Comparing quotes from different providers is always a good idea, but there is more you can do to make sure you get the best deal on a merchant cash advance. Here are a few suggestions that other businesses have found helpful:
Before seeking a business cash advance, you should evaluate the financial "big picture" of your situation. Is the cash advance absolutely necessary? Can you seek funding from other sources? Make sure you have a plan for dealing with how repayment terms will affect your business..
Have you evaluated the tax consequences of the advance or invoice factoring? This is a very important concern if your invoices are from prior years or if repayment of an advance will span multiple calendar years. Depending on the type of accounting your business uses and the type of entity your business is formed under, these are important considerations.
Are there hidden or unaccounted costs associated with the advance? Costs incurred by switching to a different credit card processing company or purchasing new credit card equipment should be factored in to the cost of the advance.
Are you aware of the potential for surprise charges? Does the contract specify any costs associated with changing terms, or any fees assessed if revenue declines?
What are the consequences if you cannot repay on schedule? Some advance providers include a contract provision allowing full repayment to be requested if regular payments decline below a certain amount. Can a provider place liens on your property or to sue you for the advance balance?
When factoring, are there customer service issues that might cost you in the future if the factoring company is unprofessional?
Just like with any other important financial decision, it is a good idea to weigh all of your options and shop around before settling on a merchant account provider or on contract terms. Shop smart and be informed to make sure you get the best deal.
