Merchant cash advance

A Business Cash Advance (a.k.a. Merchant Cash Advance) is a form of accounts receivable factoring available to small business owners. Beginning in the late 1990’s, Business Cash Advances have helped many entrepreneurs receive the capital they need to grow their business and survive the beginning stages. A Business Cash Advance is NOT a loan and as such has NO interest rate or term. The applying business’ historical cash flow is evaluated for past, present and projected performance. The applying business can then qualify for an advance on their future sales which are purchased at a discounted rate by the Business Cash Advance company.

Unlike traditional factoring, a Business Cash Advance utilizes a businesses merchant account to repay the advance. For example, a qualifying business sells $135,000 of its future sales today for an advance of $100,000. The full $135,000 is paid to the company advancing the capital through a holdback on the merchant account, typically anywhere from 5% to 30%. If the qualifying business negotiates a 20% holdback with the advancing company, out of every dollar processed by their credit card processor, 20 cents goes toward paying back the advance.

While there are many companies in the Business Cash Advance industry, the industry leaders offer:
- Approvals in as Little as 24 Hours
- No Up-Front Fees or Closing Costs
- Easy Payback Process with No Fixed Payments
- No Financials Required
- No Collateral
- No Equity in the Business

Qualifying businesses typically use advanced funds for:
- Inventory
- Advertising
- Expansion
- Renovations
- Equipment
- Taxes
- Working Capital
- Emergencies

Quite often the advanced capital is put into a program which returns much more than the payback amount. For example: a qualifying business receives an advance of $10,000 and expects to payback $13,500 (the best advancing companies often ask for an even lower payback amount). The business owner invests the $10,000 received into an advertising campaign which earns the business $50,000 in new sales which they would otherwise not have.

While recent years have seen many companies enter the Business Cash Advance Industry, many of these are actually only brokers for the original organizations that pioneered the industry. A company looking for an advance should do its research to ensure that they are not paying a marked-up broker rate. It is best to receive an advance from one of the original companies as they will have the strongest financial backing, best customer service and often offer better terms & conditions to entrepreneurs. At least one of the original companies offers specially designed programs to specifically pay for an entrepreneur’s advertising, equipment, inventory or taxes; also see Advertising Advance and Tax Advance.

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