Merchant Cash Advance Info

LA Times Reports that Tightening Credit is Squeezing Business Owners

2009-07-01T13:26:00.000-07:00

Last week, in the LA times, there was yet another article addressing how tightening credit is "putting the squeeze" on small business owners.

In the story, the author (Cyndia Zwahlen) reports on how more than 100,000 small businesses were directly affected when one retailer's credit line offers were rescinded. Zwahlen points out how similar changes from other small business credit card providers have actually affected more than one million small business owners and that the situation may get worse before it gets any better.

This quote from the article tells quite a powerful story:

"Author and freelance writer Donna Stone relied on her [business credit] card to support book signings, book festivals and book development expenses. 'As a low-budget author, it has allowed me to easily separate my business expenses from my personal budget,' Stone wrote in a recent e-mail. 'I am concerned about where I will find a comparable tool to support my business, my livelihood and my life.' "

While stories like these are common, there are ways that small business owners are protecting their businesses from "feeling the squeeze" of increased economic uncertainty.

Education, Followed By Careful Integration
One of the best strategies to help protect your business' future is to educate yourself about all the potential products and services available to provide capital for your business, and to understand how each option might be best integrated into your business.

The first step is to clearly identify the different types of capital sources that might be available to your business (e.g., loans, leases, Merchant Cash Advances, lines of credit, factoring, investors, etc.)

The next step is to understand the requirements for obtaining each specific product or service (e.g., do you need collateral, down payments, a specific credit score, a particular relationship established, business plans or other paperwork, etc.)

When reviewing the above steps consider the following:

How each option will affect the cash flow of your business (e.g., how your business will pay back, or meet the obligation(s) it undertakes, to access the capital)
If the strategy your business will employ ensures the best possible ROI
If your decision will have the desired effect upon the business
What are the short- and long-term effects on your business

When researching the options your business will consider, try to identify every possible source and resource. Look at traditional providers, but also see if any industry-specific or other options are available. Be creative, and willing to think outside the box.

Of course, some economic conditions are beyond the control of any small business owner. However, by understanding how and when to use the various working capital options available to your business, you increase your likelihood of success.

What do you think? How creative have you been when protecting the financial future of your small business?

The Bad News, and the Good News

2009-03-05T10:55:00.000-08:00

There was a very interesting page added to the small business section of Newsweek’s website last Sunday: http://www.newsweek.com/id/186572
Kevin Kelly, the author, describes his own experiences with his business’ banking situation turning sour. Why did it take a turn for the worse? Because Kevin needed more money for his business and his bank was reluctant to extend a loan without imposing a much higher cost than Kevin expected.

The Bad News
The bad news is, Kevin’s story is not unique. Surveying a variety of news sources right now, you can find many stories just like his – stories of small business owners feeling like they can’t get what their business’ need from a bank.

The Good News
The good news is, for many businesses, a bank is not the only option for working capital. By utilizing Merchant Cash Advances and other possibilities when appropriate, many small business owners can still get the capital the business needs without enduring the hassles and stress associated with bank loans.

More good news is that while banks have less money to offer small businesses, AdvanceMe has the money available to fund every qualified deal.

One of Kevin’s last quotes sums up what many small business owners must be feeling:
“I understand why our bank, or any bank, feels the need to be more rigorous these days. But the shifting ground has left me uneasy enough that I'll continue building bridges to other financial institutions.”

We recommend that you follow Kevin’s lead, and investigate all of your options. If your bank is no longer answering your needs, look to other providers that are willing to step up. There might be no better place for you to begin, than with a Merchant cash Advance.

What do you think? Has your bank tightened its guidelines or recently retracted previous offers?

Get a Merchant Cash Advance for Training

2009-03-03T06:30:00.000-08:00

Because a Merchant Cash Advance is best used for growth strategies, one smart way to use the money is to invest in training for you and/or your employees.

Consider the opportunities:

Salons and Spas: If you are a salon or spa owner, you could train some of your employees to offer a new service. Facials, pedicures, or maybe body wraps could be an option. Adding a certified practitioner of another type of service can create an additional, ongoing revenue stream for your business. By adding new services and options, you might be able to bring in new clientele and strengthen relationships with your existing customers.
Restaurants: A restaurateur could train a wait-staff on wine pairing, tableside preparation, or other types of value-added customer service. Sending the kitchen staff to advanced culinary training could introduce new techniques that help the menus improve and diversify. The restaurant owner could train in marketing or accounting techniques that help the business stabilize and grow.
Retail: There might be a number of good training opportunities to explore depending on the type of retail store you are running. Don’t overlook the value of training someone in your organization in the use of office-related software. The improved use of Excel, Quick Books, or other accounting software could have a big impact on your bottom line. By using an employee instead of a third-party provider you can reduce costs and perhaps improve your profitability.

Training in new and better service techniques is the way many small businesses retain a competitive edge. Don’t get left behind – use specialized training to allow your business to lead the competition, to set the bar high.

Generally speaking, the best advice for using a Merchant Cash Advance is to use it to invest in a strategy to improve your business. Paying for the training costs associated with being able to offer a new specialty or reduce costs are examples of using a Merchant Cash Advance wisely.

What do you think? Is there some specialized training you could use in your business that would open up new possibilities?

Use a Merchant Cash Advance for Trade Show Participation

2009-02-09T11:57:00.000-08:00

In many industries, participation and visibility at the right trade show can make a big difference in the bottom line. Trade shows are the places where businesses go to see and be seen, they are where new ideas in products and services are usually brought out for initial public showings and test runs.

While not all trade shows are expensive, they do carry a cost that many businesses might not have adequately forecasted into annual budgeting. There are travel and accommodations, promotional and follow-through costs to consider. Yet even with some flexible costs assumed, every trade show should have a measurable budget and this budget can be forecasted well before the actual event takes place.

How to Use a Merchant Cash Advance for Trade Show Participation
If your small business could benefit from attending a specific industry trade show, it may make sense to consider using a Merchant Cash Advance to secure the business capital needed to make it a true success.

Get There: Use a Merchant Cash Advance to handle your costs for travel and registration. Knowing the basic costs of the trade show are covered will help you to relax and get more from the experience.
Look Sharp: If you are presenting your goods or services, maybe it is time to invest in a new trade show booth. Create new graphic banners or invest in flat screen televisions on which to loop your messaging. Revamp your hand-outs and printed collateral to make your materials look as sharp as your ideas. You might pay for improving or developing a new online presence to capture your leads.
Reel ‘em In: Even the most dignified trade shows often have an almost carnival-like appeal. So what’s your hook? How do you plan to get them into your booth? A little investment can go a long way toward creating the buzz that brings them in. Rent a popcorn machine, a chocolate fountain, buy a few door prizes, hire models for help or try something really unique and memorable—you are limited only by your imagination.
Follow-Through: To make a trade show successful, you need to follow-through on your leads. Follow-through is made easier if you plan ahead and carve out a little budget to be able to reach out with the right second impression. You don’t want to stimulate interest and then leave them wanting…have your next steps built and ready for action.

One nice aspect of using a Merchant Cash Advance to pay for a trade show experience is that your business will not have to divert other budgets to the efforts. By carefully monitoring and isolating your expenditures and their returns, your ROI becomes easier to calculate. Trade show participation, like all marketing expenses, should be avoided if you can’t pencil-out a reasonable rate of return on the investment you are planning to make.

Looking at strategic trade shows as an opportunity to grow your business makes it easy to see how a Merchant Cash Advance often makes a smart choice for the business capital needed to get it all done.

What do you think? Are there some trade shows you'll be attending in 2009? What do you hope to gain from attendance?

Can I “Renew” a Merchant Cash Advance?

2008-12-11T05:58:00.000-08:00

Technically, no. Each Merchant Cash Advance is a separate sale of assets (future credit card receivables). So a “renewal” is actually a new contract to sell future credit card receivables. However, in the Merchant Cash Advance industry, many merchants and providers alike use the term “renewal” to describe all successive Merchant Cash Advances taken after the first sale – so we’ll follow industry custom and use the term.

Allowing for the disclaimer above, renewing a Merchant Cash Advance is more common than you might realize.

Three-out-of-four of our eligible businesses have returned for additional funding opportunities. Many of these satisfied businesses will in fact receive multiple fundings from us—they don’t stop at just two. They know Merchant Cash Advances are simple, straightforward and reliable sources of business working capital.

Benefits of a Merchant Cash Advance Renewal
Speed. When the timing is right for a renewal, this is a really quick option to consider. Money can be in-hand in as little as 4 hours. In most cases, everything is already in place to make a renewal a very quick process.
Ease. Having a relationship with your Merchant Cash Advance provider will reduce application paperwork and processing time. The documentation may need some quick updates, but these are generally easy. Your business shouldn’t have to switch processors and in many cases, the only paperwork you will need to complete to receive more money is a new Merchant Agreement.
Use. A Merchant Cash Advance can be used for any business need. So if your first Merchant Cash Advance was used for handling remodeling or a renovation, your business could use a second one to advertise and capitalize on its improvements.

Like many providers, we usually encourage renewal discussions once the merchant has met about 80% of their existing Merchant Cash Advance obligation. This is assuming that nothing has changed in the way the business operates.

If you are interested in obtaining a Merchant Cash Advance renewal, the first step is to inform your provider. The provider will tell you when you can consider a renewal, and help you to coordinate the processing of your request.

What do you think? Does having a reliable source of working capital change the way you view the growth potential of your business?

How fast can My Business Get a Merchant Cash Advance?

2008-10-09T12:56:00.000-07:00

One of the most attractive aspects of a business cash advance is the speed with which it can be arranged. How fast is fast? Most commonly, it is a week to 10 days. However, it can be as quick as only 72 hours!

How to Get a Merchant Cash Advance in 72 Hours
Getting a Merchant Cash Advance this quickly requires a few things to come together for you and your business. At a minimum, it requires the following:

Your Business Needs To Be Using an Approved Processor. A Merchant Cash Advance is centered on the credit card sales processing. If you are not using processor that already works with your funding provider, you will have to switch processors before arranging a Merchant Cash Advance funding. Switching processors is usually pretty painless but it does add several days to a Merchant Cash Advance timeline. Most providers will have established relationships with a variety of processors to offer you competitive rates and options if you need to switch. Caution: Watch out for funding providers that require you to switch to a more expensive processor. Most reputable providers should have relationships with processors that will “meet-or-beat” your current costs.

You Need to Provide Paperwork Quickly. Compared to other options, there is very little paperwork needed to get a Merchant Cash Advance. This means every piece of information required is going to be important to the final decision. If you want to arrange a funding quickly, make sure you complete the Merchant Agreement as well as other paperwork requested by the provider. Typically, this might include credit card statements, landlord verification and other related documents.

Be Available. If you are seeking fast decisions, many providers should be able to help you. But this means they will need to reach you quickly to help verify all submitted documents are in order. You will need to be available during this process, and it helps to have a fax machine available to speed up communications.

Having all of the above is not a guarantee that you will receive a Merchant Cash Advance in 72 hours. But these key points do make getting a Merchant Cash Advance in 72 hours a possibility.

Warning: Proceed With Caution
While it is true that a Merchant Cash Advance is a quick and simple approach to handing working capital needs, do be careful. Be sure that you know 100% what you are getting into. We’ve said it before, but it bears repeating: READ YOUR CONTRACT.

A reputable provider does not hide things from you…there is a transparency to how it all works. You will know what amount of cash the business will receive, the amount of future credit card receipts the business will sell, and what percentage of daily credit card sales go to the Merchant Cash Advance provider. You should eliminate guesswork.

If it takes a little more time for you to weigh your options in an effort to make the decision wisely, it is always in your best interest to wait. While a Merchant Cash Advance can often be arranged in 72 hours, prudence dictates that you should never sacrifice complete understanding for speed. And you should always consider all alternatives available whenever making a financial decision.

What do you think? Is timing typically an important issue when you are seeking working capital for your business?

A Business Cash Advance: One Answer to the Credit Crisis

2008-09-18T11:34:00.000-07:00

Business Week recently featured an article discussing the credit crisis we have now been enduring for a year. (http://www.businessweek.com/lifestyle/content/jul2008/bw20080731_850024.htm?campaign_id=rss_daily).

While this article primarily focuses on the effect the last 12 months have had within real estate markets, it also states: “The credit crisis has spread to infect the automotive, airline, travel, and retailing industries.”

What does it mean to a business owner operating within one of these affected industries?

Clearing the Hurdles of the Credit Crisis
A successful business will not let the credit crisis become the obstacle that prevents growth and maturation…they understand and employ a variety of financial options to get through it. When one financial strategy won’t work, perhaps another will.

Understanding different financial products and services and knowing how to use each to its greatest strength is one solid way to build and maintain success.

A smart business owner clearly understands the effect that the credit crisis is having on an ability to borrow from banks as needed. By knowing more about the current state of the economy, successful business owners are realistic in what they subsequently expect from banks.

Banks are tightening their requirements. Loans are going to be hard for many businesses to secure. Successful business owners need to have a few alternative options at the ready to stay competitive. Understanding and utilizing these alternative options can help to clear the hurdles of the credit crisis.

How Does a Merchant Cash Advance Play Into This?
As the Business Week article points out, it is becoming necessary for many businesses to move beyond traditional financial institutions.

A Merchant Cash Advance is one great option for many businesses—and it has been so for over a decade. If a small business has been rejected for a loan, this does not mean they will also be rejected for a Merchant Cash Advance. Different rules apply.

While the credit crisis is having a big effect on the banks, it is not having the same effect on stable, established Merchant Cash Advance providers. Use this to your advantage.

So let the credit crisis have its birthday. If the banks are saying “No” more than ever before, you may not be out of options to get business capital as needed. A Merchant Cash Advance offers you a sensible and reliable alternative to consider.

What Do You Think?
Do you feel like the credit crisis is making it more difficult to run a successful business?

How does a Merchant Cash Advance differ from a business loan?

2008-09-03T12:03:00.000-07:00

When evaluating all of your possible business options, it is VERY important to understand some of the clear distinctions between a Merchant Cash Advance (or “MCA”) and a business loan. Knowing how they differ will allow you to pursue the best possible solutions for the many circumstances your business will face.

A complete discussion of all of the differences is beyond the scope of this article, but the following are four basic points that can help you better understand how to evaluate your options:

Merchant Cash Advance
Involves the sale of an asset (a portion of future credit card receivables) by a business to an MCA provider.

Typical Business Loan
Involves the creation of debt by the acceptance of a sum of money with the agreement to repay the money with interest.

Merchant Cash Advances
There is no interest or interest rate because an MCA does not create a loan.

Typical Business Loans
Lender charges interest at a clearly established interest rate (either fixed or variable).

Merchant Cash Advances:
Collateral is not pledged to secure “payment” (i.e., delivery of the purchased receivables), but may be pledged to secure “performance” (see below).

Typical Business Loans
Often requires a pledge of collateral to secure repayment of the debt.

Merchant Cash Advances
Do not have fixed, regular payment amounts or a set maturity date.

Typical Business Loans
Usually have fixed payment amounts, and always have a maturity date.

What about personal guarantees?
Business loans sometimes require personal guarantees of repayment. A guarantor (the individual offering the personal guarantee) may or may not be the owner of the business/borrower, but many types of business loans cannot be arranged without some sort of personal guarantee to secure the lender’s right to repayment.

The lender can employ a personal guarantee to collect amounts owed under the loan from the guarantor if the borrower goes out of business or fails to pay for any other reason. Guarantees are usually pretty specific as to when and how they can be employed. Merchant Cash Advances do not employ personal guarantees of “payment” (i.e., that the business will generate and deliver the purchased future credit card receivables to the MCA provider).

However -- and this is very important -- Merchant Cash Advance agreements contain certain covenants concerning (among other subjects) how the MCA provider will collect the future credit card receivables it purchased (i.e., through the business client’s credit card processor). For example, Merchant Cash Advance agreements typically provide that the business client will exclusively use a certain credit card processor and will not switch its processor without the MCA provider’s consent. Merchant Cash Advance agreements often require that the owners guarantee the business will perform such covenants.

Basically, this means that if the business honors the covenants of the Merchant Cash Advance agreement but goes out of business anyway, neither the business nor the guarantor would be obligated to deliver the purchased receivables to the MCA provider, and the MCA provider bears the risk of loss. If, however, the Merchant Cash Advance agreement covenants are breached, then the Merchant Cash Advance provider can pursue the business and the guarantor.

Need More? For more answers to the differences found between these two options, we encourage you to send us your specific questions.

You can also access other posts in this blog to help you better understand how a Merchant Cash Advance Works, What a Business Cash Advance is, and figure out if you qualify for a Merchant Cash Advance.

Small Business Bank Loans Waning

2008-08-27T11:35:00.000-07:00

According to the results of the NSBA’s 2008 Small & Mid-Sized Business Survey, the number of small businesses using bank loans for financing has reached a record low point. The NSBA’s Survey data shows that in 2008 only 28% of the polled small business owners used a bank loan to answer working capital needs, down from a high of 45%, set back in 1993.

What does this mean?
Based on this number, it is easy to infer that getting money for a small business is increasingly challenging for many business owners. Or, at the very least, it suggests that traditional lending channels are not answering all the needs of today’s small business owner.

In either case, it means if you are a small business owner seeking capital, you will most likely need to look beyond the traditional methods of business financing. Knowing more about all of your options will help you to move forward when (or if) the battle to secure a traditional method of financing is threatening to slow your momentum.

Why is it changing?
Modern businesses are unique, and their needs diverse. The old school, “one-size-fits-all” approach to handling business costs is not always going to work anymore. Bank loans can be restrictive and many businesses will simply not be able to qualify.

New business models require a fresh approach to some common situations. This, in turn, is encouraging more business owners to look beyond the banks to discover better ways to handle working capital needs.

What should a business owner do?
The best plan is to be prepared. This means, if the stats are saying that bank loans are becoming harder to arrange, the smart business owner is going to know what other capital options might be applicable.

A Merchant Cash Advance is one answer that many owners find to be flexible and appropriate to many situations. Knowing when and how to use this funding is one way to create a distinct business advantage. When a bank loan is not the best option on the table, perhaps a Merchant Cash Advance offers a smart way to handle your business’ immediate working capital needs.

What do you think? Have you personally found it difficult to get a bank loan for your small business?

Using a Merchant Cash Advance to Fuel Growth

2008-08-20T05:59:00.000-07:00

While there can be many uses for a Merchant Cash Advance, the best are those that directly fuel small business growth. Ideally, you want to use the money you receive to create or build on an opportunity to make more money.

There are many examples of this seen in published Merchant Cash Advance success stories. If you own a restaurant, you can add seating, or perhaps expand your hours of operation. Add a new piece of kitchen equipment or expand the floor plan to accommodate more guests. Because of the increasing costs of food and fuel, many restaurateurs are considering menu revisions or concept repositioning to stay competitive and profitable in today’s economy.

A retail store could expand product lines or invest in new marketing. Create advertising that brings in new customers, or offer new services to your existing clientele. Increase the amount of products in your store or add another check-out counter.

An automotive repair or after-market installation business could invest in new equipment or training that offers more services to the clientele. It could buy a new truck and radios or cell phones to provide emergency services.

In each example, the business invests in a way to increase revenue generating activities, and this is a smart way to spend the proceeds of a Merchant Cash Advance. Use the money to create or take advantage of an opportunity and you are typically using it wisely.

Look At the Long Run
If you are considering applying for a Merchant Cash Advance, as like any important decision, you should identify how it will benefit you in the long run. Merchant Cash Advances are more expensive than other forms of raising working capital, such as loans or leases. If a long-term return is not clear, you may want to reexamine your motives for choosing this option. It’s best to match your need to the right type of funding whenever possible.

A Merchant Cash Advance is best used to invest in progress. Because this is not typically the most inexpensive option to evaluate, the ends should clearly justify the means. When they do, a Merchant Cash Advance can often be used as a smart and simple solution for securing the capital to begin many growth strategies.

What do you think?
Are estimating long-term results an integral part of your project planning?

How Would You Spend It?

2008-08-13T10:50:00.000-07:00

How would you spend the proceeds of a business cash advance? It certainly is a question worth considering. According to the results of a recent survey conducted by the NSBA: “Businesses impaired by an inability to access financing would grow their business if additional capital was available.” [view a pdf of the entire survey here]

The study goes on to identify the first three actions business owners would take if they were able to obtain additional working capital:
36% would invest in advertising
30% would hire additional employees
24% would invest in new plant or equipment
19% would increase inventory
18% would invest in ecommerce
13% would invest in increasing benefits to employees
11% would invest in research and development
8% would open new stores or branches
(statistics taken from 2008 NSBA Small and Mid-Sized Business Survey)

These results show that many small business owners are thinking about growth strategies in 2008, and many are simply waiting for a good way to address the costs of getting started. A Merchant Cash Advance could be just the thing to bring these strategies to life.

Investing in Tomorrow, Today
The smartest way to use a Merchant Cash Advance is to invest in growth strategies. In making the business stronger (through new inventory, additional employees, new equipment) and more accessible (through advertising, etc.) there is a greater chance for increased revenue. With a Merchant Cash Advance:

You can act quickly. Some strategies have a timely aspect and a Merchant Cash Advance application won’t bog you down in paperwork. Keep it simple, and you can keep moving forward.
You are free to spend the money on any business need. If you have envisioned a detailed growth strategy, a Merchant Cash Advance could handle one aspect of your plan or could cover the costs of various related efforts.
You can access cash as needed. A Merchant Cash Advance is a potentially renewable source of working capital. So if you need some money now and more money later, a Merchant Cash Advance can make it easy to get what you need. Have cash in hand in as little as 72 hours if you are using an approved processor.

Be Careful, and Have a Plan
A Merchant Cash Advance, like any method of raising working capital, works best as a part of a carefully thought out plan…and it is not for every business.

Before any business enters into any working capital arrangement, it should lay out a plan for what the arrangement will cost the business, to what purposes the funds will be put, and what the business expects to get. If the plan anticipates (in detail) an attractive “ROI” or return on investment after taking into account all of the expenses associated with raising the working capital, then the working capital arrangement is much more likely to strengthen the business over the long term. This helps to justify the costs of the capital raise.

It’s true that it often takes money to make money. Though some small business owners think that a loan may be the only option to get working capital, it often pays to dig a little deeper. If you are processing regular credit and debit card sales, realizing your 2008 growth strategies may be closer and easier than you think.

What do you think?
If money were no object, what would your small business do to grow?

Survey: Small Businesses like Banks—But Rely On Back Up Capital Sources Too

2008-07-29T11:40:00.000-07:00

Results of a new survey were released last week showing that small businesses believe banks are one of the most trusted sources of capital - which is not a surprise. And, as you would expect, the need for working capital is intense, with 87% of this survey’s respondents indicating that it is important to have access to a readily available and predictable source of capital.

However, another finding within this survey highlights an opportunity. Small business owners wish that banks would offer other options when they are unable to provide them the capital they need. 42% said that they think having a back up is important (read that as lost opportunity for the bank). Yet, 69% of respondents said they would consider an alternative offered by their bank if it were offered!

Alternative Options: the Antidote to the Credit Crisis
Banks are missing a valuable opportunity to show value by offering more options as credit conditions and lending restrictions tighten. Working with alternative capital providers can be a benefit for both the financial institution and the small business customer in what could be dubbed the "antidote" to the credit crisis.

As we’ve discussed on this blog, a Merchant Cash Advance is an increasingly popular solution for working capital. However, it can also be a solution for banks that want to retain the profitable business checking accounts of small business customers rejected for loans or other bank financing. The product can be offered at the time the loan is declined, and the bank can look like a hero (instead of an obstacle) by offering a product that does not require personal collateral and can deposit money in the business' checking account in as few as 3 days.

Merchant Cash Advance to the Rescue!
Merchant Cash Advance providers are able to approve requests that banks deny because decisions focus less on consumer-oriented measures of viability (like FICO or other personal credit scores) and place greater emphasis on the business’s track record of success. This is important because many successful business owners have mediocre personal credit - they are too busy running the store to pay their own bills. Or, they invest in the business before paying their home utility bill.

What do you think?
Would it be helpful for your bank to offer another alternative? Is a Merchant Cash Advance a logical alternative? If you were declined for a loan or other funding product, would you be more likely to consider a Merchant Cash Advance from your bank if offered? Would your opinion of your bank be enhanced if they offered this product?

Buying out a Partner with a Merchant Cash Advance

2008-06-10T06:10:00.000-07:00

Many times, a business concept will outlive the partnership that created it.

Here’s a common scenario:
Two or more people start a business and after a few years, when it is really starting to take off, the partnership dissolves for personal reasons. One owner would like to buy out the interests of the other owners and keep the business running, but isn’t sure where to look for the money to get it done.

In a case like this one, a simple option might be to look at the business’ future credit card sales as a tangible asset to leverage. The partner wishing to buy out the others could perhaps use a Merchant Cash Advance to get the money needed to make it happen.

A Merchant Cash Advance is quicker and easier to arrange than a bank loan. The business could continue as usual while the transfer of power takes place. In fact, the ongoing success of the business is what helps the new owner to buy out his or her partners’ interests.

Would It Work Like That If I Were to Buy Into an Existing Business?
No.
In order to qualify for a Merchant Cash Advance, you have to already OWN the business—not be in the process of buying it.
Being a partner (as in the example) indicates at least some degree of business ownership—so this makes it a little more likely that one partner could qualify for a Merchant Cash Advance to buy out the interests of another. Still no guarantee of course, but it is more likely. If you don’t own the business you simply cannot qualify for a Merchant Cash Advance. [Learn more about Who Qualifies for a Merchant Cash Advance, How a Merchant Cash Advance Works and Common Things That Could Stop a Deal.]

Is it Simple?
If the question is about getting the money to buy out a partner, then yes, a Merchant Cash Advance makes this very easy.
If the question is about the buyout process being simple, unfortunately, there is no fixed answer that would always apply here.

Every single buy out process has unique circumstances to be addressed. When both sides reach the same conclusions, a buy out procedure can be very simple. And a Merchant Cash Advance does offer a simple way to get working capital that can be used to close a deal. So if money is the only unresolved issue, yes, a Merchant Cash Advance could offer a simple solution. Many previous customers have done this very successfully.

It’s important to remember that every case is different. While a Merchant Cash Advance is certainly a flexible option to consider, it definitely won’t work in every situation. To learn if this is right for your business needs, feel free to contact us.

What do you think?
In considering buying-out your business partner, is money your greatest concern?

Merchant Cash Advances for Handling Remodeling Costs

2008-05-27T05:10:00.000-07:00

Remodeling and expansion can be good illustrations of how to best use a Merchant Cash Advance. By using the money to create something better in your business, you encourage growth and can increase earning potential.

An Illustration of a Merchant Cash Advance in Action
Let’s say Sarah’s Seafood Shack has been a busy little place in Miami for the past 3 years. Sarah wants to add a larger deck and update the interior to create a slightly warmer atmosphere; one that she feels will bring in more family business.

Sarah talks to local contractors and gets some ballpark pricing on the work she wants to do. When she added in the costs for new chairs, some additional stock and a few other necessities to make it all work, her project had a total price tag of around $32,000.

Sarah estimated that she would be able to add 35% more seating with her new layout, and anticipated her final result would likely be a sustainable 20-30% increase in annual sales. Understanding what she was facing, Sarah felt the anticipated annual monetary increases offset her known risks. She decided to move forward.

The Seafood Shack regularly processes an average of $37,000 in monthly credit card sales, and the busiest season of the year was just around the corner. Sarah knew she’d have to act fast to get her upgrades finished in time to capitalize on the increased traffic.

Sarah applies, and is approved for a $35,000 Merchant Cash Advance. She works quickly, and has the money in hand in less than 5 business days. She immediately invests it in remodeling and upgrading the Seafood Shack as planned.

The work takes about 13 full days to complete. There were a couple of unseen problems, so the total cost was about $34,400—which was still just a little less than she had in-hand and available. Sarah spent $500 on a banner announcing her grand reopening, and re-launched the new and improved Seafood Shack…just in time to take full advantage of the increased traffic of her busiest season.

Some of the Benefits:
Sarah’s illustration points out many benefits that can be had from using a business cash advance to update and upgrade your establishment.
1. It is quick and easy. The application process is simple and the money can be in your hand in as little as 72 hours.
2. Use this money to make more money. By using the money to improve and add into an existing location, you can increase your long-term earning potential. Increased business will also help you to meet your Merchant Cash Advance obligation more quickly—an added perk!
3. Spend it on any business need. In the illustration above, Sarah used money to pay for remodeling and new inventory. When her price tag inflated she was ready with the cash to keep things moving, and had saved enough to promote her efforts with a new advertising banner. Like Sarah, how you decide to spend the money is your decision. A Merchant Cash Advance can be used to answer a variety of business needs.

Remodeling or expanding a successful location is one of the best uses for a Merchant Cash Advance. Applying working capital as fuel for growth strategies is very often how good businesses blossom into great businesses. An old saying goes, “It takes money to make money.” Use a Merchant Cash Advance to remodel and improve the possibilities of your small business, and you will see first-hand that it is true.

What do you think?
If you had the money to do whatever you want to improve your business, what would it be?

Can I Use an MCA for Start-up Costs?

2008-05-19T11:00:00.000-07:00

In most cases, no, you cannot use a Merchant Cash Advance for start-up costs.

Qualification for a Merchant Cash Advance requires a review of up to 12 months of credit card processing statements. A start-up will not be able to produce these statements, and so a brand new business owner will have difficulty qualifying.

Can I Use My Projections of Anticipated Credit Sales?
Unfortunately, no. Merchant Cash Advance underwriters have years of experience in understanding how businesses cycle and operate, and even they are not able to accurately predict future credit card sales without examining statements and specific historical data.

Lots of businesses sound like great ideas. But how they look on paper and how they behave in the marketplace might be two entirely different things. Credit card processing statements help to remove the guesswork. The provider can see in black-and-white how well your small business is performing.

Do You Always Need 12 Months of Statements?
Not usually. A reputable Merchant Cash Advance provider will try to quickly get the most accurate picture possible of your small business. Usually, most providers can get a clear picture of what to expect with 4-6 months of statements, sometimes it takes more--it really depends on the complexity of the deal. Every business and every deal is different. A full year’s worth of processing statements will help to show your potential provider any seasonal trends or sales patterns worth deeper investigation.

Do be wary of a provider who does not ask to see at least 4 months worth of activity. It is very difficult (if not impossible) to understand how well a business might perform without looking at enough historical data. Keep in mind that if a provider asks to see more than 4 months of statements, it is normally just an effort to better understand how to best serve your business needs.

Where Else Might I Go for Start-up Resources?
Many small business owners try the Small Business Administration (SBA) (found at: http://www.sba.gov/). While the requirements for SBA assistance can be fairly strict, a qualified business owner can find many worthwhile resources through the SBA and its many programs.

Another good option for some entrepreneurs to get started is using angel investors. Angel investors might act independently or as part of an angel-investor network. There are regionally-focused investors and angel investors specific to many industries. To start a search for angel investors, Inc.com compiled a very handy list of resources: http://www.inc.com/articles/2001/09/23461.html

Other common sources for start-up funding could include friends and family, venture capitalists (http://www.nvca.org/), and of course, banks.

What do you think?
Is start-up money the only thing keeping you from launching your own business?

Can I Use a Merchant Cash Advance for Taxes?

2008-05-15T09:00:00.000-07:00

While a Merchant Cash Advance can be used quite successfully to handle your business’ tax obligations, it is important to note it will not work for handling personal tax payments.

A Merchant Cash Advance must be used for a business purpose, and a personal tax obligation is not considered a business expense.

Pay Off Quarterlies
If you are looking to handle your business’ quarterly tax payments, a Merchant Cash Advance might be a great option to consider. Another way that business owners have used a Merchant Cash Advance to their advantage during a tax crunch is to handle routine expenses with a Merchant Cash Advance in order to have the flexibility to devote more resources toward a tax obligation. Sound easy? It is.

Slower Season? No Problem.
One of the benefits of using a Merchant Cash Advance is that your payments align with your business’ cash flow. This means if a slower season or a little down time happens to occur, you can reduce the impact this has on your ability to stay current with your obligations. If your business’ credit card sales slow down a bit after you have received funding, your Merchant Cash Advance payments will likewise be less. As business picks back up, the payments you make will increase accordingly. Merchant Cash Advance providers get paid when you get paid. (Learn more about How a Merchant Cash Advance works).

No Strings.
Tax time can make anyone a little anxious. Even when you see it coming, it can feel like it takes you completely by surprise. Coming up with a lump sum of cash for a quarterly payment can feel intimidating. Nerve wracking. Alleviate your stress by knowing you have it covered. A Merchant Cash Advance is your ace in the hole. It is simple, and can help you stay on track.

This is a funding product specifically designed to be easy…easy to understand and easy to use as needed. There are no hidden fees or unplanned charges. No strings. A Merchant Cash Advance can help remove the worry from tax time.

Get what you need, and get back to business. Simple.

For more information on small business taxes, refer to the Internal Revenue Service website: http://www.irs.gov/businesses/small/

What do you think?
What do you consider the worst part of taxes for a small business owner?

What are Common Things that Stop a Deal?

2008-05-12T05:42:00.000-07:00

While a Merchant Cash Advance (or MCA) is a relatively easy way to get working capital, there are some common business elements that can hamper or even kill a deal. It makes sense to know as much as you can about what to expect from a Merchant Cash Advance deal, including things that might hurt your chances.

These are 5 common things that will usually stop a Merchant Cash Advance deal:

1. Not processing credit card sales. Since this funding is based on a purchase of your business’ future credit card sales, you MUST process credit card sales before you will qualify. Surprisingly, many businesses that apply for a Merchant Cash Advance don’t process any type of credit card sales. Not surprisingly, until they do process regular credit card sales, these businesses won’t get very far with a Merchant Cash Advance application.
2. Not processing enough credit card sales. You may not qualify for a Merchant Cash Advance if your business does not process sufficient credit card sales. For example, if your business takes in $100,000 a month on average but only $500 of these sales are typically attributed to credit sales, you may not be processing a large enough percentage of credit sales to make you a good candidate for a Merchant Cash Advance. And if within the same scenario all but $500 were handled as credit sales, this imbalance might again have an adverse effect on your ability to qualify for a Merchant Cash Advance.
3. An outstanding bankruptcy. If you have an outstanding bankruptcy or one that has been discharged less than a year, you may not be eligible to qualify your business for a Merchant Cash Advance.
4. An adult-oriented business. There are certain business types that most MCA providers simply will not fund. These businesses include (but are not limited to) brand new businesses and adult-themed business (e.g., pornography, etc.).
5. A start-up request. Because this funding normally requires a review of 4-12 months worth of credit sales activity, a start-up will not usually be able to qualify. In many cases, it is best to wait for a full year before applying for a Merchant Cash Advance. It is certainly possible to get funding within your business’ first year, though it may not be as easy as it will be after the first completed year of operation. In addition, it is possible sometimes to use an existing business with a solid track record to fund the start of a new business.

You can find out more about how a Merchant Cash Advance works here.
Wondering exactly what a Merchant Cash Advance is? Get more information here.
Got a more specific question about what stops a deal? Feel free to send it on.

What do you think?
Do you feel you have been stopped or blocked for a deal in the past? Why?

How Much Can You Get From a Merchant Cash Advance?

2008-05-06T05:42:00.000-07:00

It varies, but a Merchant Cash Advance typically ranges from $5,000-150,000 per location. It can be more than $150,000, but is not very often less than $5,000.

How much you can get from a Merchant Cash Advance depends a lot on the provider and what the business needs.

For example, since AdvanceMe is a well established industry leader, we have the financial strength to offer Merchant Cash Advances of $2 million or more…but these would be individual cases that don’t represent the norm.

On the other end of the spectrum, if a business only needed a couple hundred or maybe a few thousand dollars, this would typically not be the best financial vehicle to choose because approvals on smaller amounts are low in this industry.

How Can I Estimate How Much I Might Get for My Business?
To get a ballpark idea of how much you could access for your business using a Merchant Cash Advance, start by looking at your gross sales volume and identify the percentage of these sales handled by credit cards every month.

The amount of credit card sales processed monthly is usually a quick indicator of the actual amount you might be able to get from a Merchant Cash Advance. In most cases, a Merchant Cash Advance provider will be able to fund 100%-135% of your monthly credit sales volume. Do be wary of offers that are considerably higher than this amount—though they may be completely legitimate, they are certainly not the norm for this funding.

There are of course other factors to consider, such as what percentage of your total revenue is comprised of credit and debit cards. A higher volume of credit and debit card sales will allow for a larger funding amount, depending on the percentage these sales represent of the business’ total gross sales. Reputable providers establish caps on the amount of your gross sales they will retrieve from your credit card sales. The providers do this to help avoid hurting the business.

But examining the actual dollar amount of monthly credit and debit card sales is usually a good place to start.

Smaller Bites Can Satisfy Larger Needs
Keep in mind that this is an easily renewable source of working capital. So if your business needs $100,000 but your gross sales and credit card volumes only support a Merchant Cash Advance of $20,000, you might consider getting your money in smaller amounts more often. Once you have established a relationship with a provider, you can typically get a Merchant Cash Advance in less than 72 hours…making larger goals achievable despite a smaller sales volume.

In the end, how much you can get from a Merchant Cash Advance depends a lot on the financial strength of the provider and your business’ sales volume—both the gross sales, and the percentage of these sales handled by credit and signature-based debit cards.

What do you think?
Do you think it is better to be able to access a larger amount of money once annually, or be able to get smaller amounts quarterly?

Who qualifies for a Merchant Cash Advance?

2008-04-10T10:38:00.000-07:00

Many types of businesses easily qualify for a Merchant Cash Advance.
While everybody says about their products, in this case, it is honestly true…we have always had an extremely high percentage of our applicants qualify. Why? Simply put, it is because we are able to evaluate risk differently than other financial providers.

The main requirements of a Merchant Cash Advance applicant are to own a business and to process credit card sales. Each Merchant Cash Advance provider will have additional requirements, usually centered on the business’ operations.

Most small business owners will find the qualifications of a Merchant Cash Advance much easier to meet than the requirements associated with traditional financing options. That’s what small business owners are telling us—that they appreciate less hassle, less paperwork, and the fact that Merchant Cash Advances are more flexible and responsive than traditional options.

So in general, businesses that accept a specified amount of credit and debit card sales are the ones that qualify. This means they might be restaurants, retail shops, florists, spas, salons, dental or medical offices, or any number of small business types. Some will be franchises, some will be multi-unit enterprises and some will be single Mom-and-Pop establishments. It could be almost any business in almost any industry.

What makes a difference?
Like us, most reputable Merchant Cash Advance providers will review some measurable variables that tell them more about you and how your business works.

Common things for most providers (including us) to review are the time in business, current status with a landlord, the average credit card activity for 4-12 months, and the status of other current financial obligations. These variables, in large part, determine the specifics of each deal.

Does my credit score matter?
The short answer is yes, your credit score always matters. The better your credit score is, the wider the range of financial opportunities offered to you and your business. But read on.

With a Merchant Cash Advance, your credit score will matter significantly less than it would if you were to apply for a loan. It is one characteristic of a Merchant Cash Advance that many business owners have said that they really appreciate. We have approved merchants with credit scores as low as 411, and a significant percentage of our merchants have credit scores greater than 650.

Does this mean everyone who applies gets approved? No. But many who do apply will get approved…and almost all of these qualified applicants will have less than perfect credit scores.

While the credit score of each applicant is reviewed as part of our process, it is not very often going to be the sole hurdle. We have helped lots of people with bad credit scores and lots of people with good credit scores. We handle each case on an individual basis. Our ability to analyze and assess the unique risks of each specific application allows us to look beyond a credit score.

Still have questions? Just ask.
The key to making better business decisions is to know all you can about your opportunities. This forum is designed to help you understand all you can about a Merchant Cash Advance, and help you determine if this is a financial option that makes sense for your small business.

If we haven’t addressed your own questions yet, feel free to send them on.
Previous posts have covered What a Merchant Cash Advance is, How a Merchant Cash Advance works, which contains an illustration of a Merchant Cash Advance.

How a Merchant Cash Advance Works

2008-04-08T10:52:00.000-07:00

To create a real world illustration of how a Merchant Cash Advance works, let’s say you have a restaurant. Your restaurant needs $15,000 for remodeling, and you qualify for a $15,000 Merchant Cash Advance to handle the remodeling costs.

First off, here are the players:

You and your business

The Merchant Cash Advance provider, who gives you the cash

Your processor

Your customer

The Set Up
To get this money, you would sell the Merchant Cash Advance provider the right to receive a set amount of your future credit card sales – for this illustration, let’s say $20,000.

So you sell $20,000 worth of future credit card sales to receive the $15,000 you need right now. Basically speaking, the $5,000 difference is the cost of the money, which goes to the Merchant Cash Advance provider (*please note, the actual amount going to the provider varies, but it is always clearly established in the terms of a deal). Once you agree with the provider’s terms, shake hands, sign the papers, and it’s done.

You’d get the $15,000 within days and be set up to automatically handle everything with your provider (via your processor). Sometimes this means switching processors to one that has an existing partnership with your provider. If this switch is necessary it can be handled quickly, and depending on the circumstances, may even offer additional benefits to you and your business.

From here, it is really easy.

The Process
Your business would continue to handle business as usual. The only difference now is that when you run a batch on your credit card activity, a fixed percentage of it will be forwarded to the Merchant Cash Advance provider. This continues until the full amount you promised to pay the cash provider is delivered.

So let’s say the agreement calls for you to forward 18% of your batches until the Merchant Cash Advance provider has received all $20,000(*please note, the actual percentage varies, but it is always clearly established in the terms of a deal).

You run a batch report on Monday and see that you have processed $1560 in credit and debit card sales over the weekend. 18% of this is $280.80, so this amount ($280.80) is automatically forwarded to the provider. It reduces the amount of future credit card receipts you owe to $19,719.20. You did nothing different—it was business as usual. Now, however, your credit card processor adjusts your batches to send your provider a fixed percentage until your obligation is fully met.

Does this mean every forwarded amount will be $280.80?
No.
It means that whatever your sales are, 18% of the credit and debit card sales will be forwarded. The percentage is fixed, not the dollar amount. So a busy day means forwarding a little more, a slower day allows you to forward less. Look at this illustration for more detail. It will show you a hypothetical week’s sales and the resulting amount forwarded to AMI:

These transactions will occur every time you batch your credit and debit card sales until your obligation is met in full. Once this point is reached, the provider immediately stops receiving anything from your batches.

The Summary:
And that is the bare-bone basics of a Merchant Cash Advance from start to finish.
1. You qualify.
2. You sell a dollar amount of your future credit and debit card sales in exchange for a lump sum of cash.
3. You make sure the processing and paperwork is addressed, and then you receive your money.
4. You spend it on any business purpose.
5. You continue business as usual. As you batch credit and debit card sales, a fixed percentage is forwarded to the provider through the credit card processor.

Once you’ve met your obligation, collection stops automatically.

Whew.
Any questions so far?
To keep this easy to digest, let’s stop here. Ours is a unique approach if you are unfamiliar with it, so it sometimes takes a little while to let it all sink in.

No rush…that is why we started this blog. To relax, and get a better understanding of what this is, and how it works. We have also recently developed a simple Flash explanation of what an MCA is and How It Works.

As always, your response is encouraged.

What is a Merchant Cash Advance?

2008-04-04T12:01:00.000-07:00

A Merchant Cash Advance is a flexible alternative to traditional small business financing. It might also be called credit card receivable funding, credit card factoring or a business cash advance, depending on the provider or the person or forum talking about the product. While this might be called many things, a Merchant Cash Advance is the most common reference to this funding product.

In a nutshell, a Merchant Cash Advance is a really unique funding product allowing small business owners to access working capital now by selling their future credit card sales.

Let’s start at the beginning.
A Merchant Cash Advance is unique, but it is not hard to understand.
If your business accepts credit cards, you might be able to use your future sales to access working capital.

A Merchant Cash Advance is not a loan. It is a purchase and sale…customers sell Merchant Cash Advance providers a portion of their future credit and signature-based debit card sales in exchange for immediate access to business capital.

This is a financial option that can offer many advantages to a small business owner.
You can spend the money for any business purpose. You don’t need personal collateral. There are no checks to write. Everything is automatically handled by the credit card processor. You pay back the balance by processing regular credit and signature-based debit card sales. It is quick and easy when compared to other financial options.

Perhaps the most unique benefit is that there is no set maturity date, no pre-set payment amount. The amount collected aligns with your business’ credit card sales. The more you earn, the higher the payment amount. During slower periods, the amount declines.

Do you know of any other financial obligation that aligns payment amounts with your sales volume? Does your landlord decrease your rent because sales are down this month? Does your bank adjust your loan payment to match your business’ seasonality? No. So you can see how using the flexible structure of a Merchant Cash Advance can be used to help manage your business’ cash flow.

Confused? Don’t be—it is really very simple.
In our next post, we will create a real world illustration to help make it as clear as possible.
In the meantime, if you have any questions we can answer feel free to post them here.

Welcome to the “Merchant Cash Advance Info” Blog

2008-04-03T12:55:00.000-07:00

This is a blog about Merchant Cash Advances for Small Business Owners.

Being in the business of alternative funding, we’d like to think that everyone knows what a Merchant Cash Advance is and how it works. But feedback from our sales teams, the media, alliance partners and the thousands of small business owners that we deal with every week indicates otherwise.

There is still a lack of awareness, knowledge and understanding about a Merchant Cash Advance. This is causing confusion about the basics of the product, its pros and cons, and how it can help (or why it could hurt) small business owners. It seems that there is a gap between what many business owners believe or expect and the reality of what this is, and how it works.

Seems like a perfect reason for us to start this blog…to open up the lines of communication to close that gap. Offering more information about financial options seems especially pertinent during these turbulent economic times, as the “credit crunch” continues to limit access to money for consumers and business owners.

Why this blog is here.

Our purpose in writing this blog is to inform. We will be providing complete information, delivered in a simple, straightforward manner. We’ll use an open discussion forum so that readers can benefit from multiple perspectives. Our goal is helping them better understand the various aspects of Merchant Cash Advances and how the small business community is using this “working capital alternative” to its greatest advantage.

The issues discussed in this blog will focus on improving a business owner’s total understanding of what a Merchant Cash Advance is, what it does, and how it can help his or her business. To balance the scales, we will also discuss under what circumstances a Merchant Cash Advance may not be the right alternative, and why.

Other important issues facing small businesses might also be discussed in this blog. Topics will be offered, but we invite your suggestions and/or questions. Feedback is definitely welcomed and encouraged.

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