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.