Contracts & Documentation

Once the business owner qualifies for two or more Cash Advance programs, the lender will work with him to decide on the best course of action to suit his needs. Remember that Merchant Cash Advance programs have NO interest rates because it is not a traditional loan method. It might seem expensive at first, but it’s a better alternative for many small and medium business owners who can’t get a bank loan.

Merchant Cash Advance programs have fixed factor payments. This is the percentage taken out of the business owner’s Visa/MasterCard receivables or fixed daily ACH debit. The factor can usually range between 1.20 to 1.65 on the funded amount, depending on the agreement between lender and merchant. For example: a business owner taking out a cash advance of $25,000 can expect to pay back anywhere from $30,000 to $41,250.

Cash Advance arrangements usually last for only a short amount of time, most between 5 to 9 months. There are different programs for everyone. Shorter arrangements could be the best solution for business owners who want to quickly pay off their cash advances. These will have higher holdback percentages but the factor will be lower. Longer programs on the other hand, might fit a business owner who is interested in slow payments for larger sums. He would be paying more money, but he will have less taken out from his credit card receivables.

After the contracts are drawn up, additional information may be requested from the merchant. This usually includes:

  • A business license or tax return showing the legal ownership of the business
  • Month to date processing
  • Lease agreement or mortgage statement
  • Additional trade references
  • A voided check
  • Driver’s license
  • Yearly profit and loss sheet (may not be needed for smaller advances)
  • Franchise agreement and contact if applicable

There may also be a clause or a page in the contract regarding extra fees. These usually range between 2.5% – 5.0% of the funded amount. They are to cover for the cost of underwriting the file, splitting the processing, and finding the funding for the business.

To read about processing click here!