credit card income, directly from the processor that clears and settles the credit card payment. The company’s remittances are drawn from customer’s debit- and credit-card purchases on a daily basis, until the obligation has been met.

As payments are taken directly from a business owner’s card-swipe terminal, most providers form partnerships with card-payment processors. These cash advances are not loans – they are a sale of a portion of future credit or debit card sales. Most importantly, payments to the cash advance company fluctuate directly with the owner’s sales volumes. This occurs particularly during a slow season, giving the owner more flexibility to manage their cash flow. Advances are processed quicker than a typical loan, giving borrowers quicker access to capital. Also, because CA providers typically give more weight to the underlying performance of a business than the owner’s personal credit scores, CA offer an alternative to businesses who may not qualify for a conventional loan. For example: A business sells $30,000 of a portion of its future credit card sales for an immediate $25,000 lump sum payment from a finance company. The finance company then collects its portion (generally 5-10%) from every credit card and/or debit card sale until the entire $30,000 is collected.

Most merchants in need of financing turn to banks for merchant loans. The traditional merchant loan options require good credit and long business history. Many business owners seeking merchant cash and capital don’t meet the requirements most banks demand. CA financing was developed specifically for merchants in need of cash and capital but unable to qualify for merchant loans.

With the lending guidelines being tightened down by the banks, business owners need access to working capital to grow their business. An option like business cash advance can help business owners along the way.