The term “MERCHANT CASH ADVANCE” is often used to describe purchases of future credit card sales receivables. The term is also commonly used to describe a variety of small business financing options characterized by short payment terms (generally under 24 months) and small regular payments (typically paid each business day) as opposed to the larger monthly payments and longer payment terms associated with traditional bank loans. MERCHANT CASH ADVANCE or BUSINESS CASH ADVANCE providers will say that it is not a loan. If they are purchasing future credit card sales that statement is true. The reason they don’t want to call it a loan is that they would be subject to usury laws because the total cost is typically equivalent to 33-50% interest.
Most business owners want to pay their debt in full. In order to pay past due amounts, many business owners resort to MERCHANT CASH ADVANCE to generate quick cash. The payment requirements sound small but really add up as they automatically deduct from the business checking account every business day. American Finasco prefers to work with businesses before they take out a MERCHANT CASH ADVANCE. Often, however, business owners call upon American Finasco to settle with the lender once they can no longer keep up with the MERCHANT CASH ADVANCE payment terms. Here are some examples:
A funeral home that had been in business for decades experienced an unexpected downturn resulting in insufficient cash flow to pay creditors. They decided to raise cash through a MERCHANT CASH ADVANCE but soon found out that they could not comply with the repayment terms. American Finasco negotiated a discount to the amount due and a lengthy repayment term the funeral home could afford. The total cost to the client including AF fees was less than 66% of the amount due and it was paid out over several years.
A small manufacturer had a similar cash flow crunch except when they couldn’t pay back the MERCHANT CASH ADVANCE they took out a 2nd one. They then advanced on a 3rd MERCHANT CASH ADVANCE to try and keep up with the payments on the first two. They realized that they were digging a deep hole and hired American Finasco to pull them out. AF was able slow down the process and the client went 5 months without making a payment to the creditor. They instead held money in an escrow account and built up enough of a down payment that AF could negotiate settlements. The ultimate cost to the client was less than 63% of the amount owed.
A trucking company had two MERCHANT CASH ADVANCE loans they couldn’t pay. They hired another debt settlement company and paid $10,000 in fees with no results to show for it. The trucking company hired American Finasco to replace our ineffective competitor. We again bought the client time, used our attorney network to remove a judgment that had been placed incorrectly and after 6 months settled the debt for 68% of the original amount due.
The examples above all pertain to clients who were in default of their MERCHANT CASH ADVANCE repayment terms. If you have not yet taken out a MERCHANT CASH ADVANCE, your savings could be much greater. Use the savings calculator here to determine what your savings could be but in general hiring American Finasco to negotiate directly with the creditor will cost about 1/3 of your total cash outlay under a MERCHANT CASH ADVANCE.
