Category Archives: Merchant Cash Advance

Merchant Cash Advance

Using a Merchant Cash Advance as the Hidden Alternative

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You’d think success would be sweet for Crystal White, owner of Everythingbirth.com. The burgeoning business, which specializes in supplying cloth diapers and birth supplies to consumers and midwives, has been around for some ten years. In fact, thanks to a weak economy, Everythingbirth’s sales have grown 300% as young parents, eager to cut down on the spiraling cost of disposable diapers, have called the Maine-based company.

But as White explained in a recent interview on National Public Radio’s “Morning Edition,” the recession has helped her business, but it’s also made it harder to expand. After approaching ten banks, including her own, she was finally told “We don’t take risks on small businesses.”

Indeed, a lack of capital and/or access to capital inhibits growth, reduces the number of employees a business owner can hire, inhibits sales growth, makes it difficult (impossible) to increase inventory to meet demand, reduces ability to provide benefits to employees, and may force closures of stores or branches. For Everythingbirth, the cushion would allow White to offer benefits to employees, hire more staff and move from her garage to a larger location.

White is not the only small business owner finding it hard to invest in her own future. A recent press release issued by the National Small Business Association (NSBA) reported some 36 percent of those surveyed reported an inability to garner adequate capital. This number was higher among the smallest businesses.

Yet the fact remains that small businesses, however they struggle for capital, are looking to grow. In 2010, when we looked at how business owners would use a Merchant Cash Advance, we found slightly more than half (53%) needed Business Working Capital. The number increased fractionally in 2011 to 54%. The second-largest use (37%) for an MCA was to fuel growth initiatives, including purchases of inventory, equipment, remodeling, advertising, expansion and other forward-thinking investments. Only 10% (11% in first quarter 2011) needed cash for stabilizing, emergencies and “other” uses.       

Comparison of MCA Surveys

Cash Usage 2009-10 2010-11
Business Working Capital 53% 54%
Growth Initiatives 37% 37%
Stabilizing, emergency or “other” 10% 11%

Our respondents are not alone. In 2008, the NSBA surveyed small and mid-sized businesses. The question: “If you were able to obtain capital, what are the first three actions you would take?” yielded responses that spoke to business owners’ desire (and need) to invest in growth. These included 36% who would invest in advertising and 30% who want to hire additional employees. (For a detailed look at this survey, visit http://www.merchantcashadvanceinfo.com/2008/08/how-would-you-spend-it.html

The way a Merchant Cash Advance works, your business gets the lump sum of capital needed right away by selling a fixed amount of future credit card receivables. Spend that on whatever your business needs. Then over time, the obligation is handled through your credit card processor forwarding a fixed percentage of your credit card sales to the Merchant Cash Advance provider. (Learn more about how a Merchant Cash Advance works.)

While a Merchant Cash Advance is not the answer to all your business’ finance needs, consider using one to invest in your company’s growth, hire the employees that can help you optimize an influx of new orders and build out space to grow even more.

Links

http://www.npr.org/2011/08/09/139234779/diaper-business-does-well-in-down-economy

http://www.nsba.biz/content/4141.shtml

http://www.merchantcashadvanceinfo.com/2008/08/how-would-you-spend-it.html

Using a Merchant Cash Advance to Pay for Maintenance

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Merchant Cash Advance and Maintenance

The least expensive way to pay for repairs to your business’ property, equipment and building is to engage regularly in preventive or scheduled maintenance.  The problem many business owners face is how to keep up with, and then pay for, preventive maintenance that may not, at the moment, seem necessary.

Preventive maintenance is conducted to keep equipment working and/or to extend its life. Think “service, repair and replace,” which includes evaluating the condition of the item, scheduling replacements, updating its history of repair (against its expected life) and factoring the costs to test and make likely repairs.

Repair maintenance is generally more expensive as it requires more downtime, a more skilled (and therefore expensive) technician to get the item working again and, because breakdowns always seem to happen during the busy season. The time lost during repair must be added to the final bill. Owners must also consider the frequency of repairs on items not maintained and the effect on the environment of property that has been properly maintained versus that which has not. While maintained equipment and property almost always last longer and commands a higher resale price than that which has been used to “death,” the array of possible maintenance repairs can seem overwhelming.

For example, company or personal automobiles used for business require both summer and winter maintenance. When temperatures are extreme parts can become brittle and crack, fluids break down and tire pressure drop. All of these compromise safety and lessen gasoline mileage.

In warm weather, the cooling system has to work harder to prevent the engine from overheating. Check the radiator, belts and hoses for leaks or cracks. Be sure all the connections are snug, and make sure all the fluids are “topped off.” The engine belts also drive the air conditioner’s compressor, so also inspect this system for worn or damaged belts.  Because warm weather can increase the temperature of brake systems, causing pads to wear more quickly, it’s important to inspect the pads and rotors for wear more frequently in summer.

In winter, battery and charging systems should be tested by a trained technician who can ensure the battery terminals and cable ends are free from corrosion, and the connections are tight. (Tip: For a complete checklist, look to AAA or meet with your mechanic to establish a strategy for routine maintenance, especially if the business has more than one car.)

When it comes to caring for the safety and aesthetics of your landscaping, there are two major costs: labor and supplies. Outside of hiring or trading for help, there is nothing you can do about the sweat equity required to keep your grounds safe and attractive. Fortunately, there are ways you can save on the cost of supplies. For example, consider buying from local landscaping companies who can deliver mulch and other products, in bulk, at a fraction of the cost of big box stores.  If the prices sound great, but the quantity is more than you really need, consider buying in bulk and splitting the cost and the product with neighboring businesses.

A little known fact is that some townships offer free landscaping supplies to residents and small business owners. Landscaping benefits the aesthetics of the entire town, not just the person who is putting in the work. More to the point, local governments do not want to get stuck with excess supplies. If not used, some supplies, such as mulch, will otherwise go to waste. To find out what your town offers, call your local borough or township headquarters and ask if they offer anything for free.

Neglecting to remove leaves from mulch beds in the fall may not seem like such a big deal when the snow is falling, but by spring your mulch will need replacement. By keeping up with seasonal maintenance, you can avoid having to make the same purchases year after year.

Breakdowns in any business can mean costly repairs which drains your cash flow. Making sure equipment, property and land is well maintained will save your business a pile in utility and replacement costs.

To keep regular maintenance requirements under control, create a calendar with the recommended maintenance dates for all parts and equipment, including monthly, quarterly, semi-annual and annual check. The schedule should note when, for example,   air filters should be changed (at least quarterly), exhaust- and supply-fan bearings should be lubricated, and when thermostats on cooking and air-conditioning equipment should be calibrated.

In fact, because organizing and implementing a complete maintenance schedule could be a full-time job for someone in your company, consider purchasing a maintenance tracking and scheduling software package. Here, tasks can be tracked by dates or units (track tasks by miles, hours, copies, etc.) and you can create a set of color-coded charts that let you know when actions are necessary.

Keep in mind that, while a Merchant Cash Advance  provides working capital that business owners can use to cover sudden expenses, disruptions in services, or to stabilize cash flow during emergencies, the best use for a Merchant Cash Advance is as an investment in your company’s growth. Because equipment and property that has been properly maintained lasts longer and costs less to own, investing in a program of regular maintenance prevention might be a good use for a Merchant Cash Advance for some businesses.

The way a Merchant Cash Advance works, your business gets the lump sum of capital needed right away in exchange for selling a portion of its future credit card receivables. Spend that on whatever maintenance-related expenses your business needs. Then over time, the delivery of the sold receivables is handled through your credit card processor and normal sales activity. (Learn more about how a Merchant Cash Advance works.)

Business Seasonality and Cash Flow issues

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Cash flow issues due to seasonality

Business seasonality can be as varied and unexpected as the seasons of the calendar year. But, like the calendar, the majority of changes are familiar and even fairly predictable.

Anyone who’s been in business more than a year or two knows the seasonality of their own industry. These are the times when weather, holiday and event-related aspects of the four calendar seasons provide certain unique opportunities to succeed or fail.

A business’ seasonality may be closely tied to and dependent on the calendar season’s heat or cold and are challenged when the expected climate does not materialize. For example, Florida beach attractions dependent on sunny skies must be able to deal with (or be insured against) the early hurricane, Colorado ski lift operators faced with a month of no snow need a Plan B and the lawn care services dealing with droughts or floods must turn their attention to clean up and recovery of client properties. 

For other businesses, especially retail-related shops and on-line sellers, owners can expect fluctuations during traditional “shopping seasons,” which span the calendar year. These include the obvious Holiday gift-giving season, but each month has its opportunities. Can your business take advantage of January’s rise in fitness and self-help spending or February’s sales in chocolate, flowers and fine dining and other romance-related buys? Even in March, arguably the slowest sales month in anyone’s year, consumers get out. This month is when churches see spikes in attendance! Easter, Mother’s Day, and even Independence Day are holidays when consumer spending increases, if not for gifts, then certainly for food, dining and travel. Other predictable seasonal events include summer weddings and graduations, back-to-school events and vacations.

Maintaining your business’ cash flow between spikes can be challenging, especially to the small business owner. Ideally, you’ve transferred profits from your busy season to a reserve fund with which to pay for expenses and salaries. These funds, if sufficient, can also be used to invest in the future of your business with upgrades and necessary maintenance of buildings, landscaping and computer systems.

The slow time is a great time to take stock of the year, check out the competition and develop marketing plans. However, if a business owner has not, for example, saved some of the income generated during their busiest season to cover expenses for these slow times, they will find themselves in trouble.

By managing your invoicing, that is, getting a percentage payment up front from customers whenever possible, you will improve cash flow. Negotiating extended payment terms from your vendors, thus spreading your payments over six months to a year will mitigate hefty bills for materials and inventory in advance of your selling season.

If your business needs additional cash flow during the slow season, consider earning income from alternative sources. Landscaping service companies can shift to snow removal, while ice cream vendors can add winter-themed baked goods and hot beverages when temperatures go down. Be sure to stay within your area of expertise when expanding to new seasons; this will keep the business focused. Also, be sure to investigate license requirements when offering new services.

Using a Merchant Cash Advance to cover cash flow during a seasonal dip may be an alternative to consider for your business. The way a Merchant Cash Advance works, your business gets the lump sum of capital needed right away in exchange for selling a portion of its future credit card receivables. Spend that on whatever your business needs during the slow season. Then, when business is brisk, the delivery of the sold credit card receivables is handled through your credit card processor and normal sales activity. (Learn more about how a Merchant Cash Advance works.)

Keep in mind that, while a Merchant Cash Advance  provides working capital that business owners can use to cover sudden expenses, disruptions in services, or to stabilize cash flow during emergencies, the best use for a Merchant Cash Advance is as an investment in your company’s growth.  The best way to handle seasonal cash flow issues is good planning.

Using a Merchant Cash Advance to take care of timely expenses

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Using a Merchant Cash Advance to take care of timely expenses when waiting for reimbursements or rebates

Reimbursement or RebatesIn an orderly world, a business’ cash flow might be limited to a simple ratio of payables and receivables, with the latter consisting of payment for work or goods. Instead, most business owners must deal with a miscellany of receivables that include reimbursements of expenses involved in complex projects, insurance claims and settlements, and even cost-saving rebates. For small businesses, which may lack the resources to wait out the weeks (or months) it can take to receive a reimbursement or rebate, the waiting game can put their operations in peril. Business owners can cut down on lengthy delays by ensuring that records are correct and current, but there are times when waiting for needed cash just isn’t possible.

For many small business owners, getting a contract with a government agency or even a large corporation is the answer to a prayer. The projects generally pay well and the personal connections, once made, can ensure more work to come for many years. After all, behind all big brands are regular people who don’t like breaking in newbies any more than the rest of us. That said, understanding the kinds of reimbursement open to government agencies and their contractors may be useful. 

Cost reimbursement is the settling of expenses that are accrued during the process of working on a project. Depending on the terms of the agreement, this type of reimbursement may take place when the project is completed or even if the project ultimately fails or falls short. There are several different examples or types of cost reimbursement, including the contractor reimbursement, which repays contractors for any expenses they incur while performing tasks or fulfilling commitments associated with a specific project.

Cost-plus reimbursement is intended to not only defray the costs incurred by the contractor, but also allow a reasonable amount of additional compensation for time spent working on the project.

Actual cost reimbursement covers actual costs. Here, the contractor may be required to submit documentation to confirm the line items identified in the reimbursement request, much in the same manner that an employee submits receipts when filing an expense report with an employer. The documentation and the amounts on the request are cross-referenced with the terms and conditions found in the contract. Assuming that the expenses are in harmony with the provisions of the contract, the reimbursement is issued to the contractor.

With all types of cost reimbursement, the need to keep accurate records of all expenses is essential. Doing so makes it much easier to prove that a given expense is actually associated with a function assigned to the contractor, and that the amount of the expense is within the terms of the agreement. While the due date for a government agency to pay an invoice is the 30th day after the designated billing office receives a proper invoice from the contractor, delays can occur, especially when records are inaccurate, sloppy or open to interpretation.

The same holds true for reimbursements due on insurance claims where myriad errors can creep into the process. The Health Care Financing Administration has streamlined practices that make filing medical claims easier with the HCFA-1500, a standardized form used to submit health insurance claims, but “little” mistakes like an incorrect Social Security number or date of birth, gender or typos when keying insurance identification numbers can turn a simple process into a long delay. Other common errors business owners should look for include incorrect or unmatched procedure codes, insufficient (or neglected) prior authorization and debates between the insurer and the patient (and physician) relating to medical necessity. Rejected claims can often be appealed successfully, but the time it takes will hurt your business’ cash flow.

It takes a particularly savvy and dedicated business manager to track and optimize the available rebates open to business owners in all kinds of industries. Information on rebates for “green” or energy-efficient initiatives in particular are easy to find on sites such as recovery.gov and business.gov.  While some rebates can arrive in as few as three weeks, most require shepherding from the business owner.

Keep in mind that, while a Merchant Cash Advance  provides working capital that business owners can use to cover sudden expenses, disruptions in services, or to stabilize cash flow during emergencies, the best use for a Merchant Cash Advance is as an investment in your company’s growth. Using an MCA to stabilize cash flow while awaiting a reimbursement may be an alternative worth considering for some businesses.

The way a Merchant Cash Advance works, your business gets the lump sum of capital needed right away in exchange for selling a portion of its future credit card receivables. Spend that on whatever your business needs. Then over time, the delivery of the sold receivables is handled through your credit card processor and normal sales activity. (Learn more about how a Merchant Cash Advance works.)

Small to medium sized business owners receive a combined 2 billion dollars in funding from AdvanceMe, Inc.

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How can a small business innovate, expand, or continue operations without the necessary capital? The simple answer: It Can’t. For the last 12 years, AdvanceMe, Inc. (AMI) has been providing small business working capital to tens of thousands of restaurants, retail stores, online businesses and medical practices through its Merchant Cash Advance (MCA) product.  Recently, AMI crossed a big threshold, announcing that it has now provided more than $2 billion in MCA funding to their merchants. 

This milestone is the result of AMI’s continuous effort to offer a quality working capital option. Testimonials from AMI customers describe their experiences as ”win-win” for the businesses and a “painless process” to obtain working capital.  Many members of the AMI staff are veterans of the industries that AMI funds, and they are  dedicated to making their customers’ experiences  professional, easy and fast.. AMI credits their achievement of the $2 billion milestone in large part to their implementation of Capital Access Network’s Daily Remittance Platform (DRP) which enables AMI to approve and manage many more MCA’s than would be possible with traditional risk scoring and risk management models. AMI also attributes its funding volumes to its development of national sales partnerships and alliances together with continued product enhancements that have increased the appeal of the AMI MCA more merchants. 

AMI has provided funding to more than 40,000 small and medium sized businesses representing over 600 SIC codes and including more than 100 leading franchise concepts such as Subway, Dairy Queen and KFC.  Three out of four eligible merchants decide to renew their MCA with AMI and to date, AMI has entered into more than 78,000 separate MCA transactions. 

AMI merchants see AMI MCA’s as a good way to access the capital they need to grow, renovate, purchase inventory or meet emergencies. For more information regarding AdvanceMe Inc., and the many benefits of a Merchant Cash Advance to small to medium-sized businesses, view the AMI home page www.AdvanceMe.com.  There you can also review the company’s press release concerning its $2 billion in funding www.advanceme.com/merchant-cash-advances-to-small-businesses.htm.