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Merchant Cash Advance

When taking out a traditional loan, it is often the case that some kind of security is needed – something that many people and businesses are simply not able to offer. This is where a merchant cash advance differs though, as the money borrowed is secured against future payments, instead of against property or assets.

How Does It Work?

The first thing to understand about a merchant cash advance is that it is available for an amount up to your average monthly takings on credit and debit cards only. For example, if your business takes £7,000 per month through these payment forms, you will probably be able to borrow £7,000 if needed. In some cases it is possible to get larger loans, but only if you’ve been trading for a considerable amount of time.

When it comes to repayment, the lender takes a predefined percentage of all card transactions, until the payment sum is reached. This means the repayment is usually manageable for all businesses and the repayment period can be quite long. There are also no other charges to consider, aside from the actual interest on the loan amount.

There is also no need to worry about late repayments with this form of loan, as there is no charge for late repayments. So, if the amount of money you take from card payments goes down one month, you will pay less back to the creditors. This makes it a loan that many people are much more secure taking out, as they know that they won’t suffer if sales slump.

Am I Eligible?

There are three requirements that need to be met should you want to take out a merchant cash advance. These are:

  • You’ve been using card transactions for at least 12 months.
  • You receive at least £3,500 worth of transactions per month.
  • Your credit rating is not poor.

It doesn’t really matter what sort of business you run, as there are many different niches that choose to use a merchant cash advance as a way to finance their business. These businesses can be as diverse as florists through to builders, and from newsagents through to solicitors. As long as the criteria are met, a business is usually eligible for the loan.

Will I Benefit from a Merchant Cash Advance?

Many businesses use a merchant cash advance as a way to increase their finances, and there are many different reasons why they choose to take out this form of loan. The most common reason for a loan of this type though is when you are finding it tough to get a bank loan, especially in these tough economic times. While banks are often loath to provide loans to businesses, a company offering a merchant cash advance loan will generally be much more receptive.

It is also the case that many people take these loans out because they don’t have property or assets to use as security against the loan, or because they are closing their business for a short while (for renovation works, perhaps) and don’t want to repay a large loan during this time.

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