If one happens to take a look at the recent developments in the world of small business lending, one might come off with the impression that things are quite gloomy for small business owners and one might not be far from the truth. For instance, it has been revealed that in three years, bank lending for the small business sector dropped by as much as 68 percent. This was something that was going to have a devastating effect on several millions of small businesses except of course for a quick business cash advance that is now being made available by alternative lenders. In another study, it was found that around 61 percent of loan applications to commercial banks made by small businesses in one single year ended up in rejection. However one might choose to see it, the fact that 80 percent of small businesses rely on one form of funding or the other is something that is significant considering that the over 57 million small businesses in the country provide employment for than half of Americans and also account for one in every three new jobs. It is time to gauge precisely how much quick business cash advance, in particular, has come to the rescue of American small businesses.
The history of merchant cash advance in the United States is one that deserves a closer look. For just a few decades ago there were about a handful of merchant cash advance providers in the country; at present. However, there are said to be more than twenty thousand merchant lenders all competing vigorously with one another. The success of merchant lenders in providing quick business cash advance has even necessitated some response from such commercial banks. These banks not willing be outdone by alternative lenders have sought to counter the effect of what has been described as a disruptive service by creating online lending platforms which mimic merchant cash advance. Heavyweights such as PayPal motivated by the success of significant merchant lenders also decided to venture into the merchant lending business. So from being worth millions of dollars at the beginning, the merchant cash advance industry is now worth over 10 billion dollars with hundreds of millions of dollars being given to small business every single year. Quick business cash advance is something that deserves a closer examination if one hopes to understand what it is that has been responsible for the rapid success of the merchant cash advance industry over such a short period.
What is a Business Cash Advance and what does a business need to obtain it?
First things first: a business cash advance is one the several means through which a small business can obtain funding for business activities. But unlike other a term loan, for instance, a business advance is a sales transaction in which a business sells its future credit sales to the lender in exchange for a lump sum of money. Because a quick business cash advance is structured as a sale, it does not bear some of the characteristics of a loan. One significant thing that distinguishes an advance from a loan is that for an advance there are no fixed terms. This means that there are no payment deadlines; so the business pays according to how much sales it makes each day. In most cases where a fixed percentage method of payment is chosen, the actual amount the business pays on a daily basis to the merchant lender is relative to how much it makes. The fact that the business pays more when sales are high and less when sales are down have the benefit of not placing much strain on the cash flow of the business. It is one the advantages of a quick business cash advance over a conventional bank loan where the business makes the same monthly payments regardless of whether sales are depleting or not.
There are specific requirements a business has to meet to obtain a MCA that is less stringent than those imposed by traditional sources. The first thing for a business to be eligible for an advance is that it must accept credit card payments whether it is Visa or MasterCard. Apart from accepting credit card payments, a business must generate at least $5000 in monthly revenue through credit and debit card sales as this is the minimum requirement of most merchant lenders. It is the amount the business generates that determines the maximum amount of funding it can receive; most merchant cash advance providers will only lend up to four times the amount a business generates each month. A business also needs to have a physical location and meet the minimum credit score requirement of about 500 to obtain a quick business cash advance.
How can Merchant Loans Help a Business Grow?
Once a business has been able to obtain a merchant loan, it can utilize this loan for such things as inventory purchase, purchase of new pieces of equipment, and even pay off outstanding debts. Unlike bank loans, a merchant cash advance can be used for whatever purpose the business sees fit without being monitored by merchant lenders. But the primary perk of quick business cash advance for business growth lies in the ease with which it can be obtained. Nothing is as crucial to a business that is in dire need of funds for growth and expansion as speed. Merchant cash advance lenders more than any others understand this that is why funds are made available to businesses within a few hours or days. Merchant lenders do not also bother business owners with providing collateral or personal guarantees the way banks normally do. This means that small businesses can utilize a quick business cash advance for growth without bearing any risk whatsoever. Surely, nothing could be more attractive to a small business than knowing it can access funding for which it cannot be held liable. This is something lots of small business owners have realized and is why they are leaning towards merchant cash advance providers.