Are Merchant Cash Advances Your “Last Resort” Funding? We think not.

Steve O'ConnorCapital Advance, Funding Options, Merchant Cash AdvanceLeave a Comment

In the recent past, the words “merchant cash advance” conjured up images of desperate business owners, shifty salesmen and expensive money. Many see a business advance as a “last resort” funding option after all others, business loans, lines-of-credit, credit cards, borrowing from friends and family, have been exhausted. But the truth is that the merchant cash advance industry is a solid source of funding to the small and midsized business market, even more so in the current financial crunch, and some big players are taking notice and entering the market.

A merchant cash advance? Priceless.

In 2011, one of the country’s oldest financial institutions started offering merchant cash advances – American Express (AMEX). They’ve expanded their portfolio outside of business credit cards to include two options for merchant financing. The monthly option forwards you that month’s projected AMEX revenues, which are paid back 100% by the end of the month. The second option is the same concept, but different time frame. You receive a one-time payment of approx. 25% of projected annual AMEX revenues, with an entire year to pay back funds 100%. The qualification process is a little tougher, check out the AMEX Merchant Advance qualifications here, but is a viable option for select American Express merchants.

Get money, make money…online.

The country’s biggest online retailer, Amazon is now offering merchant cash advances – right in time for holiday season. While most cash advance providers focus on brick and mortar businesses, Amazon focuses online, offering up to $800,000. They weren’t the first online provider; they’re actually going head-to-head with Kabbage, who provides merchant advances of up to $500,000 to online businesses. You need have to have an Amazon merchant account to apply for the Amazon Lending program, and it seems that for the moment, it’s by invitation only.

The problem isn’t the business; it’s the banks.

Why are these big players getting into the merchant advance game? Because it’s no longer a solution for just a small percentage of businesses with credit problems.  People with good credit, and funds in the bank have a hard time getting bank approval as well. Plus, there are many business owners who use merchant cash advances over and over, not because they’re on the brink of shutting down, not because all else has failed, but because they’re willing to pay for a faster and easier way to help manage cash flow.


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