Merchant Cash Advances - Say YES to No Collateral

by Merchantcash Advance Merchant cash advance

When you research merchant cash advances, one of the common advantages you'll see touted, whether you're looking here at Merchant Cash Advance Nation, or at any other reputable provider, is that we don't require collateral. What you may not understand is that "No Collateral" is another way we say "yes" to your working capital needs.

Why is No Collateral a good thing?

A great number of small business owners use their personal assets in order to obtain funding for their companies. Sometimes this can be an easy source of funds, as in the case of a refinance or second loan on a home, but when a business fails - especially if the owner's home or car has put up as collateral for a loan - those assets can be seized by banks and creditors.

Put another way, if you used a home equity line of credit (HELOC) to fund your business, and your business goes under, causing you to miss payments on the credit line, the bank could foreclose on your house in order to recover the funds from that loan.

With a merchant cash advance, however, collateral is not typically required, so your personal assets are not at risk.

Why don't merchant cash advance providers require collateral?

If requiring collateral is standard practice in money-lending, and merchant cash advance providers don't require it, how can they be sure their clients won't just walk away without repaying their advance?

One reason is that merchant cash advances, whether they're standard credit/debit sales advances or ACH advances, are designed so that not paying is isn't even an option. Payment is taken directly from the credit card processor or via an automatic sweep of bank accounts. No one is writing a monthly check to a lender, so as long as the business stays in operation and continues to accept credit cards, payments will be made.

Another reason is the vast array of information that is so easily obtainable in the modern world. Merchant cash advance companies may not look at credit scores, but they can - and do - analyze the volume of credit/debit card sales your company transacts, and those numbers are not difficult to verify.

This means that when a merchant cash advance provider says "yes," to your application, they already have a reasonable certainty that your business can generate the necessary volume for a swift, steady repayment plan.

Merchant cash advances are not the best fit for every borrower or every business. It's quite likely that you, as a small business owner, will use a variety of funding sources as your business grows. Still, cash advances are a good way to get capital quickly, with a minimum number of restrictions.