Banking On Credit Card Sales: The Ins And Outs Of A Business Cash Advance

The Contract
All of the details of your agreement -- the advance amount, the provider fees, and the daily retrieval rate -- should be specified in your contract with the provider. Most contracts contain a provision that requires a minimum daily repayment amount, irrespective of sales, and should detail what happens if this amount is not met. Read the contract carefully to make sure you avoid the following:

Choosing a Provider
Since cash advances are technically sales transactions, they are not regulated by lending laws or the Fair Debt Collection Practices Act -- the contract itself governs all the details of repayment. Providers can require business property, your home, or access to your savings accounts as collateral in the event the advance is not repaid. Since so much can be at stake, it's important to choose a reputable provider. The North American Merchant Advance Association, a voluntary, self-regulating organization, has information on various merchant cash advance companies and the services they specialize in. The website also makes customer complaints public, as does the Federal Trade Commission website. You can also check out prospective providers on your state's Better Business Bureau site.

The "providers" you see when you run a search engine query are actually brokers, not advance providers. Inadvertently choosing one of these companies can make your transaction much more expensive. To weed out the brokers from the legitimate providers, ask to see a contract offer directly from the vendor.

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Up to 56% of merchant service companies also offer cash advance services, so ask yours first. Working with a company you already trust can alleviate some of the apprehension associated with alternative financing, and you're likelier to get better rates from a company that is already familiar with your business.

Business cash advance transactions aren't the best solution for every business, but for those that investigate providers, review contracts thoroughly, and understand the responsibilities involved, there are advantages to choosing this type of financing. Make sure you're informed before you enter into an agreement.

Resource Nation provides how-to purchasing guides, tips for selecting business service providers, and a free quote-comparison service that allows business owners to compare price and service offerings in over 100 categories from credit card processing to payroll services.

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