Merchant cash advance

A merchant cash advance is a way for a business to borrow a lump sum and pay it back over time using a percentage of future sales.
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Merchant cash advance

A merchant cash advance is much more flexible than other forms of small business loans.
  • Loans from $5,000 to $150,000
  • Variable amount without security
  • No high credit score needed
  • Automatic repayments
  • Easier to Qualify
  • More suitable for retail and hospitality businesses that predominantly use Eftpos

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What is a merchant cash advance?

This type of small business loan is a fast and easy way to get a cash injection by applying for a lump sum to then be paid back. The repayments are calculated based on a percentage of the sales.

benefits of merchant cash advance

Merchant cash advance: benefit

A merchant cash advance doesn’t require to secure the loan against an asset. No collateral means that the process to get the merchant cash advance approved is quick and easy. Furthermore, no high credit score is required.

For instance, a customer buys your product for $5,000. However, whilst they agreed that the invoice would be paid within 30 days, you have urgent fees, wages and expenses to pay tomorrow. Invoices that you are waiting to be paid for can be bought by a factoring company at a discounted price for immediate cash. For instance, if it was discounted, the business will receive 80% of the invoice value. In this circumstance, the business would receive $4,000.

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Merchant cash advance: other benefits

Compared to other small business loans, a merchant cash advance follows a more straightforward application and approval process. The documentation required for the application is limited, and also a less weight is given to the credit score. The critical lending criteria for this type of loan is the business cash flow as the repayments are based on the monthly Eftpos transactions. In some cases, there is no need to present copies of financial statements, tax returns or other business documents.
other benefits
Usually, security is not required: there is no collateral requirement because the loan is secured against future sales.
Limited business and personal liability: in the case of failure with repayments or extended repayments terms, usually the person or business assets are not at risk unless otherwise stated on the contract.
Automatic repayments: no need to make any manual payment as the repayments are taken directly from the Eftpos based on the monthly sales.
Quick and easy approval process: it takes a few days to get the approval as no collateral has to be provided. Little documentation to check if the business qualify can be submitted online. The assessment is done from monthly Eftpos machine takings (e.g. if turning over $50,000 Eftpos can lend up to 150% being $75,000 loan).
No fixed repayments: the amount of the repayment may vary based on the monthly cash-flow. A set percentage from the Eftpos taking covers the loan repayment (e.g. if agreed on 8%, when receiving payment of $60,000, $4,800 will be debited monthly. If next month only $20,000 is generated through Eftpos then will be $1,600 repayment for the month).

Merchant cash advance: disadvantages

A merchant cash advance is a more expensive solution compared to other small business loans available in the market. Check with us if your forecasted cash-flow will be enough to sustain the cost of this type of business loan.

  • Not suitable for business with a large number of cash payments: a merchant cash advance is ideal for business with a high number or credit and debit card payments.
  • Not a long term solution: most of the lenders offer a merchant cash advance for a maximum of 12 months.

Read the definition on Wikipedia.

disadvantages

Merchant cash advance: how to apply

At Lending Connect, we have developed a one to one approach that allows us in 99% of the cases to get the money in our clients’ bank account within 1 day from the application. With our network of 50+ business loan providers, we open credit opportunities for your business.

We help you through the process, and we put you in contact with the lender that offers the type and size of business loan that meet your needs. Our partners assist eligible small businesses with a merchant cash advance.

Lending Connect is the preferred and trusted finance broker for hundreds of small and medium local businesses in Australia. It all starts with an enquiry. Call us 1300 911 621 or click on “get started now” and we call you back to see if you qualify for a merchant cash advance.

SEE IF YOU QUALIFY

(100% free consultation – not affecting you credit score)

or call us now

1300 911 621

Merchant cash advance