Merchant Cash Advance Rates
Merchant cash advance is certainly used by small businesses as a financial tool especially if they do not qualify upon the requirements set for bank loans.
However, business owners must be aware on the rates designated in every cash advance that is made.
Although it may seem easier to get merchant cash advance compared with bank loans, still, in each cash advance you are required to pay for its rates.
Variable Rates
First and foremost, merchant cash advances aren’t considered as technical loans. Therefore, they are not subjected to other regulations and usury laws that can govern interest rates. Due to this, providers can choose to change its interest rate within the repayment period that may still vary on various factors. With these factors, this can make a big difference on the usual payment done everyday. Be ready on how these factors can affect your payment in a day, week, month or year!
Daily Payment Percentage
In addition, daily payment percentage is required by all merchant cash advance providers. The cash advances are collected on a daily basis that is often referred to as short term loans, which will last for six to twelve months in duration. The payment is collected daily because it’s the most secured way that loan can be paid back within a short time frame. Nevertheless, the problem would lie on the percentage that can be taken in each sale gross. Oftentimes, these percentages can double reaching forty percent, which can depend on a relatively number of factors. If your business faces a mayhem situation, this can be a final knockout to your business expansion!
High Fees
Moreover, merchant cash advances may extensively offer high fees during the time of funding. For example, for small cash advance of $51000 the expected net amount your business will be receiving is $3800. From that loan, the interest rate is anticipated to get higher as 50% that will require you as a merchant to exchange credit card processors in terms of receiving funds.
High Up Front Fees
Furthermore, a business person who ever got a call from merchant cash advance lender will often hear amazing options offered to him. What isn’t usually heard of is that high up front fee is required before one can receive pre-approval or money. In the business language, this is mostly referred to as “getting the fish on the hook” before accepting them. Due to this, cash advance lenders can attract business owners to apply even if they are not yet approving them. Fees actually range from several bucks or thousands!
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