Merchant Cash Advances (credit card receivable funding)... Good or Evil? you are a restaurant owner. Chances are you’re getting bombarded at least weekly by sales reps, phone calls, faxes, direct mail pieces, strip-o-grams, etc. approaching you with a unique program that can get you working capital based on your credit card sales. Sound familiar? Heads are nodding I’m sure.

Since it is becoming more mainstream every day, I am assuming most restaurant owners are somewhat familiar with what a Merchant Cash Advance is. I am also assuming others are not so familiar. I am writing this in hopes of soliciting comments and questions. I really want to know what thoughts, perceptions, and experiences (have you used this type of funding?) are out there.... both good and bad.

What is a Merchant Cash Advance? Here's the crash course. Well, first of all... it’s NOT a loan. There is no interest rate, APR, etc. It has a fixed cost known as a discount rate. It is a form of factoring or simply put.. a purchase and a sale. Merchant Cash Advance companies (aka the Factor) agree to purchase a percentage of a merchant’s future credit card sales at a discount. In turn, the merchant gets a cash advance (usually from $5K to $200K) against those future sales to inject into their business any way they see fit. In most cases without personal collateral or guarantees.

Because the Merchant Cash Advance company assumes all of the risk (advancing a merchant funds against sales that haven’t even occurred yet) this type of funding does come at a premium. This is where it gets scary. Discount rates range from 20% - 50%.

At some point most restaurant owners are going to need money. They may want to expand, replace broken or outdated equipment, fund an advertising campaign, buyout their bipolar cheez whiz addict evil partner, whatever the case may be. Now, we all know how much banks and traditional lending institutions adore the restaurant industry. That’s right... they roll out the red carpet every time they see you coming. They just can’t wait to lend you money.

Traditional wisdom dictates that when you go looking for money...get the best rate possible. If you can secure bank/traditional money at a good rate and good terms...go for it. It is without argument the best route possible. But for those out there that do not get the red carpet treatment from your bank...where do you turn? Friends? Family? Many have gone that route as well.

A Merchant Cash Advance is simply one more option to explore and it is a viable one. Again, the cost of the funds are high. With that being is not for everyone. If you are needing working capital just to keep your doors open, meet payroll, pay off high interest debt, buy a new Corvette, or float yourself through a seasonal rut.....RUN AWAY! This option is not for you.

But, if you can spend $2 and make $5 or’s very much worth considering. This type of funding absolutely has to be used strategically. There must be a realistic return on investment for it’s use. From my own personal experiences in this industry I have found that most of the business owners I have funded are opportunists. They find a way to make money, save money, or solve a problem with a Merchant Cash Advance. All without the headaches of traditional lending. 70% of them come back for future fundings as well. Many of these business owners are A&B paper, they use our funds to supplement their bank money. For others, the accessibility of the funds simply outweighs the cost.

So, is it Good or Evil? What’s your take?

Tags: capital, finance

Views: 56

Reply to This

Replies to This Discussion

Carol.... I feel your pain. I hear this from merchants all of the time. Because the Merchant Cash Advance industry is not regulated there are predator companies out there that do run boiler room phone shops. Many are off shore. I assure you that there are legitimate companies out there however. You just have to be careful as you would with any purchase or business decision.

If you ever get into a "financial jam" or have a strategic use for a cash advance... please contact me. That's why I am here. I will educate you and guide you any way possible. Again.. unfortunately there are clown companies out there doing this and you are right on for being wary.

Best of luck and fortune in your business ventures!

Doug Golden
AMI Funding Specialist
AdvanceMe, Inc.
I have known many a successful restaurateur to utilize services such as these, some by Tim Long himself. The bottom line is using the money to turn a profit, and relatively quickly, which can be tough in this business. If you use poor judgment, or are not using the money to make money, Merchant Advances typically come at much to high of a cost. If you use the money wisely, it can absolutely be worth it.

Just like many different industries, there are shady people working in them, but there are also good ones. I work in the merchant services industry, which typically carries not the best reputation even though there are plenty of honest, hard working, customer focused people working in that industry. I have heard of Doug's company many times, and I know Tim personally, as he is a fellow member of the Mid-South Restaurant Consulting Group. Neither come from a "boiler room" scenario, but some do in their industry, so make sure you are dealing with a reputable company (and perhaps even someone from FohBoh!) when utilizing these types of financial services.

My vote is absolutely good, if used correctly!
One of the most expensive forms of financing..............Interest rates are enormous

If your bank says NO!!!..............there might be a good reason.
Use only in an emergency
Great! Thanks for the great article posting and your all effort. I think the above article is valuable for all concerned people about this topics. For me the Informations are really really useful for my research. I've Bookmarked this page for future reference
merchant cash advance
merchant cash advance business
We offer a real loan product that cost half what a Merchant Cash Advance does. Our rate is 14.99% where the average Merchant Cash Advance rate is 35%, we are less than half!!! The loan is unsecured and we accept FICO Scores as low as 500.

You can visit our website and click on the "How It Works" page. If you have any questions you can reach me at 901-324-5237 Tim





Social Wine Club for Craft Wineries


Kids LiveWell atwitter over Twitter party

In its continuing effort to promote more nutritious and flavorful children's menu options, the NRA will hold a Twitter party  -More

Starbucks could become top on-premise wine seller in U.S.

Starbucks is planning to slowly expand its evening sales of wine, beer and small plates to thousands of selected stores throu -More

The evolving nature of snacks

Snacks have shifted from an after-school treat to a meal alternative as meal times become more fragmented.  -More


Posting a job or finding a job starts here at FohBoh. Call us about special $25 posting packages to syndicate across all major jobs boards.

National News

Wahlburgers Announces Expansion Plans Including Franchise Agreement in Philadelphia

Wahlburgers has signed a franchise agreement with Hingham Associates, LLC that will bring five Wahlburgers to the metropolitan Philadelphia area over the next several years. The franchise group is actively looking at sites and is targeting a late 2014-early 2015 opening for its first restaurant.

Chipotle Mexican Grill, Inc. First Quarter 2014 Revenue Up 24.4%

Comparable restaurant sales increased 13.4% - Restaurant level operating margin was 25.9%, a decrease of 40 basis points

Jamba Juice Announces Grand Opening of New St. Louis, MO Location

Jamba Juice Company announced the brand’s continued expansion in the St. Louis market with the opening of a Jamba Juice® store at 11477 Olive Blvd. on April 16, 2014.

Expert in Real Estate Analytics Joins Luna Grill

Luna Grill, the San Diego-based Mediterranean restaurant chain, is welcoming retail real estate industry veteran Greg Thorburn to its leadership team. Thorburn has been brought on board to fill the newly created position of Vice-President of Real Estate.

Rita's Italian Ice Awards Area Development Agreement for Kansas

Rita's Italian Ice has awarded franchise and area development agreements for Kansas and the Kansas City area, which extends to the Missouri side of the city, to franchisees and local residents Jay Miller, Jeff Miller and Pat Reilly.


If you are looking for capital to start or grow your restaurant, create the next 501c3, develop and launch the next app for the restaurant industry,or want to help your peers in some meaningful way, we want to know about it.


TED: Matthew Carter: My life in typefaces - Matthew Carter (2014)

Pick up a book, magazine or screen, and more than likely you'll come across some typography designed by Matthew Carter. In this charming talk, the man behind typefaces such as Verdana, Georgia and Bell Centennial (designed just for phone books -- remember them?), takes us on a spin through a career focused on the very last pixel of each letter of a font.

TED: Jeremy Kasdin: The flower-shaped starshade that might help us detect Earth-like planets - Jeremy Kasdin (2014)

Astronomers believe that every star in the galaxy has a planet, one fifth of which might harbor life. Only we haven't seen any of them -- yet. Jeremy Kasdin and his team are looking to change that with the design and engineering of an extraordinary piece of equipment: a flower petal-shaped "starshade" that allows a telescope to photograph planets from 50,000 kilometers away. It is, he says, the "coolest possible science."

TED: Norman Spack: How I help transgender teens become who they want to be - Norman Spack (2013)

Puberty is an awkward time for just about everybody, but for transgender teens it can be a nightmare, as they grow overnight into bodies they aren't comfortable with. In a heartfelt talk, endocrinologist Norman Spack tells a personal story of how he became one of the few doctors in the US to treat minors with hormone replacement therapy. By staving off the effects of puberty, Spack gives trans teens the time they need. (Filmed at TEDxBeaconStreet.)

TED: Jennifer Senior: For parents, happiness is a very high bar - Jennifer Senior (2014)

The parenting section of the bookstore is overwhelming—it's "a giant, candy-colored monument to our collective panic," as writer Jennifer Senior puts it. Why is parenthood filled with so much anxiety? Because the goal of modern, middle-class parents—to raise happy children—is so elusive. In this honest talk, she offers some kinder and more achievable aims.

© 2014   Created by FohBoh.

Badges  |  Report an Issue  |  Terms of Service