A merchant cash advance, which is sometimes also called “business cash advance” or a “cash advance loan” is a non-traditional financing option for businesses.  A cash advance is the exchange of future revenues for an immediate cash payment, or an “advance” on future sales.  All types of businesses use cash advance transactions.  Some don’t have the time to wait for a loan approval, and others cannot take on an additional credit obligation.  A cash advance provides solutions to both of these problems.  The transaction itself is fast and easy, and repayments are made quickly, usually within a matter of months.

A cash advance is repaid in daily installments, and is taken directly from your daily sales.  These payments are set up as automatic transfers to the cash advance provider from your merchant account.  After credit card sales are totaled daily, a portion of the total amount is transferred.  Payments are usually a few hundred to a few thousand dollars, depending on the advance amount and the terms of the advance.  Repayment begins immediately after the advance amount is transferred.

Because a  cash advance transaction is not a loan, there is usually no credit check, and no credit obligation will be reflected on your business credit report.  Cash advances have been compared by some to “payday loans,” small loans given in exchange for a post-dated check.  Like payday loans, cash advances can be more expensive than other traditional financing options, but it will also present few hurdles to qualification and can be repaid much faster.

Business cash advances and business factoring are becoming popular as credit markets tighten and banks are increasingly unable to grant loans to all applicants.  Cash advance providers are not as highly regulated as banks, and are able to determine their own, more flexible lending standards.  For business owners who seeking a quick, easy financing solution, a merchant cash advance might be the right choice. 

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