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Financing Your Business - Should You Look at a Merchant Cash Advance?
Wednesday, November 16, 2011

Credit markets have been the tightest I have ever seen them for small businesses. Access to capital has become the critical problem for small businesses that want to grow and see the vision of the future, but don't have the right connections to raise the capital to fulfill that vision. Obtaining working capital the traditional way by borrowing it from your local bank is so much more difficult because of tighter underwriting guidelines. Small businesses on the cutting edge of the economy, whose success or failure depends on their ability to seize opportunities as they arise; or need to sometimes reinvent themselves in response to shifting consumer trends, have always needed quick access to working capital. Opportunities such as a chance to acquire inventory from liquidation, compete against a big box retailer moving into their town, or just money to replace the air conditioning or heating; may turn into a challenge for business short on cash.

Small businesses are always applying the "return on investment" (ROI) philosophy, because it is in our DNA; whether we consciously say it out loud or not. We weigh the ROI concept every time we contemplate new inventory, another location, a new employee or a new sign or a new menu. Knowing that all business capital is expensive, no small business should go after new money without carefully considering the ROI.

Once a small business has exhausted all the traditional ways of obtaining working capital, like the local bank, additional investors, leasing back assets, and using factors; what is left to raise immediate cash are alternative products like Merchant Cash Advance (MCA). This involves the sale of a set amount of a business's future credit card sales at a discount. An MCA provider, like AdvanceMe, Inc., delivers a lump sum of cash to a business for its immediate use in exchange for a portion of the business' future credit card receivables. AdvanceMe, Inc. is automatically sent a fixed percentage of the business's daily credit card settlements by the business' processor, so the owner does not need to remember to write a monthly check. And, the amount retrieved daily ebbs and flows with the business' sales, further helping cash flow. MCAs are more expensive than bank financing, but in today's tough economic times, it can become the quickest way to raise that much needed capital.