Unlike a business loan from a bank; a credit card advance can still get working capital for your business, even if you have bad credit. And you can do this even during the current so-called credit crunch.
What makes a credit card advance (also called a merchant cash advance) different than a business loan is that rather than being dependent on your credit score as the basis for loan approval; a merchant loan provider looks at your business's sales transactions as the main determining factor for your cash advance.
How a credit card advance works
A cash advance providers looks at your proven track record of Visa / MasterCard transactions from the past few months and gives you an advance based on those figures. A typical cash advance is 2.5 times your monthly credit card sales. So if your average Visa / MasterCard sales are $ 10K; you could be qualified for $ 25K.
Of course there are other variables involved in determining the amount of money you will receive; but this is a pretty good rule of thumb. What makes these so different than a typical bank loan and how they are able to fund you when the banks have turned you down, is the way in which you pay it back.
Before they transfer funds into your bank account; they will need to set up your processor to automatically set aside a percentage of your daily transactions to pay back the cash advance. There is a great deal of care taken to insure that they never take out more than your business can comfortably afford. After all; because there is no collateral involved, they could stand to lose a lot of money if you go out of business.
Because they use a percentage of your Visa / MasterCard transactions, you pay back less when business is slow. This creates a flexible payback structure that goes with the natural flow of your business. This also helps to insure a successful payback.
Advantages of receiving a credit card advance over a bank loan
Aside from actually getting funded, there are many advantages to receiving a merchant cash advance. Some of these advantages include;
- 90% approval rate
- Approval takes 24-48 hours
- Typical funding takes about 7 days
- No collateral required
- Receive up to $ 500K
- No restrictions on how you spend your money
- Create a relationship to begin receiving funds within 24 hours
As you can see, there are many benefits to receiving a merchant cash advance.