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Sep
12
2011

Merchant Advance: Finance for Retailers

Nova Merchant Cash Advance

Retail Funding

A Nova Merchant Cash Advance is sale of future credit card and debit card receivables to a provider who purchases these future sales at a discounted rate.

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Creative Commons License photo credit: Daquella manera

Merchant cash advances are most often used by retail businesses (even on-line business) that do not qualify for regular bank loans despite having a well established business.

Merchant cash advances are not loans in the usual sense of the word- they are a sale of a portion of future credit and/or debit card sales.

Despite the cost of merchant cash advances, the structure has many advantages over the structure of a conventional loan.

Most importantly, there is no fixed weekly or monthly repayment amount; repayments on the advance fluctuate directly with the merchant’s sales volumes, giving the merchant greater flexibility in managing their cash flow; particularly during a slow season. Additionally, the ease, simplicity and speed of the application process, as well as the lower “hurdles to approval” associated with merchant cash advances are significant advantages.

An example transaction is as follows:

A business sells $27,000 of a portion of its future credit card sales for an immediate $20,000 lump sum payment from Nova. Nova then collects its portion (generally 20%) from every credit card and/or debit card sale until the entire $27,000 is collected.

This type of advance is particularly useful for retail businesses that do not usually qualify for bank loans or traditional business finance products.

Imagine a coffee shop that needs a refurbishment, or a retail business wants to run a promotion or a store wants to take on a fantastic new product line; but does not have the capital – as long as they have been in business for over two years backed by good financials then a merchant cash advance maybe just what they need.

Visit www.nbf.com.au

For more information contact jeremy@nbf.com.au

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