Merchant Cash Advance Buyer's Guide
Tips for Cash Advance Buyers
The best way to choose a business cash advance provider is to shop around. Comparing quotes isn’t the only thing you can do to make sure you get a good deal.
Here are a few additional tips to help you save money on a cash advance transaction:
- Evaluate Long-Term Ramifications
Evaluate how repayment could affect your long-term business plan. Consider whether the repayment might prohibit you from taking advantage of an opportunity, or might be especially burdensome if sales decrease.
- Consider Tax Consequences
Consider the tax consequences of the merchant advance. If the advance is repaid over two calendar years, or if you plan to incorporate your business while repaying, you might incur additional tax obligations. A tax attorney can help you determine how a cash advance or factoring transaction will impact tax liability.
- Identify Hidden Costs
Are there hidden, or other unanticipated costs associated with the advance? Switching to a different credit card processing company, purchasing new credit card equipment, or processing transaction batches differently can all add costs.
- Understand the Contract Terms
Consider the contract terms. You should know if there are costs associated with changing the terms, or fees charged if revenue declines. Avoid these provisions if you can.
- Understand the Provider's Remedy Options
Review the contract to determine whether the advance provider can seek full repayment if regular payments decline below a certain amount. Ask about the providers’ remedy if you fail to make payments. Are they able to place liens on your property, or sue you to collect on the advance balance?