If your company is seeking or has been turned down for a small business loan, an unsecured line of credit, unsecured business
Credit Card Receivable
However, many business owners still don’t fully understand the difference between Merchant Cash Advances (or business cash advances) and Credit Card Receivable
While both are known as a form of credit card receivables funding, the primary (and most important) difference is; a Merchant Cash Advance (MCA) is the actual “purchase” of your future credit card receivables at a discounted rate. It is unsecured
With CCRF the business still uses future credit sales as a basis on which the lender will determine the amount of funding, but the difference is that CCRF is a true regulated “business loan” and as such the qualifications are slightly more involved but the costs are usually 50-80% less than most MCA’s.
When attempting to secure any type of business loan, unsecured business credit line, or business
Another advantage of CCRF is, in the first few years many businesses are unable to establish a credit history that banks will require to qualify for loans. With CCRF as payments are made the business owner can make sure those payments, to an unsecured business loan, are reported to credit agencies so that a history of repayment is being made. This can potentially improve the credit score and possibly help in future bank loan applications. In addition, there could be tax advantages that your accountant may be familiar with regarding interest payment and so forth.
With both CCRF and MCA the amount of funding that you receive depends on your monthly credit card sales. And funding typically ranges between 100 to 150% of your monthly credit card sales average. For example, if your businesses monthly Visa/MasterCard sales average is $10,000 lenders can fund $10,000 to as high as $15,000 for the normal six to twelve month terms that are offered. Remember, this unsecured business loan is short-term working capital so don’t expect a 36 or 60 month payment term.
To qualify, your business must have processed at least $3,000 in Visa/MasterCard transactions each month for the previous six months, be in business for minimum of one year, have a minimum FICO score of 540 or greater, have at least one year remaining on your business lease or own the property and no open bankruptcies, foreclosures or liens (some liens with payments plans may be OK). There is no collateral required and the term is usually six to twelve months.
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- and more Information in our blog. (See link below!)