As opposed to banks that offer credit only to reasonably big businesses, merchant cash advance is an alternative method of financing small businesses like retail stores that have limited capacity to avail bank credit.
Although, some people believe that since merchant cash advance is not a loan, and they are not covered under usury laws, they generally operate in unregulated markets and charge huge rates of interest from retailers.
It could have been true some years ago, but due to heavy competition in the system and bank credit available to all kinds of businesses, charges levied by providers of merchant cash advance are witnessing a southern trend.
What is merchant cash advance?
If it is not a loan, then exactly what is a merchant cash advance? Well! It is an alternative source of financing small and micro businesses that have limited opportunities of securing bank credit. It is a system where you agree to sell a certain percentage of your future sales through debit or credit card to the financer on a daily basis till the agreed amount is fully paid.
This system works well for both the parties because for a business owner, he does not have an ongoing interest burden which has to pay. Secondly, he does not have to pay the amount in big chunks. Instead, a very small percentage of your total card sales is automatically debited from your account which leaves your working capital unhindered.
Benefits to the retailer:
Every business requires infusion of funds on regular basis to expand or upgrade to match enhanced competition from peers. Since, availability of bank credit is limited to micro and small businesses like retail, merchant cash advance comes as a breather for such business owners.
Most small business owners have little to offer as security to banks and finance companies to avail credit, but since merchant cash advance works on realizing part of their total lending on daily basis, they don’t require any kind of security deposit.
Since a very small percentage of your daily card payments is only deducted as installment of your total payment, mostly only a small percentage of profit is compromised against payment and working capital in business is increased significantly.
Enhanced working capital allows you to make bigger purchases, hence avail discounts on volume purchases, thereby increasing your total profits from operations.
Once your operational volumes increase, you can avail easy bank loans at much better servicing conditions.
Since, service providers charge you In the form of a small fee and increased amounts from your sales as against cash advanced, the fee and total amount that you need to pay is negotiable and depends on how you negotiate with the service provider.
So, if you are looking for some cash injection in your business in the form of merchant cash advance, Apickle can be the right choice in Australia. They are one of the leading merchant cash advance providers in Australia that offer very comfortable and convenient terms so that you and your business can grow together.