Business, Legal & Accounting Glossary
A merchant cash advance provider is a lender who gives business loans to small business owners. They can borrow against their business if they are willing to give up a small percentage of their business revenue until the loan is fulfilled. This may be accomplished by giving a percentage of their credit card sales to the lender for the period of time it will take to pay back the loan.
Many merchant cash advance business have come into being and have become lending institutions that maintain ethical standards and provide a way that allows small business owners to borrow funds by means of secured personal loans or even unsecured loans. The loans are generally based on how much the business owner can afford to pay back without jeopardizing his business. The business owner must be open and honest in regards to his business and financial situation.
The average merchant cash advance provider is honest and operates legitimately but the business owner who is hoping to secure a loan must still be careful whenever giving out their personal and business information. This sort of business dealing can result in illegal activities when it comes to paying back the money borrowed. As the advance or money borrowed is to be repaid in the form of a percentage of the businesses credit card sales this must be closely monitored until the business owner can be sure that the loan provider is legitimate. There must be a formal agreement signed and agreed to in advance.
Merchant cash advances will usually be unsecured loans, meaning there is no collateral required in order to borrow money. This makes it a very good means of obtaining money for their business, especially when the business owner has less than perfect credit.
Another benefit of obtaining a merchant cash advance loan from a provider is that business does not need to pay back the loan through a strict monthly payment plan.
A lump sum advance may be had through credit card payment involving small amounts paid through each credit card transaction until the loan is paid back. As this form of business loan is usually required by business owners with less than an ideal credit rating, the rate of interest may be high but necessary in order to be able to qualify for a loan. These borrowers may have tried to get a loan through other means such as a local bank and been turned down due to their credit situation. This is far too common today and considered part of the economical picture that is present in our economy today. For example, the most appealing feature of fixed annuities is their stable rate. The advantage of a fixed annuity rate is tax deferral.
Paying an interest rate of anywhere from sixty to two hundred per cent makes this an expensive prospect but the business person’s only alternative may be losing their business. It is a way to obtain bad credit secured loans that otherwise would not happen.
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This glossary post was last updated: 2nd April, 2020 | 0 Views.