Updated October 20, 2021
On This Page:
A Merchant Cash Advance provides an alternative to raising funding, such as outside investment or traditional bank loans. In the right circumstances, a merchant cash advance provides loan solutions for small business funding, emergency business loans, and other credit needs
What Is a Merchant Cash Advance?
The basic principle behind a merchant loan advance is exchanging a certain amount of credit for a percentage of credit card transactions until the business pays the debt and interest fully.
For example, suppose a restaurant gets a business advance for $20,000 and agrees to pay 25% in interest to Center Merchant Finance. In that case, they will also agree to pay back the total $25,000 by taking a certain amount from their credit card transactions each day. If the agreement was a 10% deduction of credit card transactions, they would pay $70 back on a day they brought in $700 and pay back $85 on an $850 day.
This example shows one of the main advantages of merchant cash advances for finance for merchants. You won’t have a bill you can’t pay because you only pay when transactions occur. The more money your business is bringing in, the quicker you’ll pay off the loan, and in difficult periods you will have the time to recover without undue pressure from inflexible loan repayment structures.
Which Businesses Should Consider a Merchant Cash Advance?
Since financers build the repayment terms of merchant cash advances from credit card transactions, this funding option is best for companies whose customers tend to pay with credit and debit cards. These operations can quickly pay back their debt because of the volume of credit card transactions.
Although the interest rates on merchant cash advances are generally higher than traditional loans from banks, they are much easier to get and put cash into your company’s bank account much more quickly. For this reason, they are a great option for financing projects that are time-sensitive but likely to bring in a high return on investment.
Get a Merchant Cash Advance with iCapital Funding
If your business needs an injection of quick cash, whether as funding for improvements or emergency business loans, a merchant cash advance may be the best route. We offer many solutions for finance for merchants who need it, including an outstanding no deposit loan.
Business lending is our specialty. Our agents can quickly apprise themselves of your circumstances and offer you financial advice and the best merchant cash advance for you or your business.