Business Funding Hero Videos.
What Is a Merchant Cash Advance?
Merchant cash advances go back over 2,000 years in history. They would have been known in history as a factoring program. Factoring was when you would sell a invoice at a discounted rate and the buyer of the invoice would have collected from the party in debt. Many people used those for years but as time, and society evolved companies learned that they would loose business to competition because the folks buying the invoices would be rough on collecting them.
In 2000 with the onset of on line banking the Merchant cash advance was born. It was a tool where folks funding could calculate future payments off of watching trends on credit card sales as the technology went on line. The merchant cash advance is not a loan it is a sales transaction between the recipient of the credit card revenue and the person fronting them cash in exchange.
In 2006 with the popularity of access to funding for businesses that could not qualify for funding with traditional loans the industry discovered there was a need for businesses that did not process credit cards. A new platform was born where we could calculate future income by watching how money flows in and out of a business checking account.
In 2008 when the housing market crashed there were many defaults due to business owners loosing homes and property. Terms shortened up rates went through the roof and these advances were becoming harmful to the businesses that were using them causing a downward spiral. Business owners started purchasing property and purchasing new businesses which created a bubble of merchants who used the advances to grow. It created a culture of businesses and funders working in harmony
In 2017 Metromedia Funding Solutions LLC headed up a revision to the program with over 200 investors. to make improvements to the program to allow businesses that did not benefit to have access to capital. In 2020 Covid-19 hit us and we decided it was time to roll this new program out after several successful trial runs. The program allows underwriters to look at things they have not looked at before, such as what opportunities the businesses out here have. Instead of only focusing on the businesses bank statements we can now look at exit strategies. The new improvements allowed for business owners to get terms from 9 months to 3 years and the ability to show payment worthiness to qualify for larger long term monthly loans in the future.
The program works regardless of a credit profile, works if someone has a mortgage, works on partnerships where only a percentage of owners have equity and much more.
Unlike a term loan - or any kind of loan, advances are set of FACTOR RATE. A factor rate is a pre-determined rate you pay for borrowing money. For instance if you borrowed $10,000.00 on a 1.6 factor rate and went full term you would pay back a total of $16,000.00. As bad as that may sound when you compare this to a compounded APR (that stands for annual percentage rate ) and if we took the same 10,000.00 in a APR setting at 9% A.P.R. would look like $17,402.00 for the same money. Many people do not know that APR compounds on everything someone buys on credit. Truth of Lending disclosures may mis-lead you as they show the cost of money with calculated early payoffs.
Furthermore because the advance method is actually a sales transaction the total amount spent for money becomes a tax deduction with your filed schedule C tax return
The unsecured programs are still there but no one would want one after they see the difference.
Ready for more? Unlike a loan or mortgage, advances have no balloon payments no flexing rates that blow up and even rewards for early payoff. That is not the best part, remember the example a few sentences back about the factor of 1.6? Our rates start at a 1.21 to the max of a 1.59 saving you more money.
People choose Metromedia Funding Solutions LLC for many reasons, but the most popular reason is because the company covers all costs involved to get funded. There is NEVER A UP FRONT FEE We cover the cost for the desktop appraisal even with multi- properties transaction. We cover the up front cost on title clerks and recording cost and simply reimburse us after you are funded from your funding. No up front origination costs- we use the same method and allow reimbursement after funding. We choose to use this method because if you were not able to get funded, or if the deal did not work for you then you are not out any money. This makes our staff become results driven.
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