How Do Merchant Cash Advances Work?

The US Business Finance Corporation Cash Advance Funding Program

Through the course of providing a company cash advance to a new small business client, we were asked if the business financing we were providing her could be used to pay off a pending IRS lien. Since the funds we provided her were from non-traditional, non-bank funding sources, we explained that she could spend the money in any way she thought best for her business.

Word of this program spread and we have now found ourselves in the position of being able to provide a valuable financial service to a large and under-served market: the small business entrepreneurs. Owners of small businesses are taking risks to improve their businesses but, given the banks lending practices, those who need cash to resolve various working capital needs have a hard time obtaining it. As in this example, when one of those outstanding obligations is with the IRS, a timely manner is very necessary.

There are several ways we assist these merchants to obtain cash quickly without going the traditional bank route. The following programs will give you an idea of what we can do for our clients. We review each small business's credit and financial situation and then outline a reasonable course of action that would provide cash to our client in a timely manner and achieve their financial goals.

Credit card funding advance:

We buy a merchant's future credit card receipts at a discount. After approval, the payment for the receipts, or the advance, is wired directly into the merchant's bank account. The process usually takes 5 - 10 business days from application to the fund deposit. Our clients enjoy a 94% success rate in obtaining funds. The merchant repays the advance and our fee by paying a slightly higher credit card processing discount rate for the term of the advance; repayment terms are approximately 6 months.

Because the money can be used for any purpose, including the decrease or eliminate current debt, it may actually improve the merchant's credit status. The amount of funding through this method is based on the average monthly credit card processing volume; the advance will range from $2,500 to $1,000,000.

There are many advantages of this program, for example:

• Funds advanced do not negatively impact the merchant's credit status
• Funds do not increase merchant's debt balance
• Funds are not a treated like a loan, but rather the merchant's own funds advanced to him