Merchant Cash Advance The Best Financing For Real Estate?
(Merchant Cash Advance)
is a type of short-term
financing in which the lender gives financing for a merchant and the
repayment is agreed as a percentage of the future cash flow of the
merchant, mainly in the form of credit card/ debit card transactions.
Companies provide this small-business financing at a higher interest
than other Long
loans such as bank
and integrate their account directly with the merchant’s cash
clearing processor of card transactions.
closer look into MCA for business expansion
for Merchant cash advance is easy and convenient and is quickly
processed and approved, with many companies allowing online
submissions. It is a one step stop for merchants in need of urgent
financial support who cannot afford to wait for the painstaking
process for long-term business loans from banks, such as giving an
advance for a real estate purchase. Repayment is also flexible, as a
percentage of the future sales and no minimum monthly installments to
be paid. Selecting the lender should be done by keeping the following
points in mind:
is ideal that the lender accepts multiple types of transaction
facilities such as non-credit card and physical payments also along
with POS terminals and credit cards.
for a company having a good history of helping startups and
businesses having a low credit score is a safe step taken.
fees charged by the lender should be justifiable and not very high
because of the bad credit.
and quick application process is one of the factors going in favor
of merchant cash advance, many lenders allow online submission of
application, some even give a response in a short interval as small
as 60 seconds.
the merchant account offered by the company is supported by multiple
underwriting banks, if any of them withdraws support, the startup
will have a backup.
obtaining an advance financing seems to be easy, its repayment is not
that beneficial. For example, for a real estate company, the sales
number may be less with larger intervals between each sale. Also,
deals are not usually made in one go, often a lock-in period of 3 or
more months are provided before the deal is finally closed. Given the
nature of merchant cash advance, two issues affect the real estate
annualized payment rates (APR) of interest are very high and can be
detrimental for small firms and start-ups in real estate, which
is usually a high investment sector subjected to market trends.
the repayment is scheduled in a small time frame (24 months or much
lesser), it will take away a huge percentage of the company’s cash
flows, giving less scope for its expansion. The long business
intervals in the real estate business add more problems to this.
these advances are not generally considered as loans, chances for
early one-time settlements or interest wavering schemes are rare.
merchant cash advance literally drains out the cash flow of the
company, leaving it with fewer funds to actually expand. Usually,
the merchant opts for this funding because of the lack of knowledge
about other alternative
available. Some of the alternatives are:
your real estate business with financing
are several dedicated companies lending out MCA like an unsecured
loan for real estate business for infrastructure building, repair and
renovation, advertisement and business expansion. You can also get a
quick advance to initiate a deal and pay it off immediately after the
deal closing to avoid draining your profit. If you are facing a
shortage of capital at the last moment while collecting funding to
complete a purchase, again BCA
(Business Cash Advance)
are automatic depending on your income. Even if you have bad credit
history and high
NSF (Not Sufficient Funds)
incidences, you can easily find a high-risk lender. For companies
operating varied businesses out of their own property such as
restaurants, infrastructure providing, rentals etc, getting a working
loan is a better option than going for commercial loans on mortgage.
Real estate owners can also explore credit opportunities in the form
cautious with position
small business borrowers have a tendency to pile up on financings
obtained from MCA to meet expenses in real estate bids. The
subsequent lenders are given lower position and subordinate claim
compared to the lender in the first position. Additional financing
comes with higher rates of interest and shorter payback times which
should be paid off as soon as possible to prevent all your business
going into credit resolve. Real estate deals come with high amount
transactions and wise management of the huge cash flows into
prepayments can help not only in clearing debts but also in the
expansion. So, instead of offering 1st
to the lenders, depend on a single lender and minimize additional
interests, repayment issues, and multiple contracts.