Some Top Advantages of a Merchant Cash Advance Loan

Small businesses often find themselves in a cash crunch. There are very few options in such instances. One can try to borrow money from friends or relatives but there is always a question mark. There are loan sharks but it is risky. There are other options for the immediate supply of cash without any collateral.

Merchant cash advance is the best solution for small businesses like hotels, restaurants, professionals, retailers and even small manufacturers. It is a straightforward deal and one is never beholden to friends or relatives. It is cash on demand, no questions asked. The process is relatively simple and there are minimum eligibility criteria making is the best source of funding for small business owners. There are inherent advantages and the cons are only a few. Consider the advantages of a merchant cash advance loan.

Fast approval, fast disbursal

If cash is needed urgently there is no better source than this. One only need to apply online, submit a request and then the process is taken forward. Applicants usually receive cash in their bank account within 4 days of making the request provided every other requirement is met.

Minimum paperwork

Unlike banks and other lending institutions that ask for a lot of documentation, this method of funding is the easiest when it comes to paper work. One needs to submit only the bank statement for the past six months, proof of ownership of business and proof of identity and residence. That’s that.

Best for people with bad credit

People with bad credit can find themselves in a jam with no one willing to even consider their request for temporary funds to overcome their difficulties. If they go down this road, it is a reprieve and they can really get back on their feet. More to the point, their credit rating can improve with assistance from the right lenders.

Best for businesses that wish to expand or launch campaigns

Traditional lenders may insist on a solid project report to show why borrower needs funds, how they will use it and how it will help them generate revenues. Small business owners rarely have the resources or wish to pay a chartered financial specialist to prepare such papers. Going this way helps them get their hands on cash that will help them expand the business, buy equipment, modernize, give their retail store a makeover or launch periodic campaigns to rope in customers.

No collateral

One of the finest advantages that borrowers like is that there is no need to submit any collateral or guarantee. Just their personal word is sufficient to help them get their hands on sorely needed cash.

Easy repayments

MCA repayments are usually tied as a percentage of the daily credit card sales. One can just as well opt for a fixed monthly repayment. In the former case, the repayment amount is low if sales are slow and higher if the sales are high. In any case, repayment extends over one year and by that time the borrower may have used the money wisely to increase revenues.

Cons

The only cons are that the factor rate is high ranging from 1.2 to 1.5 that translates to the interest rate of 20% to 50%. But then, a non-secured loan is always expensive. Another factor is that the business should have been in existence for at least a year or so with a minimum turnover of $ 10000. These are minor niggles.

The MCA advantages far outweigh the minor cons.

High Risk Merchant Accounts

A High Risk Merchant Account is typically required for certain business types, that are deemed “Undesirable” by the card associations. These businesses include a whole host of different business types, including the adult industry, travel industry, and many others that we will cover below. There are various reasons why these businesses are “Undesirable”, but for the most part the “Risk Of Chargeback” seems to be the underlying factor, as majority of these High Risk Business Types have a history of getting a high percentage of chargebacks vs other business types.

Chargeback is when a customer gets a particular charge “Reversed”, by complaining about the transaction with their credit card issuing bank. Several complaints can get any merchant account shut down, sometimes shut down forever.

Here are a few common types of “High Risk Merchant Types”:

  • Adult Industry
  • Bail Bondsmen
  • Coin Shops
  • Escort Service
  • High Ticket Sales
  • Gun Shops
  • Online Pharmacy
  • Ticket Sales
  • Time Share Sales
  • Travel Related
  • Water Purifiers

The first place to start when looking for a High Risk Merchant Account would be with a company that both specializes in traditional and high risk accounts. Note, different banks will accept different levels of risk, so you may have a chance getting a traditional merchant account, without the added cost of associated with high risk.

If that fails and you are told that a traditional merchant account is out of the question, you’ll need to proceed with the “High Risk” application. Keep in mind that you will need several documents and may have to jump through some hoops, but with a little perseverance and a lot of patients, you can be successful in getting approved to accept credit cards.

Things To Expect:

  • High Risk Application Fee
  • Potential Association Fee
  • Financial Statements
  • Business License
  • Articles Of Incorporation
  • Principal Statements
  • Marketing Materials

In closing, accepting credit cards in certain business types can seem impossible at times, but if you partner with an industry specialist, your odds of success are greatly increased. Keep in mind that your success is not guaranteed, as certain factors, such as lack of credit, lack of financial strength, or previous terminations of merchant accounts, can stop you from getting approved.

Good Luck.

1st National Processing may be able to assist you in obtaining a High Risk Merchant Account for your business.