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A merchant cash advance in New Hampshire provides alternative financing to a traditional small-business loan. Merchant cash advance providers say their financing product is not technically a loan. An MCA provider gives you an upfront sum of cash in exchange for a slice of your future sales.
So, let's say you're a small-business owner in need of capital now, and a merchant cash advance looks like a good deal. Before you act, consider this: That quick cash could really cost you.
MCAs have been known to carry annual percentage rates the total cost of a loan, including all fees in the triple digits. These costs, as well as the daily repayment schedule, can cause serious cash-flow problems. In some cases, MCAs can lead to a debt trap, where it's virtually impossible to repay and you must refinance into another and yet another MCA or file for bankruptcy.
That's why many consumer advocates and nonprofit lenders consider MCAs a financing option of last resort. Below, we lay out the pros and cons of merchant cash advances in New Hampshire to help you make a wise financing choice.
A merchant cash advance has historically been for businesses whose revenue comes primarily from credit and debit card sales, such as restaurants or retail shops. Now, merchant cash advances are available to other New Hampshire based businesses that don't rely heavily on credit card or debit card sales.
Merchant cash advance repayments can be structured in two ways.
You can get an upfront sum of cash in exchange for a slice of your future credit and debit card sales, or you can get upfront cash that is repaid by remitting fixed daily or weekly debits from your bank account, known as ACH, for Automated Clearing House withdrawals.
This option has become the most common type of merchant cash advance, according to Sean Murray, a former merchant cash advance broker and founder of trade magazine deBanked. They're referred to as ACH merchant cash advances and allow providers to market to businesses in New Hampshire that aren't primarily tied to credit and debit card sales.
Instead of making one fixed payment every month from a bank account over a set repayment period, with a New Hampshire based merchant cash advance you make daily or weekly payments, plus fees, until the advance is paid in full.
How much you'll pay in fees is determined by your ability to repay the merchant cash advance. The merchant cash advance provider determines a factor rate typically ranging from 1.2 to 1.5 based on its risk assessment. The higher the factor rate, the higher the fees you pay. You multiply the cash advance by the factor rate to get your total repayment amount.
For example, an advance of $50,000 that carries a factor rate of 1.4 represents a total repayment of $70,000, which includes fees of $20,000.
There are a few terms that you're going to need to understand when you're looking at Merchant cash advances for your business.
This Factor Rate is a calculation that helps you determine how much money you will pay back in total. Your merchant cash advance's total costs are determined by the amount of the advance and your factor rate (which usually ranges between 1.1 and 1.5). Your factor rate is dependent on your New Hampshire business's credit and financial strength—better credit means a lower factor rate. For example, if you received a $50,000 MCA with a 1.15 factor rate, you'd owe a total of $57,500.
The Holdback rate is just the percentage of your daily credit card sales that an MCA provider will take until you pay back what you borrowed. This percentage is usually between 10% and 20%. Lenders will automatically take these “payments” out of your account each day. More sales mean higher payments and a faster payback period fewer sales mean lower payments and a slower payback period.
Every business that uses merchant cash advances services utilizes it for their own reasons. Some of the best uses for merchant cash advances in New Hampshire are:
There's always a way to get the capital you need. If you've been denied a term loan or a business loan.
A MCA cash advance is a quick way to get funding in New Hampshire without facing a strict approval process. In this post, we'll reveal five benefits that come with receiving a merchant cash advance and will explain why it might be the best financing choice for your company.
Qualifying may be the easiest part of working with a merchant cash advance. Unlike most business financing options, applicants don't need to have years in business to qualify. The amount and number of your credit card transactions are more important than a business credit profile, putting less emphasis on personal and business credit information solid sales numbers can help a business with poor credit qualify for a merchant cash advance.
Most providers offer online applications, making the already quick process even more convenient for business owners.
A business cash advance (BCA), also known as the Purchase of Future Sales Agreement, that cash advances a merchant's future sales at a discount. The business owner is responsible for paying back a fixed payback known as a specified amount, which is higher than the amount that was advanced to the company. This difference between the advance amount and the payback amount is called the Factor Rate or cost, which is a fixed cost. These are not principal & interest costs. The advance is repaid by taking a fixed percentage of overall deposits called the specified percentage.
Another main advantage of merchant cash advance is that businesses with bad credit or limited credit history aka (thin credit) still have a great chance of being approved.
Here at First Union Lending we have received our fair share of questions about Merchant Cash Advances in New Hampshire. As always feel free to give us a call at 863-825-5626 with any questions you might have. In the meantime here are some of the top questions of the day.
The factor rate will determine how much you repay for your advance. For example, with a 1.3 factor rate, for every $1,000 you receive, you'll need to repay $1,300. This factor rate generally ranges from 1.1 to 1.7, solely based on your business's creditworthiness and finances.
Merchant cash advances don't have a prepayment penalty, but you also won't necessarily save money by prepaying your MCA. Unlike a loan that accrues interest over time, your factor rate and repayment amount are determined upfront. Prepaying may save you money on monthly administration fees, but it won't save you money on the cost of factor rate charges.
Technically, a merchant cash advance is not a loan, but rather a cash advance that you then pay back with a percentage of your daily sales––a merchant cash advance empowers your New Hampshire based business to trade tomorrow's earnings for cash today. You're essentially selling your future sales at a discount.
A MCA or Merchant Cash Advance in New Hampshire has no direct impact on your credit or credit score. So while a cash advance won't hurt your credit score, it also won't help your business to build credit, which is often essential in order to qualify for bigger, more affordable loans down the road. Relying on MCAs and other more expensive financing options can be costly long-term, so you must find other ways to build your business credit score meaningfully.
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