As more and more people turn to entrepreneurship, access to business funding is also on the rise. Traditional loan companies such as banks have tightened credit score in the past years so cash-strapped entrepreneurs turn to other alternatives to solve one particular crucial problem – finding money. While commercial banks squeezed their financial support for small businesses, growth companies, micro lenders and merchant cash advance providers opened their doors, filling the void and helping entrepreneurs gain access to cash.
Small business owners for example restaurant operators, dental service providers, promotional product owners, and other small business workers looking for alternative sources of business funds are now able to secure additional cash rapidly without having to offer any collateral. Companies such as cash advance providers offer this kind of services and are preferred by a lot more business owners.
What exactly is a merchant money advance?
A merchant cash advance (or MCA, also called credit card factoring) is a funding option often availed by little to medium-sized businesses. It involves the purchase of a portion of the merchant’s future credit card receivables at a discounted. Every time the merchant receives payment from customers via credit card, a portion of the sales is forwarded towards the MCA provider until all of the purchased receivable is repaid back. A merchant cash advance however , is not that loan mainly for the following reasons:
2. The MCA provider requires simply no personal guarantee or collateral in the merchant.
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This means that the provider risks losing its investment if the product owner goes out of business. This is one of the reasons why providers have a minimum set of requirements before doling out the money. These are:
The merchant must have been in the business for the past year;
The service provider has at least fifty (50) credit card transactions every month;
The merchant has no outstanding rental obligations and has at least a year remaining on its lease, and;
The merchant has no open bankruptcies or foreclosures.
* Service provider cash advances have no fixed payment schedule. Repayment follows the merchant’s everyday card sales volume. In other words, the provider receives higher repayment quantity when merchant sales are up and receives a lower repayment percentage when merchant sales are lower. There is no late payment, thus, no additional charge or penalties rather than a fixed-term loan where a set dollar amount must be paid upon or before its due date whatever the merchant’s sales volume.
* There is absolutely no business-use restriction. The merchant will be free to use the money in any business-related expenses – purchase of additional inventory, new equipment, paying off debt, office remodeling or emergency subsidy among others.
Most reputable MCA companies such as Entrust Cash Advance can qualify a business for a cash advance quickly and easily. The application form process is quite simple. No tedious paperwork and no credit score or credit score checking involved. You just have to choose the right company.