Merchant Financing : Is it a Better Option than a Traditional Bank Loan?

Merchant cash advances in many ways provide exceptional financing in a relatively short period; sometimes within five to ten business days. It’s no secret to entrepreneurs who have solicited a bank loan, the specter of having to deal with an insurmountable amount of paperwork with resultant obstacles and time constraints hindering access to funding. Due to credit score and oftentimes nature of the industry, scores of businesses simply do not meet the requirements of traditional banks. Restaurants and retail businesses particularly gain advantage over other business types in obtaining swift financing solutions for working capital purposes:

- Loan and vendor debts
- Advertising
- Buying equipment
- Inventory expansion
- Emergency funding or whatever project that needs funding.

Qualifying for a traditional bank loan does not necessarily mean that your financing needs are immediately solved. Several months can go by before funding is actually acquired. We know of many business owners who failed to meet their obligations with respect to past due payments and loans and perhaps even worst, lost potentially lucrative contracts or transactions. So in light of these troubles, it’s only logical to find refuge in a better solution; a merchant cash advance.

Meeting the requirements or qualifications for a traditional bank loan will certainly offer you a relatively low-cost source of financing. Nevertheless, for most, many obstacles the likes of bad credit, type of industry, and collateral contribute to your success or failure. On the other hand, merchant cash advances give more consideration to your business performance than to a bad credit rating. Core requirements for a merchant advance are:

• To carry out a number of credit card transactions, given that this would be the form of repayment;
• To have carried out business activities with a subsequent credit history statement for no less than 12 months;

Allow us to mention once more that it is not necessary to have a favorable credit rating in order to attract a merchant cash advance provider. Being private financiers, they finance merchants and subsequently purchase their future credit card sales at a discounted rate. The investor is repaid by securing a percentage of the merchant’s credit card receivables. With no need for collateral, all payments are automatic resulting in no late fees sustained by the business owner. Moreover, a tremendous advantage is granted to the merchant since repayment is made by means of a percentage taken from the monthly credit card sales. In many ways, this form of financing has attributes of an unsecured loan thus providing many benefits to the business owner.