Business cash advance also referred to as merchant cash advance (MCA) is a rapidly growing industry, and for all the right reasons.  Its rising popularity can be attributed to its unique business financing model, which makes it attractive to small and mid sized business merchants with a history of credit card sales. Fast, unsecured business loans give credit card processing merchants the freedom to finance their working capital, equipment, inventory or business expansion needs within 24-48 hours.

 In Jan 2009, BusinessWeek reported that business cash advance companies have penetrated about 10% of the business loans market that is worth about $5 billion to $10 billion. This booming business financing market has caught the interest of both responsible and unscrupulous cash advance lenders. All are out to make a  quick buck!

Major industry leaders teamed up to form the North American Merchant Advance Association (NAMAA) in 2008 to standardize business cash advance industry practices. Small business merchants are advised to follow these guidelines to verify the authenticity of of the cash advance lenders before signing up for business cash advance loans:

1.    Dealing with the Business Cash Advance lender directly

Make sure you are dealing with the business cash advance lender directly before applying for the business cash advance loan. Many business cash advance companies use loan brokers to get in touch with small businesses. Ask for a copy of the contract to verify that you are dealing with the cash advance company directly and not a loan broker.

2.    Verify the Reputation of the Business Cash Advance Loan Company

Merchants must assure themselves of the reliability of the business cash advance companies by checking their expertise and references. The cash advance company’s association with NAMAA is a positive sign. Find out how long the business cash advance company has been in business. Merchants will get maximum benefit from business cash advance companies that have experience in the same industry as the merchant, and have handled similar sized accounts, average monthly credit card sales volumes and cash advance amounts.

Asking for references is one of the best ways to substantiate a cash advance company’s reputation. Ask business partners and associates about their experience with business cash advance for small business and the approval process.

3.    Scrutinize the Business Cash Advance  contract diligently

The devil is in the details. Read and understand the fine print in the contract. Business cash advance is not a credit, and business cash advance companies do not come under the same mantle as banks and other lending organizations. Laws such as the Fair Debt Collection Practices Act will not help or protect the merchant if the business cash advance company tries any unsavory tactics. Make sure there are no loopholes in the contract that gives the business cash advance company the right to seize property or overcharge. The contract is the only document that can protect you legally.

4.    Verify that the Business Cash Advance Company has Sizeable Number of Staff

Business cash advance companies and merchants should communicate frequently to have a good business relationship. Professional business cash advance companies keep the merchant informed through the application approval process and repayment phase. A business cash advance company will have a good communication system if it has sufficient company representatives maning the phone calls.

Reputable business cash advance companies vastly outnumber the unscrupulous ones. The small percentage of unscrupulous business cash advance companies can still tarnish the image of the business cash advances industry. NAMAA hopes to shakeout unscrupulous MCA players by forcing them out of business. This can happen if merchants are aware of the ‘best practices’ of the Business Cash Advance industry.

Business cash advances ensure small business merchants have quick access to unsecured business loans while they have the assurance of payments from their credit card sales volumes. Merchants and the Business Cash Advance companies can have a long and fruitful financial association if the merchants follow the guidelines laid down by the Merchant Cash Advance industry.

Tags: Business Cash Advance

You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.