Aboriginal Buying Group

One thing to understand about the business of providing a merchant cash advance is that this is not as regulated as lending is. When you take out a merchant cash advance, you are technically selling a portion the future income from your business. As such, this is considered a business-to-business transaction, which is exempt from regulation by laws such as the Fair Debt Collection Practices Act, Electronic Funds Transfer Act, and the Truth in Lending Act.

That being said, the merchant cash advance is a niche that is able to provide businesses with capital that otherwise may be difficult or impossible to obtain. But since it is still a fairly unregulated industry, you must take steps on your own to avoid predatory practices. The North American Merchant Advance Association (NAMA) has been formed by a consortium of merchant advance providers as a self-regulatory organization (SRO), like the Financial Industry Regulatory Authority is an SRO. Before doing business with a merchant cash advance provider, check with NAMA to see if they are a member, or if NAMA is aware of any complaints about them. You may also want to check with the U.S. Federal Trade Commission to see if there have been any complaints or cases brought against the provider.

Before you accept the terms of any agreement with a merchant cash advance provider, be sure to read and understand the terms of the contract. If you accept a contract with unfavorable terms, you will have very little recourse. Most often you will fill out an application with a broker that will work to find a provider with the best terms for your business. This application, or even an application directly with a merchant cash advance provider, is no substitute for your contract; get a copy of your merchant cash advance contract before you agree to anything. Armed with this information, you will be best able to determine for yourself the fairness of any deal you enter into.

An advantage to unsecured business loans over conventional loans is that there is no collateral required to back them up. These unsecured loans can be made on the basis of the credit worthiness of the borrower, and are sometimes referred to as signature loans. However, unless you are on good terms with a private lender, or your business has an outstanding credit rating, it is unlikely that you will be approved for a very high loan amount — if at all. If your business’s credit is not well established, but you yourself do, it is possible that you may be able to obtain unsecured business loans with a personal guarantee. However, this exposes you personally, as you become the payer of last resort if your business operations cannot meet the loan obligations.

On the other hand, it is much easier to obtain capital from a merchant cash advance, which does not rely on your credit because it is not a loan. Credit worthiness does not normally play a very big part in the approval process for a merchant cash advance, because it is repaid from the credit card receipts generated on a daily basis by your business. The advance is actually from the discounted purchase of a portion of your credit card receipts, so it does not require you to make fixed monthly payments like a loan does. You should avoid doing business with any merchant cash advance provider that requires you to put up collateral or provide a personal guarantee — this is simply not required for this type of transaction. The approval rate for a merchant cash advance is much higher than that of unsecured business loans, and it is likely that you will be able to get a larger amount of capital by this method, as well.

Provisions for small business loans in the American Recovery and Reinvestment Act (Recovery Act) have just started to trickle cash into the hands of capital-strapped Small Business Administration (SBA) applicants. There are over 360 SBA lenders that have not approved a single loan under the government sponsored program since October, 2008; nearly half of those lenders had not approved an SBA loan for over two years. As a result of the Recovery Act, there are now about 1,200 lenders participating, which is a good sign. However, there is a critical program intended to help small businesses that are struggling, which has yet to get off the ground as of this writing. The America’s Recovery Capital program is geared to businesses that only need amounts up to $36,000 — a modest capital need that might not seem worth bothering with for most business lenders.

If you have a small business that just needs $20,000 to $50,000, and you are having trouble finding lenders or investors, you do not have to wait around for your turn to get a piece of the Recovery Act pie. There is already an option that you can tap into without waiting on bureaucrats and wading through red tape; it is called the merchant cash advance. This alternative to small business loans is available to most established businesses that generate a steady stream of credit card receipts. A merchant cash advance provider will simply purchase a portion of your future credit card receipts at a discount, and provide you a lump sum of ready capital you need to jump-start your business. Unlike small business loans that tie up your credit and may require you to put up collateral, the merchant cash advance requires neither. The amount you can be approved for depends on several factors, including how long you have been in business and your receipts volume.  Once you are approved, you can have ready capital in your hands within a couple of weeks.

Have you had trouble getting approved for restaurant loans? What if you had an easy way to raise capital for expanding your restaurant business without tying up your credit or putting up any collateral? You can do this easily with what is called a merchant cash advance. Unlike a small business loan, (and all the paperwork that goes with an application for one), the merchant cash advance is not a loan at all.

When you take out a merchant cash advance, you are actually selling a portion of your future credit card receipts to the provider at a discount. In return, you have access to a lump sum of cash that you can use to expand your business. With restaurant loans you have to pay a fixed amount each month, no matter how much, or how little volume your business accrues, and this can make for a big cash squeeze during those slow months. Since the cash advance is paid back with a portion of your credit card receipts, when your business is slower, you also pay less on your advance.

One thing that makes it difficult to get restaurant loans is this lack of liquidity during the slow times. But, despite this, merchant cash advance providers like doing business with restaurants because they know you produce a lot of credit card receipts, which is what they are buying. You may be surprised how easy it is to find a provider that can give you terms that are right for your business.  A broker will be able to take your application information in minutes to help you find the right deal, and upon being approved you can realistically expect to get your cash in a matter of a couple of weeks. You are the best judge of how capital investments in your business will be able to affect your ability to generate receipts. Rather than try to prove this to lenders for restaurant loans, you can easily raise capital to expand your business based on those very receipts.