Business financing is not an easy stage, especially for small companies. When you’re starting a business, what options do you have to get capital going? You’ve got the conventional bank loans; then there are the modern options of bootstrapping, crowdfunding and finding venture capitalists who paved the way for the computer industry.
But have you heard of merchant cash advance? Blursoft and Fintegra are just two of the companies that offer financing to small businesses.
What is merchant cash advance? And is it a smart idea for your commercial venture?
- What is a Merchant Cash Advance?
- How Do Merchant Cash Advances Work?
- What is a Merchant Cash Lender?
- How Do You Borrow Merchant Cash Advance from Blursoft?
- How Do You Borrow Merchant Cash Advance from Fintegra?
- What’s the Difference Between a Loan and Merchant Cash Advance?
- Are Merchant Cash Advances a Good Idea?
- Benefits of Merchant Cash Advances
- Potential Drawbacks and Considerations
- Are Merchant Cash Advances Legal?
- FAQ
- 1) How can a business qualify for a Merchant Cash Advance?
- 2) What is the repayment process for a Merchant Cash Advance?
- 3) How quickly can a business receive funds from a Merchant Cash Advance?
- 4) What are the typical costs and fees associated with a Merchant Cash Advance?
- 5) What are the advantages and disadvantages of obtaining a Merchant Cash Advance?
- 6) Can a business apply for multiple Merchant Cash Advances at the same time?
What is a Merchant Cash Advance?
A merchant cash advance is a financial arrangement where a business receives a lump sum payment in exchange for a portion of its future sales. It is not a loan in the traditional sense but rather an advance based on projected revenue. This form of financing is commonly utilized by businesses that have a steady flow of credit and debit card sales, such as retail stores, restaurants, and e-commerce businesses.
Merchant cash advances differ from traditional loans in several ways. They are typically characterized by flexible repayment options, quick access to capital, and a streamlined application process. Unlike conventional loans, merchant cash advances do not require collateral, and approval is often based on the business’s sales performance rather than credit history.
How Do Merchant Cash Advances Work?
Applying for a merchant cash advance involves submitting basic business information, such as sales history, credit card processing statements, and sometimes bank statements. The application process is often quick and straightforward, with minimal documentation required.
Once approved, the funding process is typically fast, with funds deposited into the business’s account within a few days. Repayment is based on a percentage of daily or weekly sales through split funding, automated clearing house (ACH) withdrawals, or a fixed percentage deducted directly from credit card sales.
Merchant cash advances offer various repayment methods tailored to the business’s needs. Split funding involves a predetermined percentage of credit card sales automatically directed to the funder. ACH withdrawals deduct a fixed amount from the business’s bank account, while the percentage of sales deductions adjusts based on revenue, providing flexibility during slower sales periods.
What is a Merchant Cash Lender?
Merchant cash lenders like Blursoft and Fintegra provide financing to businesses that accept credit cards and debit cards as payments. The lenders offer a cash advance — not a loan — based on future revenues or sales.
You pay the cash advance with a percentage of your credit card and debit card sales or, for some lenders, receivables streams. The payments may also come with a fee and are done in multiple options.
A merchant cash advance is designed for small businesses; businesses that may have a hard time meeting the complex requirements of a bank loan program. In contrast to a loan from big banks, a business cash advance from Blursoft Capital is unsecured funding.
A typical business that works with a merchant cash advance lender:
- Those with bad credit
- Startups
- Contractors
- Young entrepreneurs
Any business or entrepreneur who may not qualify for a conventional loan from financial institutions will be able to rely on a merchant cash advance.
How do you apply for one?
How Do You Borrow Merchant Cash Advance from Blursoft?
Blursoft Working Capital Solutions has reportedly funded about 50,000 projects. It offers five options for business cash advance:
- Merchant Cash Advance
- Cash Advance for Contractors
- Cash Advance for Uber Driver
- Cash Advance for Startup
- Cash Advance for Invoice Factoring
If your business happens to have accumulated bad credit or poor credit rating, the Blursoft’s merchant cash advance for startups may be the program for you.
Before you put in an application for merchant cash advance on Blursoft.com, be aware of the qualifications. It’s easier to apply for a cash advance versus a bank loan, but business must still meet the criteria.
For Blursoft, it’s businesses or entrepreneurs that have been:
- Operating for at least four months;
- Generating $10,000, at least, per month in sales, and
- Maintaining a credit score of 500 or above.
Once you meet all requirements, fill out the online form. A funding specialist will be in touch after reviewing your application. If approved, you receive the funds in your account in 24 hours. Your application must be connected to your bank account to facilitate this speedy cash transaction. If you need assistance with filling out the form, call for support.
You could get a loan of $5,000 through $50,000 for about two years. Blursoft’s rate is 1.2. The merchant cash advance provider also has a loan program that allows business with bad credit rating to borrow up to $500,000. This type of loan will depend on the number of years your business has been operating, the financing structure and your credit rating.
How Do You Borrow Merchant Cash Advance from Fintegra?
Fintegra offers small businesses with a steady cash flow and a checking account cash advance from a low of $10,000 to a high of $250,000. Its merchant cash advance process is similar to Blursoft in that you only need to fill out an online application.
Once it’s reviewed and approved, you may be able to receive your loan on the same day of your application. Fintegra has simplified the process with a one-page application form and minimal documents: a copy of your recent business checking account statement. And unlike Blursoft, the business cash advance lender serves companies that have been in operation for at least six months.
What’s the Difference Between a Loan and Merchant Cash Advance?
Traditional financing institutions, like banks, tend to have a complex, lengthy loan process. Because these loans are categorized as secured loans, businesses applying for one must provide collateral and several documents. Proof must be established of your capability to repay the money that is being borrowed.
In contrast to a bank loan, a business cash advance provider may qualify a company that has been around for under a year. Whereas banks tend to favor businesses that have been operating for at least five years. What happens when your startup, shop or home-based business hasn’t been around for that long? Your application is likely to get rejected.
The process and requirements aren’t the only factors that differentiate a conventional loan from a merchant cash advance from Blursoft, Fintegra or other lenders. The average business loan rate also sets these funding options apart. Whereas a typical business cash advance lender may offer 1.2 to 1.4 rate, a bank may offer 2.54 to 7.02.
Are Merchant Cash Advances a Good Idea?
Considering the easy application process and minimal documents required, is a merchant cash advance a good idea?
The financing option works for businesses that meet the lender’s, from Blursoft to Fintegra, criteria. Certainly, when you must get rapid cash to operate, a same-day approval and no collateral will allow you to get immediate funding. The lower credit rating is also appealing if your credit history seems risky for conventional loan applications.
It all seems like a sensible way to get some capital or finance your business. But like every other loan that fast tracks a transaction, some considerations must be determined.
Consider first the percentage of credit card and debit sales the lender is going to get. And this happens automatically since the business cash advance company has access to your checking account. It may not seem like an issue on your application day, but it may be when you miss sales targets. If that were to happen, you could have a problem with your cashflow.
Then there are other financial problems to prepare for if you happen to mix your personal finances with business expenses.
Merchant cash advance lenders, from Blursoft to Fintegra, are not like payday loan providers; it’s not a $500 cash advance no credit check application. But like every type of loan, business cash advance must be considered well before pulling that trigger.
Benefits of Merchant Cash Advances
In the following section, we’ll go over the benefits of merchant cash advances.
Quick Access to Capital
One of the primary advantages of merchant cash advances is the speed at which businesses can access capital. With minimal paperwork and a streamlined process, funds can be available within days, making it an ideal solution for businesses in need of immediate financing.
Flexible Repayment Options
Merchant cash advances offer flexible repayment options based on sales, allowing businesses to adjust their payments according to their revenue. This flexibility helps alleviate the pressure of fixed monthly payments, particularly during periods of fluctuating sales.
No Collateral Required
Unlike traditional loans that often require collateral, merchant cash advances do not necessitate assets as security. This reduces the risk for business owners who may not have substantial assets to pledge, making it a viable option for those without significant collateral.
Approval Based on Sales Performance
Approval for a merchant cash advance is typically based on the business’s sales performance rather than credit history. This opens opportunities for businesses with less-than-perfect credit to secure financing based on their revenue potential.
Funding for Various Business Purposes
Merchant cash advances provide businesses with the flexibility to use the funds for various purposes, such as inventory purchases, equipment upgrades, marketing campaigns, or general working capital. This versatility enables businesses to address their specific financial needs.
Potential Drawbacks and Considerations
As anything, business financing with Merchant cash advance has its drawbacks and considerations. Here are some of the things to keep in mind.
Higher Costs and Fees
One consideration with merchant cash advances is that they often come with higher costs and fees compared to traditional loans. The effective interest rate can be higher, reflecting the risk associated with the advance and the convenience it offers.
Impact on Cash Flow
Repayment terms tied to a percentage of sales can impact a business’s cash flow, especially during periods of lower revenue. It’s crucial to carefully analyze cash flow projections to ensure the repayment structure aligns with the business’s financial capabilities.
Limited Availability to Certain Business Types
Merchant cash advances may not be available to all business types. Some industries may be excluded or face more stringent eligibility criteria. It’s important to research and ensure that merchant cash advances are suitable for the specific business before pursuing this financing option.
Are Merchant Cash Advances Legal?
Merchant cash advances are legal forms of financing; however, regulations may vary by jurisdiction. It’s important for businesses and funders to comply with local laws and regulations governing merchant cash advances to ensure ethical and transparent practices.
To safeguard businesses and consumers, some jurisdictions have implemented consumer protection measures related to merchant cash advances. These measures aim to enhance transparency, disclosure requirements, and fair business practices within the industry.
FAQ
1) How can a business qualify for a Merchant Cash Advance?
Qualification for a merchant cash advance is based on sales performance rather than credit history. Businesses with a steady flow of credit card sales and a certain minimum monthly revenue typically meet the requirements.
2) What is the repayment process for a Merchant Cash Advance?
Repayment is usually based on a percentage of daily or weekly sales. It can be structured through split funding, ACH withdrawals, or a fixed percentage deducted directly from credit card sales.
3) How quickly can a business receive funds from a Merchant Cash Advance?
Funding for a merchant cash advance can be relatively fast, with funds often deposited into the business’s account within a few days of approval, providing quick access to capital.
4) What are the typical costs and fees associated with a Merchant Cash Advance?
Costs and fees for merchant cash advances can vary. They are typically higher compared to traditional loans due to the convenience and risk involved. The total cost is influenced by factors such as the advance amount, factor rate, and repayment terms.
5) What are the advantages and disadvantages of obtaining a Merchant Cash Advance?
Advantages include quick access to capital, flexible repayment options, no collateral requirement, and approval based on sales performance. Disadvantages can include higher costs, potential impact on cash flow, and limited availability to certain business types.
6) Can a business apply for multiple Merchant Cash Advances at the same time?
Yes, businesses can apply for multiple merchant cash advances simultaneously, depending on their eligibility and financial capacity. However, it’s important to carefully assess the impact on cash flow and overall financial health before pursuing multiple advances.
