Skip to main content

Merchant Cash Advance


Author : Awepay

A Merchant Cash Advance is a lump sum payment to a business in exchange for an agreed upon percentage of future credit card and/or debit card profits. The way this works is Merchant Cash Advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income. This percentage is taken directly from the processor that clears and settles the credit card payment. A company’s remittances are drawn from customers’ debit- and credit-card purchases on a daily basis until the obligation has been met. Most providers form partnerships with credit card payment processors and take payments directly from a business owner’s card-swipe terminal.

A Merchant Cash Advance is most often used by retail businesses that do not qualify for regular bank loans. A business cash advance can be expensive compared with interest on a bank loan, ranging from 10% to 100% effective interest. Merchant cash advances are not loans – they are a sale of a portion of future credit and/or debit card sales. Therefore merchant cash advance companies claim that they are not bound by specific laws that would limit interest rates.

Despite the cost of merchant cash advances, the structure has many advantages over the structure of a conventional loan. Most importantly, payments to the merchant cash advance company fluctuate directly with the merchant’s sales volumes, giving the merchant greater flexibility with which to manage their cash flow, particularly during a slow season. Additionally, the ease, simplicity and speed of the application process, as well as the lower security position (i.e. behind that of the bank and landlord) associated with merchant cash advances are significant advantages.

There are generally three different repayment methods for the business:

Split Withholding, or Split Funding: When the credit card processing company automatically splits the credit card sales between the business and the finance company per the agreed portion (generally 10% to 22%). This is generally the most common and preferred method of collecting funds for both the clients and finance companies since it is seamless.
Lock Box or Trust Bank Account Withholding: All of the business’s credit card sales are deposited into bank account controlled by the finance company and then the agreed upon portion is forwarded onto the business via ACH, EFT or wire. This is the least preferred method since it results in a one-day delay in the business receiving the proceeds of their credit card sales.
ACH Withholding: When the finance company receives the credit card processing information and deducts its portion directly from the business’s checking account via ACH.


#awepay #awepayawesome #payment #paymentgateway #merchant #MerchantCashAdvance

Comments

Post a Comment

Popular posts from this blog

12 Startups Utilizing Blockchain Technology in New Ways

Author: Awepay Cryptocurrency created quite the buzz this past year. Although the technology has been around for a few years, 2017 was the year it really took off. Bitcoin, the first application of cryptocurrency technology, hit $20,000 a coin, while coins like Ethereum also saw their prices increase. However, the technology behind these tokens, blockchain, has far more applications than just cryptocurrencies. Through a network of smart contracts that operate utilizing decentralized information on a ledger, blockchain is able to provide unmatched security and speed for data transfers. This means that blockchain technology has an application in nearly every industry where value is exchanged. For this reason, many startups have started to explore how this technology can change the way the world works. Here are twelve of those startups, each of which are utilizing blockchain technology in new ways. Related: 10 Reasons Why Good Customer Service Is Your Most Important Metric ...
6 comments
Read more

EMV transactions: Is it time for you to upgrade?

Even if your business has not yet adopted an EMV-enabled solution, you’re probably somewhat familiar with the technology since it's among the most talked about developments in payments. EMV has proven to be an effective tool to fight card present payment fraud in Canada and many European countries. While EMV is new to the U.S., payment card fraud is not, with nearly $8.5 billion in fraudulent transactions in the U.S. in 2015 alone. What’s more, the U.S. represents nearly 40 percent of worldwide fraud, despite having less than 25 percent of transaction sales volume. EMV defined So what is EMV? EMV technology is based on specifications developed to ensure worldwide acceptance of secure payments by an organization called EMVCo, a group of leading companies in the payments industry including American Express, Discover, JCB, MasterCard, UnionPay, and Visa and supported by dozens of other companies in the industry. EMV has become the global standard for authenticating credit...
Post a Comment
Read more

5 MAJOR BENEFITS OF MOBILE PAYMENTS

Author: Awepay When customers come to the register to pay for their meal or purchases, many can now simply hold up their mobile phones instead of handing over dollar bills or pulling out a credit card. Since mobile payment programs are relatively inexpensive and don’t require sophisticated technical knowledge to implement, many small businesses have been quick to adopt the new technology. “Mobile has really taken away the requirement that you have to build big systems and be a large company to be successful with technology,” says Gene Signorini, the vice president of mobile insights at Mobiquity. “In many ways, it is easier for small businesses to adopt mobile payment programs because they don’t have a large infrastructure to work through so small businesses can jump right in.” Here are five ways offering a mobile payment to your customers will help you increase sales: Integrate and increase incentive programs. One of the biggest benefits of using a mobile payment option i...
Post a Comment
Read more