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Without time-consuming credit checks and rigid repayment plans, merchant cash advance is perfectly suited to the fast-paced, unpredictable world of retail. Similar to a business loan, but with several important differences, a merchant cash advance may suit any company that receives the majority of its payments by card.
A merchant cash advance is an amount of money paid by a lender to purchase a company’s future transactions. In return the lender will take a percentage of each sale your company makes until you reach your pre-agreed payback limit.
The advance involves two figures that make up the repayment:
There is a simple application process, which means it is possible to be approved for a merchant cash advance quite quickly. Most lenders will want to evaluate the health of your business, but for smaller amounts a check of your credit file may be unnecessary. There is also no need for secured assets as the lender’s money is tied safely to your future income.
Once your application has been approved, the lender will help you to open a separate bank account known as a “pass through” account. You can then use this for processing any transactions and the lender can collect their share.
There are several benefits and features of this form of finance, including:
It is important to consider how a lender is going to view your business before you ask for an advance. If you are looking to borrow a large amount and the lender has little faith in your company, it could mean a payback rate of as much as 60-70%. As with any loan, you need to make sure you have a clear plan for the money and how you are going to pay it back.
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