Everything You Need To Know About Merchant Financing and More

Are you in need of a quick business loan? Yes. Well, you might have come across the concept of merchant financing at some point of time. Isn’t it? So do you have any idea about it or how it could be helpful for your business? Don’t’ worry, as this post will guide you on this matter pretty well.

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Merchant Financing

Merchant Financing is a blanket term and it is often used by the merchant cash advance lenders. However, understanding this term is of great importance. It’s a financing option for the merchants. Any businesses with a merchant storefront and credit card processing system need some funding to run their business. This is where merchant financing or merchant cash advance (MCA) turns out to be of great help.

Understanding MCA

Merchant Cash Advance (MCA) is a funding option through which the lender gets back his repayment through the credit card sales or credit card processing system.

Merchant Financing Working Process

Usually, merchant cash advance lenders come up with a system for checking the money that a business receives from the credit card transactions. From that system only, the lender will take a daily percentage of the transactions. It is a kind of a repayment procedure and the process will continue till the lender gets back the financing amount, along with the interest.

On a day, if the business does well, more repayment towards financing would be made, and vice versa. As there is no set repayment length, merchant financing might become expensive.

Merchant Financing Terms and Condition

Before applying for MCA, it’s important to take a look into the terms and conditions of this financing product.

Loan Amount

The MCA amount could range from $2500 to $250000. Businesses that are ready to pay high rates would easily get big financing options from merchant cash advance lenders. For large loan amounts, going for a long-term lower rate funding source would be better.

Financing Rates

The financing rate for MCA isn’t the same as the APR or usual interest rate. There is no fixed term length for merchant financing. However, it comes with a factor rate, which tells about the loan amount needs to be repaid. A typical MCA product comes with a factor rate of 1.14 to 1.18.

merchant Cash advance lenders

Securing Merchant Financing

In case, you are looking forward to applying for merchant financing, you will need the following. They are:

  • Personal Credit Score Of 500
  • 1 Year in Business
  • Annual Revenue of $50,000
  • Void Business Check
  • Driver’s License
  • Bank Statement and Credit Card Processing Statement
  • Business Tax Returns

Advantages of Merchant Financing

  • To qualify for business funding is very easy.
  • There is nothing to worry about missing payments as repayment will be through credit card revenue.
  • Merchant financing is a short-term financing option that offers small businesses with low-cost capital.

Disadvantages of Merchant Financing

Often businesses refuse to take the help of merchant cash advance lenders for one reason i.e., a daily percentage of the business revenue would go towards the repayment. This affects the cash flow to the business.

Lenders That Are Offering Merchant Financing

Are you looking for lenders who would provide merchant financing for your business? Yes. There are many MCA lenders in the market; however, many credit card processing companies are also providing this financing. Some companies offering this financing option are American Express, PayPal, Amazon, and so on.

With all the required information in your kitty, you will need to decide if you want to go for it or not.