Questions to Consider Before Accepting a Merchant Cash Advance

By Robert Jacovetti

A merchant cash advance is an advance on future revenue and may not require a person to pay the advance back if his or her business fails. However, while this may seem like a good option for some individuals, it may not be the best option for others. For this reason, here are a few questions to consider prior to accepting a merchant cash advance.

Is a merchant cash advance the best option for your situation?

It is important to ensure that a merchant cash advance meets your businesses needs. With that being said, it is important to determine the monthly rate of your business’s credit card transactions. Typically, a merchant cash advance works by deducting payments from a merchant’s revenue account each day until the advance is paid in full. Ordinarily, it works by a lender purchasing a portion of a company’s future revenue. As part of the process, a lender will require a person to provide the businesses merchant processing statements and bank statements to determine how much of an advance he or she will qualify for. With that being said, a Merchant cash advance works best for businesses with a high volume of credit card sales.

Determine if your credit card sales will remain high?

The duration of time in which it takes to pay back a merchant cash advance may vary due to a number of factors, such as, fluctuating sales or a decline in sales. Depending upon the sales, the interest rates fluctuate. Therefore, determining if you will continue to have high credit card sales is key to paying the advance off promptly.

Is the advance enough to meet the needs of your business?

If approved for a merchant cash advance, a lender will deposit a lump sum into the business owner’s account for their use. However, depending upon the lump sum, it may not be worth taking the advance. For instance, if the advance only covers half of the cost of business bills for the next three months, then it may not be worth taking it.

Do you have alternative financing options?

While merchant cash advances offer a quick approval process with little collateral, it also has high APRs and is not federally regulated. With that being said, it is especially important to make sure that a merchant cash advance is a right option for your business.

For many small business owners, a merchant cash advance may be the only option in order to continue to grow a business. However, it is important to speak with an experienced merchant cash advance attorney who can help explore the options that are right for you and your business.

The lawyers at Jacovetti Law, PC are experienced in representing clients in merchant cash advance defense matters, including debt resolution. Our merchant cash advance defense lawyers will work with clients to assess their debt situations and advise them on the best path to financial stability. To schedule a free 15-minute telephone consultation, contact our New York debt relief law office at (516) 217-4488 or fill out our contact form.