Merchant Financing 101: What You Need to Know

Last Updated on January 16, 2018

If your business is in the B2C retail space and most (or possibly all) of your transactions are conducted via credit card or debit card, then merchant financing might be the flexible funding solution you need to cover expenses, make investments, and keep your business on-track for future growth.
Since there are some misunderstandings and myths surrounding merchant financing — often propagated by banks that don’t offer this solution — here are some key facts that you need to know:

merchant cash advance 101 information you need to know

You can use merchant financing for any purpose.

Most bank loans come with strings attached — including one that obligates you to use the funding for a specific purpose, such as buying inventory, upgrading a facility, and so on. If you deviate from the plan, then you could be in breach of contract and your loan could be called in.
However, with merchant financing there are no spending rules or restrictions. You can use the cash to cover temporary shortfalls, purchase equipment, pay for advertising campaigns, implement new technology — and the list goes on.

Your total cost of borrowing won’t go up if you take longer to repay the financing.

Merchant financing is technically an advance on future credit and debit card sales vs. a conventional business loan. At the end of each business day, a small portion of your daily sales is calculated (e.g. 2.5 percent), and that amount is automatically withdrawn and applied against the advance.
One of the key advantages of this approach — and a factor that makes merchant financing distinct from other kinds of business funding — is that you won’t pay a higher total cost of borrowing if it takes you longer than anticipated to repay the advance. Your total cost remains fixed and known from day one, which gives you more control, predictability and stability.

You don’t have to pledge business and/or personal assets to secure merchant financing.

Unlike a conventional bank loan, some lenders — including National Business Capital — offer unsecured merchant financing. This means you don’t have to pledge business and/or personal assets as collateral, nor do you have to endure a prolonged collateral valuation process that often takes weeks; or sometimes months.

You can combine merchant financing with other business funding solutions.

If it’s beneficial to do so, you can combine merchant financing with other business funding solutions. For example, many of our merchant financing customers also obtain a revolving business line of credit to cover unexpected, short-term expenses. And since interest is only charged on the amount borrowed, having this option as a contingency makes strategic sense.

Want to Learn More or Apply for an MCA?

To learn more about merchant financing, contact National Business Capital today or fill out our two-minute application! At National, we know merchant financing is a great way to get funding for your future credit or debit card sales in order to take advantage of a time-sensitive opportunity.
If you’re ready to identify these opportunities and learn how business funding can grow your business, download our FREE eBook “7 Profitable Opportunities That You Could Miss Without More Business Fundingtoday:
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About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.