Merchant Cash Advances on the Uptick

Merchant Cash Advances on the Rise

Merchant Cash Advances, which first appeared about a decade ago, provide capital in exchange for a share of future debit- or credit-card sales. As such, they tend to be used by retailers, restaurants and other small businesses where a large number of customers pay with cards. Providers typically charge between 8% and 10% of gross sales against the advance, though some charge far more.

Business owners use the cash to buy new equipment, restock inventory or pay off debt, according to the North American Merchant Advance Association, a trade group launched in 2008.

In May, a study found more than half of 250 small businesses it analyzed weren’t qualified for traditional bank loans and would need to seek other sources, such as merchant cash advances, factoring and unsecured lines of credit. Many of these businesses would face charges of more than 23% in annual interest and fees, the study found.

The years “2008, 2009 and 2010 were not easy for U.S. merchants,”  most business owners appear to turn to merchant cash advances only after being rejected by a bank.

Even though we have seen a turn in business since 2012, cash advances continue to be sought after by small businesses. Banks are still pretty tight with their lending criteria and that makes merchant cash advances a pretty attractive option.

Rob Olson
Quantum Merchant Services
Merchant Cash Advance America
1-888-881-0657 ext 707

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