Some experts predict that as credit restrictions tighten in the past few years, merchants' cash overdrafts will grow to a $10 billion industry. How do you choose between companies when thousands of providers appear by quickly searching for merchant cash advances? This is some basic knowledge about the principle of merchant prepayment transactions.
1. You must have established: how long it takes for most vendors to conduct business for you, how long it takes to accept credit cards, and how long to keep sales. This means you must have a company with a solid financial history and accept thousands of dollars of credit card sales accepted by customers to get the best interest rates from suppliers.
2. You must first get approval: One of the many reasons why so many business owners favor corporate cash advances is because the approval process is quick and easy, but you have to be careful. Don't accept prepayments or amounts just because you were approved on your first attempt. Some providers have misconduct in order to collect arrears and fines, thereby approving companies that they know are unable to repay the borrowed advances.
3. How the service agreement works: After you are approved, the provider will explain all the details. You will be refunded your prepayment by prepay per day from your business account, which should be considered "safe" and can be charged a percentage of your daily sales, including service charges, until the prepayment is paid until. note:
• Reimbursement for full repayment after a certain period of time
• Fees charged when sales decline
• Extension or repayment period
Merchant cash advances are not a loan with a lending or usury law, so providers can charge companies without additional financing.
4. Start repayment immediately: Just like a traditional loan, you start repaying once you get cash. Before signing a service agreement, please ensure that your current sales volume is able to support repayments.
5. Consequences of default: If you are unable to repay the advance payment, the terms of the service agreement will govern your possible default. If you are unable to repay the merchant prepaid provider as expected, make sure you know exactly what will happen. In some cases, companies are known to reserve liens on business devices, charge a levy on your personal bank account, or withdraw funds directly from your business checking account, so be careful when providing such information.
Terms you can negotiate with the provider
• Discounts: Working with suppliers you don't know is better than working with companies you know and trust. Many credit card processing service providers also offer provider cash advances, and you may be able to get higher interest rates from existing merchant service providers.
• Interest rates: Just like traditional loans, the better your financial and sales records, the higher the interest rate you can negotiate with the provider. Check the supplier's rating in the Business Improvement Board to see if any complaints have been submitted to the Federal Trade Commission. Get a reference as much as possible. You can also secure a high interest rate with a mortgage or bank account as a collateral, but you must be very careful with companies that require you to choose this option.
• Repayment schedule: The repayment schedule is as flexible as the rate, but be wary of possible daily/monthly minimum transaction fees.
Terms that the provider cannot negotiate
• Application fee: A reputable provider will not ask for it. There is no application fee.
• Existing Terms: Unless you are prepared to make a serious compromise, you will not be able to negotiate terms, timetables and fees after signing the contract. If you want to extend the repayment time, please be prepared to pay.
• Merchant requirements: Merchants accepting credit cards are only eligible to receive cash advances from merchants. The company won't accept you because they want a guaranteed automatic repayment method.