A merchant cash advance is a little more complicated than a personal cash advance. That is to be expected when dealing with sums that are in the thousands versus just hundreds. One of the things that can be really confusing for some business owners is the fact that they might have to change out their existing credit card machines for new ones to take advantage of a merchant cash advance. It can add some unexpected costs to the loan, but in the end, it will give them a new way to get lines of credit in non-traditional ways. The additional equipment is necessary to be able to repay the loan in the terms set in the loan agreement. At any rate, cash advances are easier to access and quicker to approve than traditional sources of credit and can be worth the added equipment investment to take advantage of this alternative source of credit in a pinch.
Why Might You Need New Machines?

Not all credit card machines go back to providers who will allow the split funding relationship necessary to implement a merchant cash advance repayment scheme. When you agree to take out an advance with a lender, they give you the amount you desire on the promise that you will repay it from future credit card receivables at a percentage that you both agree upon. That means that when someone shows up at your business and you swipe their card into your credit card machines, the provider of the service has to be able to send a portion of that payment to the cash advance lender to fulfill your loan terms. This split funding relationship ensures that you get some of the money in the transaction, and the percentage that you’ve agreed to give to the lender, typically between 15 and 25% of each credit card transaction, goes back to them.

Costs To Replace Your Machines

Each credit card terminal can cost $100 for simple types of machines. More advanced types cost between $250 to $300 per machine. This expense comes out of the business owners pockets and has to be included in their assessment of the loan expense before anything is formalized. You can check with the cash advance lender to find out if it will be necessary to replace your machines, if you are looking into merchant cash advances for future forms of alternative lending.

Leasing Versus Buying

The other option is to lease new terminals, if your old ones won’t work. This can be a short-term solution, but may end up costing more than simply buying a new terminal. Leasing rates go from $35 to $150, depending on the type of terminal chosen. If your term is six months or more, it makes more sense to buy new terminals, rather than leasing them for that duration. If your loan term is very short, like three months, it may make some sense to lease the machines and return to the old ones when your loan has been repaid, depending on the type of machines you need.