Merchant Loans - A Simple Way To Raise Funds For Your Business
Merchant Loans are increasingly prevalent in society these days
. The existing position of the economy and tough credit expectations are major contributors to the raise in capital advances. It is hard for entrepreneurs to get the funding that is necessary with the increasingly strict conditions for regular business loans. Business cash advances are a different means of attaining funding for everyday business requirements. So how does a merchant cash advance operate? Let us explain
Merchant Loans are a service provided by a lending institution to a small business owner that processes credit cards, most frequently in the retail or restaurant industry. The merchant loan lending agent basically advances the small business owner a predetermined amount of cash in exchange for a part of their future credit card transactions.
For example, let's take Jo's Diner. Jo may not have necessary funding on hand to pay his employees or to buy new appliances for his kitchen. Say Joe needs thirty thousand dollars and he called a Merchant Loan lender for the funds.
The lender would assess Jo's past credit card numbers and find out if he is eligible for the advance. They would figure out an interest rate for the cash advanced. The rate is typically more expensive than a regular business loan because the advance is typically given to merchants that don't have the credit or collateral to get cash from a traditional bank. If the fee for Jo's advance is 30 percent then he would be getting the thirty thousand dollars and paying the provider thirty nine thousand dollars in future credit card receipts.
The lender would collect the $9,000 by taking a portion of the daily credit card volume the business charges. Say the percentage the lender takes is eight percent of daily credit card sales and the entrepreneur received 10,000 dollars in credit card volume for the day. The merchant cash advance provider would receive $800 (8% of the $10,000). This process would keep going until the lender received the entire $39,000. This payment process goes up and down with the cash flow of the business. The percentage will remain the same so if your business has a slow period, you will be paying less. This is a big selling point for the advance service. Regular bank loans have a set payment amount, which could be difficult to pay during slow periods. A merchant loan has the advantage to follow fluctuations in business cash flow.
A merchant loan is a valuable alternative to a business loan. Some will think 9,000 dollars is a steep sum to pay but the stipulations a merchant must meet for a conventional loan is becoming more and more difficult to attain. A business cash advance is a way of receiving fast and easy money to meet business working capital needs.