Merchant Cash Advance
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Time to Funds
Benefits & Drawbacks
What is a Business Line of Credit
How Does a Cash Advance Work?
A cash advance means you receive funding upfront, and the lending entity gets the purchase of future receivables. The advance amount may be anywhere from $15,000-$1,000,000 and can carry a reasonable factor rate.
Cash advance companies like AMP Advance help fund a business when it needs money, and allows them to repay the amount over the course of three to 24 months.
The initial funding may be available in as little as 24 hours, so businesses can quickly adapt to their changing needs. The repayment may occur on a daily, weekly, or monthly basis.
Benefits of a Merchant Cash Advance
The most significant benefit of a cash advance is that you can get your money exactly when you need it. Beyond that, there are three key advantages to choosing a merchant cash advance:
- They are one of the easiest types of financing to qualify for. You can get a merchant cash advance with any credit score, so this is a good option for businesses that have been denied for other loans. You can also get a merchant cash advance with bad credit.
- You can use the funds however you want. Merchant cash advance companies understand that you know your business better than anyone, so they let you decide how to use your money. Other types of loans might restrict how you can use the funding.
- You do not need to use collateral to get a cash advance. Other loan types require that you put up some collateral. This could be your retirement savings, your personal property, or even your business itself. Later, banks can claim that they’re entitled to your property if there is any problem with the loan. With cash advances, there are no such worries.
What Types of Business is a Merchant Cash Advance for?
There are a couple of common types of cash advances, which gives business owners a lot more flexibility. Businesses can choose the kind of advance that best suits their needs. The two main types are as follows:
- ACH Advance – An ACH is similar to a merchant cash advance, and begins with the cash advance company analyzing the past four to six months of banking statements from your business. Depending on this analysis, the company will decide what kind of holdback is appropriate. The holdback is the rate of repayment for the advance. Once a client agrees to the terms and authorizes the advance, the repayment is set to occur by automatic withdrawal. Some ACH advances can be approved in less than one day. The holdback is collected at a flat rate.
- Credit Card Split – Holdback is fixed % but only based off of credit card sales. Benefits are no fixed payments during bad months as collection is reduced with ebb and flow of a business’s normal trends.The line of credit helps save a business money because there are no fixed payments, and all interest is flexible and often based on the market. There is no way for a business to recover the funds it loses by starting a credit card, so the best course of action is to avoid those fees and high rates whenever possible.
Can I Qualify for a Merchant Cash Advance?
This is a non-traditional type of financing which was created as an innovative way to meet business needs. They are relatively easy to qualify for, mainly because you can get a cash advance with bad credit; the unrestricted nature of these advances and the lack of required collateral means that any business can qualify. The critical requirement has to do with a business’ current cash flow. As long as the company is bringing in enough money, advance funding should be available.
The most important factor that helps a small business qualify for a line of credit is its credit score. A small business should have a credit score of 560 or greater to apply for a business line of credit because it can be difficult to qualify with anything less.
A lender may also want to see an active business checking account, and some general financial information. Small business owners should be willing to provide answers about how long they have been operating and what kind of revenue they achieve.
Most lenders will ask general questions about why the business owner needs a line of credit and their plans to use it. A business’ line of credit will depend on multiple factors including its credit score, the amount of credit desired, and current interest rates.
One constant when it comes to business lines of credit is that the best opportunities come from trustworthy and reliable lenders. Amp Advance is a respected source for direct funding based out of Miami. Our reputation and relentless dedication to our business partners has made us leaders for small business financing.
How Much Will a Cash Advance Cost?
Merchant cash advances do not operate based on an interest rate like most loans do. Instead, these advances use a repayment factor rate. This does create a slightly higher repayment rate but provides much more flexibility. Because there is no credit rating or collateral required, these are sometimes risky for the lending company, and the higher rate helps to minimize that risk.
How Can I Get a Merchant Cash Advance?
Since your repayment is a factor of you much you borrow, it’s important to think about how much of your advance you can use right away. It’s also important to find a trustworthy lender who is willing to negotiate when it comes to fees. AMP Advance is an extremely flexible alternative lender who will cater to your needs and provide the best deal possible. Apply today to see if your small business can qualify.