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What is a Merchant Cash Advance

Every entrepreneur knows that it takes money to earn money. Ask any business-minded person and they will tell you that it can be frustrating to find additional business funding, especially when you have an excellent idea to help improve or build upon your business, but you are still turned down for funding by banks or other lenders. Most banks typically require a number of requirements to secure a loan and you have to convince your loan officer that your business idea will work.

The good news is that there are alternative sources of financing available for small to medium-sized businesses other than banks and other mainstream lenders. One of the most popular is called a merchant cash advance (MCA), also known as credit card factoring or a business cash advance.

Why is it popular? Unlike banks, merchant cash advance providers don’t require any collateral, no fixed term of repayment, no late payment fees, no penalties or surcharges and, best of all, the approval time is quick. The borrower has the flexibility of spending the money in any business-related expense, be it refinancing the existing business, remodeling the business location, upgrading tools and equipment, marketing, payroll, or simply as an addition to working capital.

So how does a merchant cash advance work?

The merchant cash advance provider purchases credit card receivables from the merchant borrower. That is, the merchant cash advance provider advances money on the borrower’s future credit card receipts. Here is a simple, step by step explanation of what this means:

The merchant applies for a merchant cash advance and hears back from the lender on whether their business qualifies within 24 hours. The business cash advance company quickly provides the merchant with a quote for how much money the business qualifies for, and a reasonable rate of repayment (a fixed percentage of future credit card sales) Once the necessary documentation is received, the business cash advance company advances the merchant up to $250k in cash (this amount varies depending on how much money your business generates from month to month) The small, agreed-upon percentage of repayment is then deducted from the merchant’s future credit card transactions with their clients until the cash advance is paid back in full, plus a premium. The rate of repayment stays the same from month to month, meaning that a larger percentage of the business’ sales is used to pay back the cash advance lender when business is going well, and a smaller percentage when business is slow. Because the entire process is electronic, there is no need to write the cash advance company a check for repayment. The agreed percentage of the credit card receivables is deducted automatically, in a process known as credit card factoring.

It is important to remember that a merchant cash advance is not a loan to the client receiving the money because there is no interest rate. Rather than borrowing money, the merchant is selling an interest in his or her future credit card receivables. And best of all, qualifying is easy: The merchant must process at least 50 credit card transactions a month, have a minimum of $4,000 in credit card sales monthly, have owned the business for the past 6 months, and must not have any open bankruptcies or foreclosures, then the merchant is eligible for a cash advance. We also offer a program for merchants who do not accept credit cards at their businesses, called the Bank Only Program.


Citi Wide Merchant Funding

300 Carnegie Center
Princeton, NJ 08540

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