A merchant cash advance is a form of business finance available to eligible business houses to provide them with the necessary funding whenever needed. This loan is then repaid in the form of a percentage of future credit card or debit card sales. The tenure of these types of finances is also short usually up to 24 months. This is an excellent option to finance the business with little to no assets as well as businesses having a lower credit score.
In the case of the merchant cash advance, the lender of the funds is directly in contact with the terminal provider. This provides clear visibility of the fund entering the business and the repaying capacity of the borrower. This further eliminates the need to run credit checks or have a detailed study of the financials of the entity.
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The amount that can be sanctioned to any business depends on many factors like the profitability of the business, turnover of the business, repayment capacity of the borrower, credit score if any, etc. The rate of interest of such short term loans is higher than the regular business loans. However, the factors like ease and promptness of finance, wider eligibility parameters as well as minimal documentation make up for the limitations of the merchant cash advance.
One of the basic prerequisites of getting a merchant cash advance is having a card terminal that is used to take payments from the customers. Hence, this includes a wide spectrum of applicants that can avail the benefits of merchant cash advance.
A merchant cash advance is one of the many sources of external finance available to businesses, especially small businesses. These are in the form of flexible short-term loans at relatively higher interest rates with comfortable repayment options.
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