Noteworthy, a merchant cash advance is quite different from a loan. A merchant cash advance is a fund or cash you get depending basically on the amount of cash you have in your merchant account.
From time immemorial, merchant cash advances are mainly used by businesses whose existence is tied to sales that involve the use of debit and credit cards.
Furthermore, businesses that make use of merchant cash advances include retailers and restaurants. However, in recent times, other types of businesses now make use of merchant cash advances to meet up their financial needs.
Advantages of a merchant cash advance:
As earlier stated, the merchant cash advance is technically not a loan as it operates based on specific features which differ slightly from the conventional loan systems we have around us
Not to mention, one of the major advantages of a merchant cash advance is the time frame required in processing it. Surprisingly, accessing a merchant cash advance does not take much time. The money is accessible for the user within a few weeks.
Also, a merchant cash advance requires less paperwork compared to other sources of funds for businesses. A merchant cash advance requires less documentation to process as the business owner already has a merchant account with the lender.
Another advantage is the ease of use. Failure of a business to come up with the expected revenue required to meet up with the merchant cash advance does not require the business owner to put up any asset for collateral or sales. The merchant bank would simply adjust to the realities of the business, and new modalities that suit the income generation of the business drawn.
Problems associated with a merchant cash advance:
In this case, a major problem associated with a merchant cash advance is the fact that the limit of funds you can access as a business owner is determined by your ability to pay back. In addition, a factor rate that ranges from 1.2 to 1.5 is determined by the merchant bank which is based on your risk factor as a business outfit.
Furthermore, a higher factor rate implies higher charges for a merchant cash advance. The total amount to be paid back is the cash advance times the factor rate. So, as a business owner, it is obvious that the risk factor your business possesses to borrowers determines whether you get funds or not.
Merchant cash advance lenders operate in an unregulated market and this enables them to charge higher rates for interests more than any other conventional money lenders. As a matter of fact, the money borrowed is not in the form of a loan, there can be no usury and this is the basis by which money lenders charge higher rates.
Conditions for a merchant cash advance
In conclusion, to get a merchant cash advance, there are certain conditions you have to agree to. One of these conditions is that you agree to remit on a daily basis a certain percentage of your daily credit or debit sales directly from your bank account to specified bank details. The remission is daily and it is based on a rate that is calculated. In addition, make it a duty to talk to your account manager or your financial institution to know your bitcoins.
