There are times when business owners find themselves in a situation where they need to put some cash together quickly. There are a number of different ways that a business can go about getting cash. They can approach a bank, or another type of lender for a loan. They can sell their accounts receivable to a third party, or they can use it as collateral when securing a line of credit. While there are advantages to all of these options, there is another method that is frequently utilized. This method is known as a Merchant Cash Advance. This happens when a business obtains money from a third party, and gives them a small share of sales that happen in the future.
This type of financing option does not technically qualify as a loan; it is considered a sale on a certain percentage of sales. The institution that is offering the Merchant Cash Advance will agree to buy a part of the credit card receivables that will come in the future. The rate is determined by certain factors such as the way that the business has performed in the past, and the way that the business is currently performing. As soon as the business acquires the funds, the financial institution offering the money will start collecting a certain percentage of the credit card receipts obtained by the business until the money is paid back.
There are three different ways that payment is collected when a business obtains a Merchant Cash Advance. One collection method is called split withholding. When this option is used the company that processes the credit cards will split the sales between the two parties using the percentage that was agreed upon. Another option uses a bank account that is operated by the financing firm. All of the credit card sales made by the business are put into the bank account, and the percentage owed to the business is forwarded to them. The third option stipulates that the financing firm will receive all of the process information for the credit cards, and then they deduct the percentage that they own from the checking account of the business.
There are several advantages that a Merchant Cash Advance can provide a small business. First of all, this financing option makes it possible for businesses to receive money that may not qualify for a regular loan. Financial institutions that offer this advance will look at the performance of the business, rather than personal credit scores. These advances can happen very quickly. It is possible for a business to receive necessary money within a couple of weeks. This type of financial option can help a business navigate tough times and come out ahead.