subject: Advantages Of A Merchant Advance Vs. Conventional Business Loans [print this page] For those in business for themselves, getting financing can be difficult. Without years of history, masses of collateral and an almost perfect credit history, banks are disinclined to loan money so here is where a merchant advance comes into play.
A merchant advance is a specific type of financing based on future credit card sales that is much simpler to obtain than a conventional bank loan. A business owner can usually get a loan between $5000 and $250,000 per business location depending on how much they process in credit card sales on a daily basis. Heavy paperwork is not needed and this type of financing is completely unsecured.
Naturally, this simpler access to necessary funds does come with some conditions. The business will be required to show at least six months in business, including credit card processing statements that display their actual credit card receipts. They are going to have had to have processed credit cards successfully, sometimes for at least 6 months. While there's more margin of error regarding credit worthiness with a merchant advance, a score of no less than 500 is usually what is required to get the advance. Not that much to ask is it?!
One of the premium advantages for business owners who apply for a merchant advance is the speed at which the request is processed. A turn around of less than a week is common with cooperation of all the parties involved. Additionally, unlike bank loans, an advance offers a flexible repayment plan.
Repayment is directly tied to credit card receipts on a daily basis, meaning that if a business has a slow period they are not required to pay more than they are able, unlike a conventional bank loan that requires fixed monthly payments. This is what is referred to as the "Daily Capture" rate.
Any business considering a merchant advance should establish that the company with which they want to work has a reliable and reputable history. The North American Merchant Advance Association provides guidelines for best practices and recommendations for businesses searching for such financing. Business owner's can also do a Better Business Bureau search at www.BBB.com as well as a Google search. If you want to take your due diligence to another level you can also search The Rip off Report www.theripoffreport.com.
by: Daniel Samoohi
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