Archive for the ‘Merchant Advance’ Category
All businesses need a loan at some point, they need to expand, buy seasonal merchandise, or renovate their store. Whatever the reason, the business owner goes to a bank to apply for a loan only to get turned down. Banks have stringent lending requirements and they are even more stringent today. Is this all a business owner can do? Not at all. A business owner who accept credit cards can apply for a merchant advance.
A merchant advance is not a loan. They are a sale of a portion of future credit sales. The merchant gets the cash and the facilitator, who operates like a lender, works with the business owners merchant account provider to automatically deduct a small percentage of the businesses credit card sales to repay the merchant advance automatically. Sometimes the business owner will need to switch to an approved merchant account provider to get their advance.
The disadvantage to getting a merchant advance is that it does cost more than a bank loan, however it is significantly easier to get. The advantage to this type of arrangement is that the business owner always pays back a percentage of their sales so if business is slow, their payment is less. Regardless of the advantages and disadvantages, the merchants advance is sometimes a business owners only source of funding.
Posted in 
Tags: 