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Understanding Your Business Advance

Q. What is a merchant cash advance?

A. A merchant cash advance is a fast funding product were a private lender can get you 10%-15% of your gross annual sales.

Q. How do you pay back a merchant cash advance?

A. There are two ways of paying back your advance.

1. Is a daily ACH were a specific amount comes out of your bank account Monday through Friday 23 days a month no weekends no holidays.

2.If your organization accepts credit cards the private lender has the ability to take a percentage of your daily credit card sales no weekends no holidays.

Q. How much does a merchant cash advance cost?

A. A merchant cash advance is priced off a “factor rate” which is a one-time flat fee on the money advanced. If you are a merchant looking for 50,000 in funding and receive a offer with a 1.20 factor rate in order to calculate the cost of the advance take 50,000 X 1.20 = 60K. The advance cost you 10,000.

Q. What happens if I do not pay back my advance?

A. A merchant cash advance is an uncollateralized product so the lender does NOT have the ability to take your home, property, possessions, or personal savings. The lender will file a UCC filing against the business notifying the industry that you defaulted on your advance.

Q. What are “advance terms”?

A. The phrase “advance terms” usually refers to the term length of your advance (however it is sometimes also used to describe other advance conditions). For example, advance terms can range from 4 months, 6 months, 12 months, 15 months, 18 months, 24 months, or longer—depending upon the nature of the advance.

Q. Can I get a business advance after a bankruptcy?

A. Qualifying for a small business advance will be more difficult during the 10 years the bankruptcy appears on your credit report, but our exclusive lenders will work with your businesses if the bankruptcy has been discharged.

Q. Is a business advance tax deductible?

A. Business advance interest may be considered a legitimate business expense and tax deductible by the IRS. You should consult with a trusted tax adviser to discuss how this applies to your business.

Business Line of Credit

Q. Do I need collateral to get a line of credit for my business?

A. Some lenders, including many banks, may require specific collateral to secure a business line of credit, while other lenders may apply a general lien to all the business assets – both are deemed “secured.” There are two types of business lines of credit available to business borrowers- a secured line and an unsecured line. You should ask your lender to identify the type of business line of credit you are applying for.

Q. How long does it take to apply for a business line of credit?

A. It depends upon the lender. It could take several days or weeks when applying with a traditional lender or as little as a few minutes with many online lenders.

Q. What is a business line of credit?

A. A business line of credit is a revolving advance that provides a pre-determined capital limit that can be accessed as needed. Unlike a term advance, all or part of the line can be accessed at any time up to the pre-determined limit, repaid, and used again. Interest is only paid on the amount actually used.

Different Advance Types

Q. Why do you need to provide Bank statements for an advance?

A. A bank statement advance is an advance that is based among other things on the past 3-24 months of bank statements showing that the average monthly deposits, withdrawals/expenses and average balances will support the advance payments.

Q. What is an ACH advance?

A. The ACH designation applies to the Automated Clearing House, and a lender’s ability to withdraw an agreed upon amount directly from your checking account at agreed-upon intervals. An ACH advance is an advance where the lender collects the borrower’s periodic payments via ACH.

Q. What is a non-bank lender?

A. A non-bank lender is any lender that is not a bank. For example, non-profit lenders, online lenders, and equipment financing companies are frequently non-bank lenders. They are usually regulated as commercial lenders, but are not banks.

Finding the Right Business Advance

Q. What is the best type of business advance for my business?

A. There are many options available for most small business situations. The first questions to ask to find the best advance for your situation are 1) What is my advance purpose? 2) How much capital do I need to meet that need? 3) What type of advance can I likely qualify for?

Q. What is the difference between a line of credit and a business advance?

A. A line of credit is a revolving advance that provides a pre-determined amount of capital that can be accessed as needed, repaid, and then used again. A business advance is a fixed amount of capital in a lump sum that is repaid over the term of the advance (see What is a line of credit?).

Q. What is the difference between an equipment lease and an advance?

A. The equipment is owned by the leasing company during the term of an equipment lease and the equipment is being purchased by the small business with an equipment advance. Many leases include an option to purchase the equipment at the conclusion of a lease, sometimes for as little as $1.