What to know about business merchant cash advances

6:33 AM, Jun 17, 2019
2:21 PM, Jun 21, 2019

A merchant cash advance is not a loan but rather a cash advance to the business. A lender is advancing them money for a % of their sales until the amount borrowed + fees (interests) are all paid back (total payback). It’s designed for people with low credit but has strong revenue or consistent revenue who’s been sidelined by banks or lenders due to lack of credit history.

It’s also designed for business with fluctuating revenue or seasonal revenue where you might have a slow month. Therefore, your payment should adjust accordingly so that you can manage your cash flow better. The lender is purchasing future receivables of that business, so it’s revenue dependent lending, not credit.

Why would a small business owner go for a merchant cash advance when you can get approved for a loan?

We always offer our clients best loan program with the lowest rate that suits their credit risk profile, but sometimes we have no control what they can qualify for due to some external factors that are out of our hand. They don’t always get approved for whatever they ask for, but we always offer alternative options to be able to achieve their goals — reason like short-time in business, low revenue, poor payment history or lacking business and personal credit will bring you down to the merchant cash advance program.

Is merchant cash advance a long-term funding solution?

No. A merchant cash advance is just short-bridge funding for a business that is short with working capital to cover short-term expenses. One example would be a construction company who signed a big contract, but for him to complete the project he’ll need working capital for deployment, materials, inventory, and payroll, but he has no collateral, no time nor he has the credit? So what would a business owner do? A taking a short-term cash advance if that’s the only program they qualify might be suitable since the project will pay back soon. If you do this, you can enjoy the benefit of using other peoples money, yes, at a high rate but without it, they wouldn’t be able to complete the project which is a bigger opportunity lost than the cost of funds.

Why would a business owner need to do merchant cash advance and why would they switch their credit card processing?

The true merchant cash advance is where a % of daily credit card sales is taken off the top toward payback through their credit card processing.

Is the process different from other loan programs? No, the process is faster because it’s revenue driven. It’s not only faster, but we also don’t require our merchant to switch or move their credit card processor to access funding for a merchant cash advance.

Working with Liberty Capital is a little bit unique than most of our competitors. Not only we’re a direct lender, but we also broker some of the transaction which allows us to have a high success rate with our clients when it comes to getting an approval.

Liberty Capital Group specializes in helping those that have been turned down by traditional banks. You just need to have been in business for at least 6 months and be able to show revenue. Call or visit a Liberty Capital Group today to find out if you qualify. Click here for more info.

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