Merchant Cash Advance for Online Businesses

Dec 01, 2012

Merchant cash advances for online businesses can solve a lot of cashflow hassles and remove a lot of the difficulty of dealing with bank loans. However, getting a cash advance for an online business is usually not a straightforward affair. Because online businesses tend to be seen as high risk, many lenders won’t offer cash advances on reasonable terms. Often they charge high interest, impose unrealistic repayment time frames, use hidden fees or utilize a combination of both. The result is a bad experience which can actually put your business at risk, rather than helping it.

So what exactly is a merchant cash advance, and how can it be useful for an online business? Well, it’s essentially a way of bridging a gap in your finances. It allows you to get cash for invoices you’ve issued immediately, rather than having to wait for them to be paid. This allows you continue paying for advertising campaigns or other business expenses in the meantime. You are effectively selling your invoices to another company, so when your clients pay the money goes to the cash advance lender (along with a small fee).

So why is it so hard for online businesses to get merchant cash advances? It comes back to the issue of risk. Many lenders see online businesses as a high risk in the sense that invoices may not always be paid, leaving the borrower essentially in debt to the lender. If the borrower then can’t cover the cash advance and goes out of business, the lender loses their money. That’s why so many lenders are wary of offering cash advances to online businesses.

Luckily, there is a solution. Some lenders and brokers deal specifically with helping high risk businesses find the funding solutions they need. eMerchantBroker is an example of a broker that can help you find the right kind of merchant cash advance for online business.

So what are the major factors you have to consider when choosing a lender that suits you? For starters, you should take into account how long it will take for the cash advance to actually hit your bank account. There is little point in taking a cash advance only to find the transaction does not go through quickly enough to cover the expenses you need to pay for. This is actually the kind of scenario that can get you into trouble – for instance, if you need the cash advance for a loan payment, but the advance doesn’t come through in time and you incur fees and penalties on your loan as a result. This can then hinder your ability to cover your existing debt as well as the cash advance.

You should also take into consideration the percentage of your accounts receivable the merchant cash advance company will take. Generally speaking, lower-volume businesses can expect to pay higher percentages. If you have a large volume of business, you may be able to negotiate lower percentage fees on your cash advance.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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