The Merchant Credit Card Cash Advance (MCCCA) is by no means a new form of financing for businesses that accept credit cards. In fact, this blog already has a post about the product in general. The intention of this article is to delve a little deeper into the product, its benefits, and its potential pitfalls.
THE PRODUCT
As discussed in a previous post, the MCCCA can be utilized by nearly any merchant who accepts credit card sales at his or her establishment. Needless to say, there are restrictions such as those that are purely internet based businesses or those businesses that derive their income from adult entertainment. For the most part, however, nearly every other type of business can qualify.
For the purposes of qualification, the advance company is going to calculate a 4 month average of credit card sales (12 months if the business is seasonal). With programs offered through http://www.bayharborcapitalcorp.com, merchants can receive an advance from 116% to 134% of the monthly credit card sales. Once again, we must emphasize that this is not a loan. The advance company is merely purchasing future credit card sales at a discount from the merchant.
This means that a company processing $10,000 per month in credit card transactions is eligible to receive an advance of up to $34,800.
THE BENEFITS
The benefits of the Merchant Credit Card Cash advance are fairly apparent. The primary benefit is the ease with which the funds can be obtained. If a merchant at a qualified establishment does in excess of $2,500 per month in credit / debit card sales, then that merchant is a candidate.
In most cases, all that is required is a simple, one-page application, the last 4 months merchant statements, the last four months bank statements, and a copy of the applicant’s drivers license. After a 48 review process – which emphasis the strength of the business and not the credit of the owner – and upon approval, funds may be wired to the merchant’s account within 7 business days. There is no personal guarantee and there is no collateral required.
All of this amounts to a broad group of qualified applicants, an easy process, quick turnaround time, rapid funding, and no personal risk to the merchant after funding.
THE PITFALLS
More than anything else, the trap that many merchants fall into is signing up with a company who takes too large of a percentage of each transaction. We at Bay Harbor Capital have come across clients who are paying as much as 38% per transaction back to the company from whom they secured the advance. This means that for every dollar they bring in, they earn only 62 cents. This is literally crippling their business.
The better, more established advance companies, like Bay Harbor Capital, require a per transaction payback of between 7% and 15% depending upon the perceived risk of the business. This, we have found, is far more manageable for clients. It is also far more intelligent for advance companies.
Why? Because we want merchants to stay in business so that they can pay back the advance. Seems like common sense, doesn’t it?
So, if you believe that your business could benefit from a merchant credit card cash advance, we encourage you to contact us at 800-541-0919 or to visit at our Web site, http://www.bayharborcapitalcorp.com.
Filed under: Merchant Credit Card Cash Advances | Tagged: bay harbor capital, http://www.bayharborcapitalcorp.com/CCAdvance.html, merchant credit card cash advance, restaurant cash advance
That all sounds great, but aren’t I still better off going to my local bank for a loan?
I have heard that even if it is a seasonal business there are programs that will apply.
In response to the first comment, you may very well be better off seeking a loan from a bank. There are certainly lenders out there – particularly smaller ones – with funds available for small businesses. The key distinction is that this is not a loan – no personal guarantee and no collateral. It is an advance.
As for the availability of an advance for a seasonal business, that is correct. We will simply use a 12 month average instead of a 4 month average. In fact, we are doing a seasonal restaurant right now located on the New Jersey Shore.
This is a very helpful article. I feel that a cash advance can be a great benefit when you need it and it’s helpful to know that those services are available.
Can you work with all Merchant Credit Card Processing companies?
That is a good question. The answer is yes. We are compatible with any Merchant Credit Card Processing company.
I have been researching these types of loans (or I should say “advances”) for my business. The one question I have is whether there is still any money available for this type of financing. It seems like no one is lending money right now!
Another good question, particularly given the media’s portrayal of financing sources and the resultant public perception.
But the answer is a resounding yes. There are financing sources who specialize in this type of funding for business and that is ALL THEY DO. So, they are not being dragged down by mortgage backed securities. They have had the same business model for decades and not deviated from underwriting guidelines. As such, their portfolios are just as strong as they have ever been, meaning they have the liquidity and desire to make these advances.
If there is no collateral and no personal guarantee, what do you base the advance upon? How do you know that it will be repaid?
The advance is based upon a determination of the overall strength and health of the company. For instance, industry, location and previous performance are all factors. It is really a common-sense approach – If a business has been averaging a certain amount in sales each month for a period of time and the industry is sound, there is little reason to believe that the business will not continue to maintain said level of sales.
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