When you’re a business needing quick cash and are having trouble getting approved by a bank or traditional lender, there are alternative sources of funding. One of these methods is called a merchant cash advance. While the cash advances are considered a method of using online lending, they are typically sold by a sales representative.
Methods of Finding Sales Representatives and Brokers
Even though the majority of cash advances are sold through face-to-face meetings with brokers, there are some online brokers. They may have a website that provides an application form. Alternatively, they may have a “contact us” page that allows you to enter your contact information for them to reach out to you.
Word of Mouth
Ask fellow business owners if have ever worked with a merchant cash advance broker in the area. This allows you to find a broker that other business owners have been happy with and are willing to recommend. This method will also allow you to discover which brokers business owners will not work with again. By talking to other business owners, you can “pre-screen” the brokers before contacting them.
Allow Them to Find You
Merchant cash advance brokers typically work on commission. As a result, they are often contacting businesses in order to find out if they are in need of a cash advance. Even if you are not currently needing a cash advance, you can always save their information for if the need arises. The visits are sometimes random, and other visits occur because the broker is interested in the business.
Being Matched Through a Third Party
There are some brokers that work with websites to match them with business owners seeking a cash advance. When business owners enter their information into the site, the third party will match them with a broker who can meet their needs. Before choosing this option, it is important to be aware of any applicable fees for the services.
Important Things to Consider Before Signing
Regardless of the method you choose to find a cash advance broker, it is important to note that fees and interest rates tend to be higher than money obtained through a small business loan. Merchant cash advances are not regulated like typical loans, meaning brokers are not required to fully disclose the effective interest rate. Depending on your factor rate, you may end up paying an effective interest rate of over 100%. You may also have trouble with cash flow, since the loans are paid back daily or weekly as opposed to monthly.
Merchant cash advances are an alternative source of funding that may be helpful for businesses needing extra cash without a long wait and paperwork. It is highly recommended you do your due diligence to research your broker before signing an agreement. Each company rates differently, so you’ll want to shop around and find the lowest factor rate available.