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Merchant Cash Advances – Helpful, or Harmful?


Small business owners face many obstacles in our economy today in their struggle to get off the ground and prosper, one of which is having available liquid assets that allow flexibility and security. Some costs for small businesses are completely unexpected. For example, a restaurant may experience the unfortunate event of their stove blowing up in the back with no available funds to make repairs and buy new equipment so it can continue to operate properly.

What options do small businesses have? The main problem they experience is the lack of options from the bank. In order to obtain help, most banks require you to be in business for at least two years. Even if you are fortunate enough to get an unsecured Small Business Administration Express loan (up to as much as $50,000), the paperwork may take inconveniently long. If both of these options are unavailable due to the banks unwillingness to lend a hand, the business owner may have no other chose but to consider a merchant cash advance.

But what is a merchant cash advance? What does it involve? According to, “As long as your business does at least $2500 per month in revenue through a merchant account, then we should be able approve you for a merchant cash advance.” As far as receiving the capital, states that it will typically take between 5-7 business days for the funds to be released to you.

After reviewing either your recent merchant processing and/or bank statements, the merchant cash advance lender will make you an offer. In an article written by Ami Kassar, (founder of MultiFunding) for The New York Times, the following scenario is given to explain the actual implications of a merchant cash advance: say the lender offers you $20,000 with the agreement that they will receive $25,000 of your future receipts. This may seem like an incredible offer until you examine the actual interest rate involved. “It sounds tempting because the owners figure they can get $20,000 immediately, and it costs only $5,000. Think about it, though. The $5,000 is 25 percent of the amount they’re borrowing, and it’s actually even worse than that. Considering that most of these loans have to be paid back within six months, the actual interest rate may be more than 50 percent. That is a lot for any small-business owner to swallow.”

In some cases, the merchant cash advance may be the best option for the small business owner. As with most things, exercising caution is the key. Be sure to ask the company to provide you with the projected annual percentage rate for the loan you are considering. Make sure that you understand the terms and that you have seen all of the fees upfront. Finally, be sure that you do your shopping and take advantage of the competitiveness of the cash-advance business.

In the end, be sure that you do your research and find the option that works best for you.