Working Capital for Processing Merchants - Not a Moment Too Soon
Is the economy looking up? How are your receivables? Did the bank close the line of credit? Slash your credit card limit?
These issues have been a mainstay in the media for the last year, including their impact on small business. Access to cash in the recession has become unusually difficult - and it was never easy.
Despite the stimulus, small to mid size businesses continues to feel the credit crunch. Creative financing is a fact of entrepreneurship. Family funding (pursue with caution), credit cards, SBA and bank loans, personal lines of credit. Some of the options come with impossible paperwork including years of tax returns, financial projections, business plans and a promise to hand over our first born. Financing was tough - now it appears non-existent.
Merchant cash advance products and services based on a merchants future Visa and Mastercard sales have been around for a while. Clearly these are not loans. There is no specific payback date and often monthly payments are based on overall card processing volume - hence the payment can fall or rise based on whether the merchant has a good or bad month.
Like all legal contracts and financial products, merchant cash advance requires research and education. Cash advance is not inexpensive but it comes with a great many benefits in times like these -
- access to cash can be quick, with no indepth paperwork required from the merchant (usually requires 4-6 months of card processing statements).
- there is no personal guaranty or collateral required - remember the money is advanced against the merchants future sales
- approval rates are high with minimal qualifications
- statistics show that despite its cost - many merchants renew their cash advances
Some of the top uses for merchant cash advance amongst merchants appear to be remodeling, inventory, tax payments, and working capital. The monies can be used for any business purpose and the purpose is not a part of the application process.
A cash advance based on a merchants future processing sales is clearly an option that calls for consideration when it comes to a need for immediate cash flow, something the SBA and our financial institutions are simply not renowned for.