Guidelines to Follow for Business Cash Advance Companies

With the economy still on the edge after the sub prime mortgage debacle, entrepreneurs are finding it tougher than ever before to qualify for a traditional bank loan. A a> may be a perfect solution. A fast approval time, viable cash advance amounts of up to $250,000, and a flexible payment term are all motives for pursuing this alternate path for the working capital your business needs.

Still, a small business owner would do well to look at more than just the working capital they can obtain. The North American Merchant Advance Association (NAMAA) has guidelines of best business practices which they endorse for business cash advance companies. If the company giving you a business cash advance does not adhere to these rules, it is probably best to look somewhere else. The practices are as follows:

-Provide transparent disclosure of fees - NAMAA doesn't condone closing fees as part of the approval process of merchant advances but recommends that any such fees be transparently explained and disclosed. The total payment number should be entirely explained and figured out prior to finalizing the contract.

-Provide transparent disclosure of liability - In reality, merchant advances are not considered loans; instead they are regarded as a purchase of future Visa-MasterCard receivables. As such, the small business owner can be held personally in debt for any working capital not returned if the small business owner opts to violate the contract.

-Be sensitive to a small business owner's business cash flow - A basic contract involves that the small business owner repays a certain percentage of Visa-MasterCard receivables on a daily basis.

-Marketing materials disclosure - All marketing materials should make it clear that the contract is one of factoring, not a loan.

-Stay on top of your Sales Agents/Brokers - Merchant advance companies should ensure that their sales agents or brokers are appropriately representing the program.

-Verified repayment of outstanding Merchant Cash Advance Balances - if a small business owner opts to take an additional merchant advance with a new lender the new lender should immediately repay the prior balance instead of trusting the small business owner to repay the balance.