If you are a small business owner looking for financing for your company, consider applying for a merchant cash advance, a smarter business funding alternative. This is also a good option for financing specific purchases such as equipment and inventory, or for marketing and expansion.

What is a Merchant Cash Advance?

A merchant cash advance is also known as a business cash advance. How does it work? You will get an advance on your future credit card sales. You will be required to pay off the advance by the advance company taking a percentage of each credit card transaction until you pay back the agreed-upon amount to the advance company.

A merchant cash advance and a business loan are different things. In both cases, a merchant will get money upfront to pay back at a later date. However, there is no legal definition for a merchant cash advance to be considered a loan: merchant cash advances are not reported to credit bureaus.

The Rates of a Merchant Cash Advance

The rates of a merchant cash advance depend on the size of the advance, the risks associated with the business and the term of the payback. Usually, merchants are required to pay back between 20% – 40% of the amount borrowed with a merchant cash advance. Some providers require rates as high as 60% of the amount borrowed.

If you are interested in an alternative funding option for businesses, consider turning to firstamericanmerchant.com or First American Merchant. FAM is a reputable payment processor that specializes in the high risk sector and offers the lowest possible rates in the industry.

Important to Know

When it comes to switching your credit card processing, generally, you have to switch your credit card processing and point of sale (POS) system to get a cash advance. Cash advance providing companies set up their own proprietary hardware and software that is built into the POS system to measure your revenue.

As for your credit, a merchant cash advance does not build business credit. Your business will not be improved by paying back a cash advance completely. Finally, to get cash advance financing, it is important to have significant credit card sales.

 

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