The merchant cash advance industry has witnessed enormous growth in the tow or so decades of its existence. Contrary to what could have been expected of the few pioneers merchant cash advance companies have become quite popular among small business owners as providers of the best business finance. It was certainly a long time from when the first few merchant cash advance companies merged to when they came to be regarded as a viable source of business funding.
The success of the early starters has inspired thousands of other companies to venture into the merchant cash advance lending industry. It is longer surprising to find processors that are involved in merchant lending; nor is it a surprise to hear that such big names as PayPal are seeking tap into the alternative lending market.
Does the growth of merchant cash advance industry indicate a failure of traditional lending institutions?
One thing that comes to mind when one realizes the rapid growth of the merchant cash advance companies and their current reputation as one of the leading providers of the best business finance is whether or not the traditional lending sector has failed. A surface examination of the facts might immediately lead one to conclude that the growth witnessed by merchant cash advance providers is indicative of the failure of commercial banks in meeting the demands of small business owners.
The truth is likely that there the growth is in the sense that more and more small businesses that could not have access to funding from traditional sources are beginning to embrace the best business finance from merchant vendors. It is not a case of businesses that might have otherwise been eligible for banks loans, for example, turning to merchant lenders. All the same, the main point is that the merchant cash advance industry is expanding.
Do traditional lending institutions consider merchant cash advance to be disruptive?
Without minding the positive impact of merchant cash advance providers all around the country in providing best business finance, some skeptics have been quick to dismiss merchant cash advance as a disruptive form of lending, negatively impacting the traditional lending sector. Although such a position is somewhat on the extreme, it is true that some banks for instance view merchant cash advance lenders and other alternative finance providers with some level of contempt.
Because of this, not a few commercial banks and traditional lenders have had to make changes to their services to keep up with the competition from merchant vendors. Some banks have had to review their lending policies to make the process of obtaining best business finance less demanding. Others have created online lending platforms that are quite similar to those of merchant cash advance providers. However, it seems it can be said that although merchant vendors are considered disruptive or even threatening, they have caused some significant changes to happen in the traditional lending sector.
What does it take for a business to be issued a merchant cash advance?
It is true that merchant cash advance lenders are aimed at providing the best business finance to small businesses. But it is also true that not all businesses can be eligible for the offer although the number of businesses that fall into this latter category is quite a few. There are certain requirements that a business must meet before it can be issued with an advance.
Top of the list is that it must accept credit card payments be it MasterCard or visa. The business should also generate significant revenue—possibly 5000 dollars or more—each month using debit and credit cards. Currently, businesses that accept ACH are also eligible merchant funding. The combined effect of this is that millions of small businesses are now offered a chance to obtain what can be regarded as the best business finance with no stress at all.
What does the whole process of obtaining a merchant cash advance look like?
A business that is need of funding only has to approach any credible merchant cash advance provider and fill out a preliminary form which is used to quickly assess the business. The information that is required from the business is how long it has been in business, how much it generates on a monthly basis and maybe credit score. If the merchant vendors are satisfied that the business is eligible for the best business finance which they offer, then a representative from the merchant company can be sent to liaise with the business.
Issues to be discussed often bother on the factor rate, holdback percentage and the method of repayment. While the factor rate determines the cost of the advance to the merchant, the holdback percentage determines how much of the daily credit card sale of the business goes into the repayment of the debt. The method of payment which is almost always batch splitting is how the money is transferred to the merchant lender on a daily basis. One all of these have been agreed on, the business signs the merchant cash advance agreement and then obtains the best business finance.
A final word on Merchant Cash Advance
Small businesses have found merchant cash advance appealing because it offers certain things that traditional lenders do not. A business that has been able to obtain the much-needed funding without having to provide collateral or offer personal guarantees cannot be grateful enough to merchant cash advance providers. Also, a business with poor credit score which has deprived it of business funds can be expected to be grateful to merchant vendors.
Businesses that had had merchant cash advance providers come to their rescue when they needed funding in a matter of days or even hours certainly have a lot to say about the best business finance from merchant cash advance providers. Certainly what one business regards as the most beneficial of merchant funding might not be the same as that of another business. Either way, the main point is that merchant lenders have had a positive impact on small businesses, and continue to do so.