Top 3 Merchant Cash Advance FAQs Answered

There are a lot of questions when it comes to navigating your way through the complex world of unsecured financing. We can’t answer all of the questions borrowers have in one article, but we can make it easier to narrow down the best option by looking at each one individually. This article will focus on the 3 most frequently asked merchant cash advance questions.

Answer Me These Questions 3

Businesses need money for all sorts of reasons-lean sales periods, payroll glitches, unexpected expenses or repairs-whatever the cause; a merchant cash advance may be the answer you’re looking for. The process starts with asking the right questions.

1. What is it? A merchant cash advance is similar to a loan. A lending company approves you for a lump sum of money up front. Upon receipt of the money, the lender will open a credit card terminal that is linked to your business. This means that all credit card transactions processed through the terminal play a part in repaying the advance. A percentage of every sale goes toward what you owe; eliminating your debt automatically over time.

1. How do I qualify? Your credit isn’t checked, but your profit margin is. Approval for a merchant cash advance is based on your monthly credit card sales. Since a portion of these profits are automatically applied to your debt every month, you must give the lender verifiable proof that you can honor the payment agreement. If you fail to do this your request will be denied.

A better question to ask might be is your business profitable enough to support the long-term costs of an advance? The lender will perform a qualifying review of your credit transaction receipts to help find the answer. Approval is fast. It usually takes less than a week. If you are denied find out why, fix the problem, and try again.

Before you make any agreements, do some comparison shopping with local companies. Beware of any lender charging more than 30 percent interest, who does not disclose terms or require documentation. These tips will help you avoid getting scammed.

Read through the terms and conditions carefully. Pay particular attention to the interest rate and the required pay down schedule. The interest rates on terminal agreements are high. It’s likely you will pay over and above what you originally borrowed due to interest and the lender’s long-term pay out structure.  Look for cash advances that have either a good fixed interest rate or-even though it’s not required-when possible, back your advance with collateral and attach it to a prime rate.

1. Are there any restrictions on how the funding is used? When it comes to a merchant cash advance, this is a trick question. The answer is, no. The money can be put toward any business-related expenditure.

Having unsecured financing options is good, knowing which one is right for your business is even better. Hopefully, the answers to these questions have given you the information you need to make your next lending decision.