A merchant account can be a means for you to obtain a business cash advance should it become a necessity. Today’s business person will most likely acquire a merchant account. Merchants accounts are the means in which a patron enters your establishment and uses their credit card to purchase the product or service that you are selling. A company handles these services for you in making sure that the purchaser’s account is charged and the funds spent at your place of business, minus a small percentage, is credited to your bank account.
Now and then, when a business is just getting off the ground, a business owner may wish to purchase more equipment or inventory with the hope of making their business more profitable. You may have already attained a mortgage to open the door to the public, and your additional resource of loans is limited. This is when a merchant loan is an opportunity that you may wish to take advantage of.
A merchant loan is one of the easiest and quickest ways to secure cash for your business. The approval rate is very high with this type of loan and funds are released often within a weeks time. These lenders do not ask for financial statements or tax returns. There are no application fees and you do not even have to worry about specific amounts of repayment.
The few requirements that you are asked to provide are no bankruptcies over the last year or so, your rent must be paid in full and up to date if you do not own your own property, and your business has to be up and running for a minimum of sixty days. Based on this, a merchant lender will be willing to give you up to thirty percent of your monthly credit card income. If you were taking in $10,000.00 USD, this would allow you no less than $2,000.00 USD to use toward your purchases.
Another way of explaining the process would be to state that your merchant account is considered as accounts receivable collateral. The money coming into your business by way of credit cards, is the lender’s guarantee of being repaid. In lieu of a monthly payment, the lender takes a percentage of that months credit card proceeds.
Although a business cash advance obtained by a merchant loan seems simple and easy, there are also some disadvantages that should be paid attention to. No business, regardless of how profitable it is, is guaranteed long term success. The business market can be fickle. A business that is thriving this year, can fall into bankruptcy next year. As a business owner, you have to be prepared for any possible future downturn and handle your business carefully. All creditors have to be paid in a regular, timely fashion in order for you to establish a good credit rating. When securing a merchant loan, you are putting your business in debt. If you are a new business with a mortgage, and loans to pay for inventory and equipment that you already have, this additional debt may be more load than you can carry. Merchant lenders will take a percentage of your credit card proceeds each month, but on top of that, there is an additional interest charge for the loan itself. Let’s face it. The institution that lends money for nothing has yet to be invented.
Over time you should work to be your own lender. While your business is profitable funds should be set aside for unexpected costs and reinvesting in your business. If you were to pay yourself the same amount of funds that you would disperse to a lender, the amount saved would be staggering.
If something unforeseen should befall your business, look at as many other options as you can. If you have worked to maintain your business credit rating there are business loans available for nearly all types of businesses. Banks are prepared to aid the professional and commercial business owner at greater savings than a merchant loan. As in all aspects of business, you first need to know specifically what it is your business needs. Secondly, you need to know the least expensive way of securing the funds.
Want to apply for small business funding but seem to be going nowhere? Visit Credit For Merchants today and get an expert to help you with getting a business cash advance approved within 24 hours instead.
Other articles you might like;
Pingback: National Foundation For Credit Counseling- Related Fact For Chase Credit Card Payment | Credit