Wednesday, May 22, 2013
Merchant Cash Advances - A Small Business Lifeline for 2008
When a business needs funds quickly, a merchant cash advance offers unlimited flexibility. Also, it's easy and exceptionally fast. Cash in your hands in 5-7 working days. 80% of all small businesses fail during the first year. 92% are unable to get traditional financing from banks. Restaurant and retail operations, or any business that accepts credit cards as a form of payment, can now get a credit card factoring cash advance on future credit card sales. And many smart companies are using that option to grow or just stay afloat. There are as many different needs for a merchant cash advance, or credit card receivables financing, as there are small businesses operating today. For example, a restaurant owner who can't quite make payroll may survive the crisis and keep his doors open with a merchant cash advance. A mom and pop hardware store could suffer a flooded basement or damaged piece of equipment or loss of inventory and need to make an immediate and often substantial expenditure. Even when these extra expenditures are covered by insurance, there might be a lag time until reimbursement. This is where a credit card receivables advance can become a small businesses lifeline. Then, there's just the unpredictability of running a business on a day to day basis. Routine occurrences, like a slip in sales because of bad weather or a shutdown during a power outage or road maintenance, can cause a significant cash crunch. Small businesses may also need a quick influx of cash for a growth opportunity. If a hair salon is looking to expand its services and become a day spa and the space next door suddenly becomes available, the owner will need money to renovate. With a cash advance the owner could have the needed funds in hand in just 5-7 working days. The advance amount the merchant can receive is determined by calculating the company's average monthly Visa and MasterCard credit card sales for the past six months. The level of financing ranges from $5,000 to $1,000,000 per location. The loan amount is typically 100 percent to 150 percent of the average monthly Visa/MasterCard volume. Cash is also used as the basis for the loan in certain situations, such as diners, pizza places, and sandwich shops. The bottom line: The merchant's monthly payment should be in the neighborhood of 10 percent of his total monthly volume, including cash, and Visa/MasterCard. Loans generally average $35,000-$50,000, and the loan is paid back within 5-12 months. After the merchant pays back 50% of the advance, he has an opportunity to renew the arrangement again. Payment is very simple. The funder will work through a credit card processor to draw money from actual profits as payments are made using credit cards. Or, the merchant cash advance funder may draw his payments directly from the merchant's bank account once the credit-card payments are deposited there (ACH Withdraw). A merchant cash advance can be a great way for a small business to get the cash it needs to grow, or to get through a particularly difficult time. Will you need a cash advance in 2008? Look into this option now before you need the funds. Merchant cash advances are a great "emergency cash" plan as well. Be prepared! It's your business. And for many small businesses, it may be the only source of funding that will help it survive. For a free- booklet, please log onto "10 Ways to Get Working Capital". Dan Ollman is President of Crown Financial Services. Crown Financial Services is a proud member of the American Cash Flow Association, Las Vegas Chamber of Commerce and the Las Vegas Better Business Bureau. They provide working capital to businesses by purchasing a small portion of their future credit card sales. Crown Financial Services helps you turn your future credit card sales into cash. We provide small business cash advances for merchants who currently have credit card processing. You can get a cash advance on future credit card sales with a merchant account cash advance loan. Merchant account financing, also called credit card receivable factoring, is an excellent alternative to restaurant loans and other business loans.