Many businesses opt to acquire a merchant cash advance. Merchant advances are based on the credit card activity of a business. The advance provider will grant businesses immediate funds for exchange of a return and interest. Commonly, there is no exact time limit or quantity of payments; the repayment is mostly akin to the receiver’s business volume.
Small to mid-sized businesses are good candidates for receiving a business cash advance because they may not have an established relationship with a bank that can provide them with sufficient funds sought. Many times, a smaller business may desire equipment, manpower, or other utilities that can advance their size and revenue, but the unfortunate instance of their size or age may deter lenders from granting monetary provisions.
Merchant cash advance providers are aware of the legal aspects of their industry, but it is also wise for those seeking their services to gain a better understanding of this aspect as well. To begin, the receiver must determine whether the provider is treating the interaction as a sale or a loan. If the interaction is treated as sale, then the receiver must be aware that their debt can be sold to another party. Alternatively, the cash advance provider must be aware that a sale structure may mean the recipient’s business may slow down or close; these risks are not present in a loan situation.
If the account cash advance is considered a sale of particular financial assets, it can be assumed there are no set payback periods, no minimum payments, and no additional fees. However, whether or not the advance is a loan or sale is contingent on the intent and actions of the provider and receiver. How the merchant loan provider treats the interaction will be the court’s focus should its presence be warranted.
If the advance is to be structured as a loan, the provider needs to be licensed as a lender in states requiring unsecured commercial lenders to be so. Most states do not require a license for unsecured commercial loans and many states do not set a maximum interest rate for unsecured commercial loans.
In addition to interest rates, collection behaviors of the merchant advance provider may become an issue. Many states regulate commercial collection activities. Collection practices also become relevant in determining whether the transaction is ultimately a sale or a loan in a court of law.
The federal government and most states host laws prohibiting unfair and deceptive tactics that may be exercised by providers known as UDAP laws. Cash advance providers need to market their product in an accurate fashion clearly describing the receiver’s obligations.
In a market where obtaining financing is near impossible for business owners, Merchant Cash Finder (http://merchantcashfinder.com) makes finding cash for your business easy again. We here at Merchant Cash Finder have found the best means of alternative financing for businesses and have given business owners the access to those who provide this type of financing.
Merchant Cash Finder has partnered with the Business Cash Advance industry’s top providers and allows business owners to receive offers from up to 5 providers in order to compare and contrast the terms of the Business Cash Advance. After reviewing all of the offers, the business owner can then choose the provider that offered them the lowest cost and best terms for the Business Cash Advance.
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