How does a Merchant Cash Advance work?
A merchant cash advance is simply a form of factoring against future credit card receivables. We offer to purchase a set amount of your future credit card sales to get you the money today that you need to help your business grow. Here is a good example that will help explain this further: A Pizzeria’s oven suddenly breaks-down and they are essentially out of business until they have it repaired or replaced. It’s quite an expensive endeavor since the typical pizza oven will run around $10,000. The Merchant could go the routine route of applying for a small business loan with a Bank but that could take weeks to get finalized and time is always of the essence when it comes to running your business efficiently. On the other hand, a merchant cash advance would provide an almost immediate solution. It would be like offering the merchant to purchase $13,000 worth of future pizzas that would be consumed over the next 6 to 9 months for $10,000 in cash right now. I think you can see the value of money today versus money tomorrow and of course the markup on the food ingredients would more than absorb the cost of the money.
How does it get paid back?
The payback is very flexible. Rather than having to pay a set amount once a month like a business loan, we take a set percentage (typically under 20%) of the daily MasterCard/Visa sales for as long as it takes to repay the agreed-upon repayment amount. On a busy day the Merchant pays back more but on a slower day the Merchant pays back less, so it rolls with the business without creating any strain on the merchants bottom line.
How long does it take to complete the process?
The average turnaround time is less than 72 hours to complete the funding process. Because you’re dealing with the direct lender and we’ve cut out the middle person, everything is much more streamlined and efficient. The first step is completing the enrollment form which takes only a few moments. We then ask you to provide some basic financial documentation such as several months of copies of your merchant statements and bank statements, business license, and drivers license. We then assign an Underwriter to review your request and within 24 hours will have a formal offer letter outlining the terms and conditions of your specific cash advance. Once you have chosen to accept our offer, it typically takes 24 hours to complete the process and wire your money into your bank account. Once you have paid back at least 50% on your first cash advance you would then be eligible at that point for additional funds whenever you need them.