Checking Out the Financial Credit Zone

Merchant cash advance (MCA) offers you a quick and easy way to procure funds for small and middle-sized businesses, in exchange for a portion of your credit card receipts. Since merchant cash advance is considered a purchase, rather than a loan, it is not bound by financial regulations and is outside the purview of financial regulators. With the MCA industry set to cross the $10 billion mark, a number of unscrupulous providers have entered the industry to enjoy a share of the profits. To maintain the integrity of the industry and guard you against financial malpractices, major MCA companies have collectively formed the North American Merchant Advance Association (NAMAA).

NAMAA has issued the following guidelines to enable you to segregate genuine providers from fraudulent ones, and retrieve maximum benefit from MCA funding:

Inappropriate Terminology

Guard yourself against inappropriate or complex terminology in merchant cash advance contracts. According to NAMAA, beware of MCA providers who use the term "loan" to refer to your financial transaction or issue contracts that involve personal guarantees. Make sure that you understand every term in your contract and its implications. This is even more important when you are dealing with a provider who sells a host of other financial products in addition to MCA.

Risk Management Processes

Experienced and reputable MCA providers rely on underwriting process to analyze the risk involved in your financial transaction. For this, legitimate providers will ask you for two pieces of information - number of months you have been in business and your monthly credit card statements. You do not have to provide your financial statements, tax returns or other asset documentation to receive the funds. Even though the funding is fast and you will receive MCA funds within a week, be wary of providers who are willing to offer funds to you without collecting the necessary application details about your business performance.

Collection Tactics

Merchant Cash Advance industry has created a set of standards to define acceptable conduct and collection tactics. To make your MCA transaction beneficial and profitable, a set of appropriate collection rates have also been defined. Inquire about these rates before signing the contract.

Fixed Retrieval Rates

In a merchant cash advance transaction, repayment amount is a fixed percentage of revenue. In periods of low revenue, you pay small amounts and when times are good you pay bigger amounts based on agreed upon fixed percentage. To guard against fraudulent providers, MCA providers are forbidden from including steep rate increases in your contract or retaining the right to change the payment percentage at will. Make sure your retrieval percentage is clearly stated in your contract and that the same cannot be changed without your written consent.

Survey the terms and conditions offered by multiple providers before finalizing your MCA transaction. Ask for a sample copy of the contract and study it carefully. To get the most out of your merchant cash advance business opportunity, learn about the industry best practices and standards before you select your MCA provider.

About the Author:

Daljeet Sidhu. Merchant Cash Advance quotes. Merchant Advance. advice. Buy business cash advance leads.

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