Small business owners are increasingly looking for an alternative type of finance as banks are more frequently turning down applications for small business loans. Businesses which need an immediate influx of cash can be quickly served through lenders who provide merchant cash advances, as the application can usually be approved within 2 -3 days, thus saving a long and often frustrating wait as banks make a decision.
Merchant cash advances are not subject to credit checks as they take future income from credit card sales as repayment, thus the applicant need only provide proof of credit card sales over the previous few months to qualify. Most applications are approved and the cash is then immediately forthcoming to the business. As the lender is repaid from the credit sales processed by the credit card merchant they are guaranteed a set percentage of credit card receipts income.
It is easy to find merchant cash advances on the internet, with a whole host of providers to choose from. Many have different requirements but they all expect the business to have been running for a set period, and previous credit card receipts to have reached a certain level.
The drawback to many of the online providers is they do not actually publish their interest rate until the application is made, meaning you may well have to start the application or complete the application before the interest rate is revealed. However there are no hidden fees with merchant cash advances and repayment terms can be extended if needed. There is no collateral required as the cash advances are unsecured.
Here is a selection of some of the merchant cash lenders and the amount of credit card receipts which the business needs to receive on a monthly basis from sales to qualify for an advance. Each lender requires no security, has no hidden charges, and does not require good credit.
Merchant Resources International: Available to businesses which process more than $2,500 per month in credit card receipts. The company advertises itself as having the lowest interest rate but does not disclose what the rate is. Instead it addresses the issue by saying a merchant advance is not an interest based loan, “however all the numbers will be provided to you to the penny.”
Fast Up Front: Requires monthly credit card receipts of $2,500, and does not disclose the interest rate.
Express Funding Group Business: Requires monthly credit card receipts of $3,500, and does not disclose the interest rate.
1st Working Capital: Requires monthly credit card receipts of $10,000 and a minimum credit score of 525. It does not disclose the interest rate.
Business Loan Option: No monthly credit card receipts amount specified, and does not disclose the interest rate as it is not a loan. Instead your ‘financial obligation will be met through a percentage of your daily credit card receivables.
This is just a small sample of the many merchant cash advance lenders, all reluctant to display their interest rate. Those who state it is not an interest rate but a percentage of receivables fail to inform what the percentage is.
The interest rate, or percentage, is the key point to look out for. With more competition now in the market, rates should come down, but be aware that the industry average is around 25%. However you only make payment when your business is paying, thus releasing the pressure associated with having to meet a fixed date repayment schedule, making them ideal for seasonal businesses.