Business Loan Options Blog

If you are in the market for a merchant cash advance, you will find that repayment terms can vary from lender to lender. Be sure to read the contract that outlines the terms of repayment carefully to make sure you are getting a good deal. Some lenders will not be as reputable or transparent as others. You want someone who is willing to lay out the terms clearly and who is ready to answer any questions you have about repayment before you sign the contract.

Typical Rates And Terms

Regardless, you will find that merchant cash advance lengths of loan terms run up to six months, in most cases. There are some that will go as far as nine months before full repayment is due, but these come with a higher total repayment costs. Some of the cheapest rates are about 1.12 times the value of the loan. That means that if you borrowed $10000 for six months, you would have to repay 11,200 by the time the payment term ended. In that situation, it’s not any worse than holding a fixed rate loan of 12% interest, which right now can beat a number of different credit card companies offers, even though  a merchant cash advance doesn’t come with a set interest rate. On average, however, the repayment terms are more like 1.38 times the value of the loan and can exceed other types of short term credit limits, when compared to loans that deal with interest rates. The advantage to a cash advance though is that you agree to have the repayment made automatically from your future receivables and acceptance standards are more lenient than more conventional types of credit vehicles.

The Term Affects The Total Repayment Costs

If you want lower repayment costs,  you have to be willing to have shorter terms of  the loan. Higher repayment costs come with longer loan terms. For instance, a nine month loan  might come with repayment rate of 1.45 times the value of the loan. Lenders in this industry are interested in getting the most value for their money and  don’t want to tie it up for too long with a low return on their investment. In addition, since the terms of acceptance are more lenient, the lender takes on significantly more risk, justifying the higher repayment costs. If you want lower total repayments, all you have to do is negotiate something that meets your cash needs with terms that are agreeable to the merchant cash advance lender.

How Repayment Is Made

Normally, repayment is made via your future credit card receivables, as a percentage of each transaction. If you take out a $10,000 loan, you might have to pay  anywhere from 15 to 25% of each future transaction back to the  cash advance lender. Balancing the term of the loan with the amount loaned is one way to reduce the repayment costs on the loan or the percentage that you have to pay back with each transaction. This can vary from lender to lender and you will want to try and negotiate a loan that you feel comfortable sustaining and repaying in the short-term with your future business receipts.

As credit has tightened, more and more small business owners are having trouble expanding or growing their businesses. Other small businesses are making tough choices that range from laying off workers to  decreasing products and services. Some may even have to restructure completely or go bankrupt. All of these hard decisions stem mostly from an inability to obtain the necessary funding in a lending climate that has grown somewhat anemic with the advent of the recession. There are still alternatives to get funding during tough times and one of these is merchant cash advances.

Spur Business Growth

A very smart use for the merchant cash advance is to use it in an area that will help to expand your business model and create more profit for your business. By implementing growth strategies, you can easily afford to pay back the cash advance with the six month time frame and still be reaping the benefits of better income months after you’ve settled your account.

Bridging Payroll Gaps

Another great application a merchant cash advance is to help bridge cash shortfalls in your business. Typically, most business owners would seek lines of credits to help them with these temporary shortfalls, but even these lending instruments are seeing credit lines reduced or eliminated for small business owners. However, that doesn’t mean the gap goes away, instead it becomes an even bigger headache. To cover this gap, one can get a merchant cash advance based on the credit card receivables of future sales.

Restructure To More Profitable Model

If you want to restructure or implement new lines of revenue, any change in your business model is going take some cash, if you want to avoid laying off employees. A business cash advance can provide the necessary capital to retool your business to help you survive the changing market place. You may have to change some of your credit card processors to be able to take advantage of a merchant cash advance, but that can be included in the cost of your restructuring. Once the necessary equipment is in place, it will act very nearly like your regular processors except that now you can send a percentage of each credit card sale to your advance lender to help repay the advance you received. As a way to restructure, it is less intrusive than trying to reduce staff while maintaining a level of business that can generate the income that you need to stay afloat. Instead, you would simply tweak the business model a bit to allow your future sales to help finance present day restructuring costs.

While it is true that you can get a merchant cash advance in as little as 72 hours, that is dependent on how prepared you are to deal with your lender. There are some requirements that need to be satisfied before you are approved, including verification of the right equipment to process payments. A business cash advance requires more than just an application, there is also business paperwork required to help the lender determine your ability to repay the loan with your credit card receivables. The more you delay in getting these items done early, the longer it will take to process your application leaving your looking at least 10 days or more to actually get the funds. Here’s a few things to help speed up the process.

Become An Approved Processor Early

This is what can essentially halt the process much more than any other aspect of the application. Specific type of credit card processing equipment that does split funding is required before you can be given a business cash advance. That means you need to have some credit card processors that are willing to work with your lender to ensure they get a portion of your future receivables. You may think you can use your present credit card provider, but they may not have this option and it will delay your application. In the event you do have to switch processors, it can add several days to the entire application process. Don’t feel rushed to switch to a more expensive processor. Your cash advance lender should be able to direct you to some processors they’ve worked with before who have similar rates than your old processor.

Get Your Paperwork In Order

Documentation for your credit card receivables, and business income, is necessary. Some other types of documentation like landlord verification will also be required. If you’re not sure what you need to get, contact the lender early to be sure you have all your paperwork in order.

Give Out Your Current Contact Information

If you want to remove obstacles to approval, be sure to list current contact information on your application. If you have a cell phone where you can be reached, or a business fax, this can tremendously speed up the process, rather than waiting for emails to be lobbed back and forth across the Internet. Once you are able to talk to someone directly, be sure you are giving the lender exactly what they need to speed up the approval of your loan.

Be Patient

It does take more time and effort to get approved for a merchant cash advance than just 24 hours. Be patient with the process and the quickest you can expect the funds to arrive is 72 hours. Otherwise, the most common time frame to receive the funds is at least a week, if not two. The more you are able to meet the lenders requirements and settle on terms agreeable to you both, the easier and quicker it will be to get the money you need to fund the shortfalls in your business.