A merchant cash advance scheme is an alternative form of business finance that enables small companies to accessinstant cash. It is suitable for companies that cannot get conventional loans by traditional means. The financial service provider offering the plan gives the corporation a lump sum of money upfront according to their business needs.The corporate enterprises then repay the debt they owe to the financier as a percentage of their future credit card sales. The financial plan helps the companies maintain a constant cash flow to ensure the continuity of the business operations. Moreover, business organizations do not have to provide collateral to get the necessary funds.
Kavan Choksi – Why do small companies opt for merchant cash advance schemes?
Kavan Choksi is a businessman with a passion for photography, advanced technologies, and business finance. According to him, themerchant cash advance scheme allows small companies to borrow substantial sums of money from a reliable lender. The corporations can then use the available funds to expand their business operations, strengthen their cash flow and acquire assets. Many of themmight not qualify to get convention commercial loans because they have a low business credit score. However, the companies are able to pay off their outstanding debts to the financier by generating adequate credit card sales. The financing facility suits these corporate enterprises for the following reasons:
- The companies do not have to provide collateral to lenders to obtain the necessary funds,
- The lenders do not impose any restrictions on how their corporate borrowers use the money,
- The financiers ensure an easy approval process for sanctioning their borrowers’ loan applications,
- The corporations do not need to go through time-consuming credit checks to get the funds, and
- The businesses do not incur any hidden costs that they would associate with conventional loans.
How does the merchant cash advance scheme work?
Small companies first need to approach a reliable financier who specializes in offering merchant cash advance facilities. The lender will determine the corporations’borrowing needs and provide them with a large sum of money upfront. When disbursing the funds, the financier will not conductany credit checks on the borrowers. The companies then repay their outstanding dues to the lender via automatic deduction of their businesses’ daily credit card sales. The percentage of the credit sales that companieshave to pay to the financier will vary depending on the amount they borrow. The tenure of the merchant cash advance scheme normally depends on the companies’ credit card sales volume.
According to Kavan Choksi, the merchant cash advance scheme is a boon for small companies with a low credit score but need instant cash funds.The lending facility enables them to maintain a steady cash flow for the businesses to ensure the smooth functioning of their commercial operations.However, corporate enterprises should always approach a financier with a good reputation in the market. The lender must be a thorough understanding of their businesses and financial needs.The scheme’s duration, advance sum, payback amount, holdback percentage, and other relevant charges should be acceptable to them for success. Moreover, the corporations should read the fine print of the relevant documents before signing.
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