Home » Loans » Business » Merchant Cash Advance Loan
What it is
A merchant cash advance loan is a loan in which the amount borrowed is determined by the volume of business transactions of the applicant during a 90- to 120-day period. The cash is provided to the borrower almost immediately. Then the borrower, or merchant, must repay the principal from credit card sales. Unlike traditional loans, a merchant cash advance loan is paid back according to the strength of the market. When credit card sales are slow, less is paid toward the principal; when credit card sales are high, more is paid toward the principal.
The approval rate for merchant cash advance loans is much higher compared to other types of loans, but the rate is typically higher. The merchant cash advance loan is very similar to factoring, except in this case your credit card receivables are factored rather than your business-to-business invoices.
Who it's for
Many small businesses find themselves in need of a business loan at one time or another for a variety of reasons, and a merchant cash advance loan can help. This loan is designed for people with seasonal businesses who could use some extra funds during a down time. Those interested in a merchant cash advance loan must accept Visa or MasterCard as a mode of payment, must process a payment of $1,500 or more in a month, and should be established for at least 12 months.
What you need to do to apply
While the application for a typical loan requires a written proposal and financial statements, a merchant cash advance loan only requires a transaction history in order to be approved.
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