What Is A Merchant Cash Advance

What is a merchant cash advance? Cash flow is the life blood of small business. The business might be undergoing a slow period, need funds for expansion, or be experiencing unexpected expenses. These and other circumstances generate a need for immediate cash. Even with good credit, the funds might not be available in time. A merchant cash advance can provide the necessary cash quickly.

Most businesses allow their customers to use debit and credit cards for purchases. A merchant cash advance company, such as WG Financing can provide funds directly to the business owner. The advance is paid back by deductions from debit or credit card sales. That is, a fixed percentage of each card sale is paid directly to the company. Business owners don’t have to put up collateral or make loan payments.

Although a merchant cash advance is not technically a loan, and therefore no interest is charged, there is a fee. The amount of the fee varies from company to company, and business to business. One common example is for the business owner to receive $20,000. The company will then deduct a percentage from each day’s debit/credit card sales until $25,000 has been repaid. The difference between $20,000 and $25,000 is often called a premium, and is the cost of having the cash available when needed. It is often more than what the interest rate would be on a conventional loan.

The advantages of a merchant cash advance include how quickly the funds are available, often within a week of applying. Business owners aren’t required to put up collateral. They can often get the money they need even with a poor credit rating, as repayment is based on sales. If sales are slow, they aren’t obligated to make a fixed loan payment they may not have ready cash for. Disadvantages include the “premium” or cost charged for the advance. Some contracts might have ambiguous clauses which don’t allow the business owner to make changes he/she feels are necessary for successful operation of their business.

The answer to the question what is a merchant cash advance is that it’s a way for small businesses to obtain money quickly and easily, but as with all transactions, merchants must do their due diligence first.