This week, we have been taking a look at some of the most common myths and misconceptions about merchant cash advances. While this alternative source of business financing is growing in popularity, there is still some confusion over exactly how cash advances work and why the process of attaining them is more easy and convenient than the traditional bank loan.
Myth #3: Cash advance programs take advantage of companies that are going out of business.
Nothing could be further from the truth. One of the primary goals of Synergy Merchant Services' cash advance program is to assist business owners who have the mindset of expanding and growing their businesses.
Since the amount of the cash advance is determined by the amount of monthly credit and debit transactions processed by the business, Synergy ensures that each tailor-made quote allows for manageable payments to be made with the closing of each batch out. The payments are based on a specific percentage of the business' future credit and debit sales.
Keeping that in mind, it would be counterproductive to simply provide money to companies who are potentially closing down as they are less likely to produce any future sales. It benefits neither the business owner nor the merchant cash advance provider to partake in such an agreement as the advance would not likely be used to help the company grow. Therefore, it would be less probable that the company would pay the cash advance back.
Myth #4: Taking a cash advance will negatively affect a credit score.
Completely untrue. Because a cash advance entails the purchase of future credit and debit transactions, the money is NOT being borrowed. Therefore, attaining a merchant cash advance does not affect one's credit.
In addition, because there is no set schedule for the repayment of a cash advance, there is no such thing as a late payment. Again, a fixed small percentage of future credit and debit transactions is what makes up each payment that goes toward repaying the cash advance. A payment is made with each batch out. Synergy only gets paid after the merchant does. So, of course, there are no timely requirements set in place.
Therefore, no interest accrues. No late fees are applied. And best of all, no one is contacting the business owner to request a payment. The automated process is quick, easy and effortless. One's credit rating does not even come into play.