Merchant cash advance programs are designed for small businesses that require capital for their daily transactions and also for transactions that do not qualify for raising conventional cash. Under a merchant cash advance program, applicants get a lump sum payment in exchange for a fixed percentage of their future credit card and debit card sales. The percentage of repayment may be usurious, as a merchant cash advance is not considered a loan but as sales and therefore does not fall under the regulated sector.
Merchant lending programs are considered as a last resort because the business capital is provided to the applicant only on the condition that there are steady credit card sales. Under the merchant cash advance program, future credit card sales up to a percentage are sold to the lender for a continuous period of time until the total obligation is met.
Although it is a source of instant capital funding for businesses, there are still a few points to ponder before applying under the merchant cash advance program.
First and foremost, the loan applicant under a merchant lending program must thoroughly check the agreement with the lender to establish whether the terms are of loan or of sale, plus the rate to be charged on the sales and whether there is any clause that the applicant might regret on a later date. Second, given that the merchant lending program is a flexible way of raising a loan, the applicant should check his paying capacity given the debit and credit card sales made in past. Then, the applicant should understand that it is not a loan, but the sale of future sales of debit and credit card sales. This sector is fairly unregulated and the lenders are free to charge high-interest rates and might put some other conditions into the contract.
Despite the conditions listed above, merchant lending programs have many notable qualities, such as a quick and trouble-free advance. Credit card processing might be a requirement under this program depending on the lender you choose. It is a very flexible method of raising business capital given the simple conditions and easy arrangements. The underlying credit score of the lender is not required to be checked in many cases. It is the best mode of raising short-term business capital in a short time span. Applicants who do not qualify for loans under conventional programs may also apply under merchant cash advance program for raising business capital.
For loan providers or the merchant lending program administrator, the benefits come in the manner of the high and regular share in credit and debit card sales the applicants make. The risk in the business is reduced as the risk is spread over multiple parties, so this is a win-win situation for lenders as well as the applicants under the merchant cash advance programs.
A small business owner who has a regular income through credit card transactions but does not have much credit to take advantage of should look into a merchant lending program.