What You Need to Know About Using Merchant Cash Advances

by Kaylie Phelps

Running a small business can be challenging, but it also can be extremely rewarding. Some small business owners even take it to the extreme by making sure they only frequent other small businesses.

But when it comes to financing a small business, some options are better than others. In the end, it comes down to what you need the cash for. In the case of merchant cash advances, there are a few things that all business owners need to know. As the saying goes knowledge is power, so having a complete understanding of how merchant cash advances work will help you add this useful finance tool to your arsenal.

Merchant cash advances have been around for a long time. They predate the financial crisis and even the internet, though they weren’t called merchant cash advance at the time. The premise is simple, get cash today for your future credit sales and then pay off the advance from a percentage of your credit card sales going forward.

These advances can be useful when looking to meet short-term financing requirements. What makes them so attractive is the fact that traditional banks are largely unable to service this community. It is a shame. According the U.S. Census Bureau, firms with fewer than 100 employees account for nearly 50% of all private sector payrolls. As you can see, there is nothing small about small business.

Unfortunately, the big banks do not feel the same way. Part of the reason is cost of processing loan requests for small businesses. Basically, the processing cost of one $5 million loan is the same as one $50,000 loan – but the banks can make a lot more money on the bigger loans.

Whilst other options have cropped up in recent years. Loan programs such as the Small Business Administration’s (SBA) express program can actually take several weeks to complete and business owners need to spend a lot of time working on a mountain of paperwork. Let’s face if you are running a small business, you don’t have time to wait.

So when a small business owner needs cash fast, they will often turn to a merchant cash advance lender. These unsecured loans are a convenient and cash-flow friendly way to access cash quickly. The application process is often as easy as supplying a business’ merchant processing statements, and bank statements. From there a lender will approve a loan amount based on a percent of future credit card sales. In this way, a business owner can get $20,000 today by pledging $25,000 of future credit cards sales.

While the rates are high, it can be a useful tool when a business needs cash fast. However, the temptation to turn to merchant cash advances to finance every business need should be resisted. Remember, short-term loans for short-term needs as loans usually need to be repaid within six months or less.

Granted the rates are higher than other loans, but merchant cash advances can be useful option when faced with a liquidity emergency. Another plus of a merchant cash advance is that the balance is paid every day until it is paid off. What this means is that you don’t need to save up for a monthly payment and if sales are slow on a given day, you just pay a little bit less.

So what should you look for when considering a merchant cash advance? First, you want to compare lenders. Look at their rate and fee structures, how will the advance be funded, and how will it be repaid.

Check the fine print. Compare programs, as not every merchant cash advance, is equal. Some will take a fixed amount every day, while others will take a percent of credit card sales every day. When comparing, ask for the annual percentage rate (i.e. APR). This will help you to compare rates between lenders to figure out which one is the best fit.

In the end, remember that merchant cash advances are a short-term finance solution and should not be used to finance large-scale capital expenses. Instead, these advances are best used when you need cash quickly and then can pay off the loan quickly. Remember to search for the best deal. Compare terms and rates to see which program is the best fit for you and, if possible, try to talk to past clients to get a feeling for their experiences.


Rules to Follow for Successful CFD Trading

by Kaylie Phelps

CFD trading is an interesting way to invest your money. In CFD trading, you speculate on the rise or fall in price of a particular asset and if your prediction turns out to be correct, you will profit from the trade. Here are a few rules to follow that will help you in CFD trading.

1. Keep Your Emotions Under Control

Fear and greed are the two most common emotions surrounding CFD trading and investing in general. The “gut feeling” may work occasionally, however, emotional trading can also led to impulsive decisions – which you may end up regretting in the future. Logic works better than emotional trading. Thus, if you start to feel a little overwhelmed, it’s time to take a few moments and breathe deeply before making a CFD trading decision.

2. Don’t Put Your All of Your Eggs in One Basket

Placing all of your investing capital in a single CFD trade is the best way to mess up your chances of success. Diversification is probably the most important rule in investing, CFD trading included. As a rule of thumb, each of your trades should be 2% or less of your total investment capital. This way, you will have plenty of trades – and time – to recover from losses. Additionally, by not risking too much in a single trade you will be more able to follow rule #1. That’s two birds killed with one stone.

3. Understand Your Risk Profile

Not all investors can bear the same risk, psychologically speaking. Usually, investors are divided into three types. These are risk-averse investors, those who can bear moderate risk levels, and those who like risk. Your plan, trading strategy, and goals should be aligned with your risk profile. You should analyze yourself and see how much risk can you bear to take. Then, you should make a specific plan or series of sub-rules for each trade you make that will allow you to preserve your mental tranquility at the same time you trade for profits. Also, there is a direct relationship between risk and profits. The more risk you are willing to take, the more your potential of profits in a trade and vice versa.

4. Use Stop Losses

Using stop losses is the best way to manage your CFD trading risks. Even the most temerarious investors can benefit from them. A stop loss will place a limit on the amount you can lose on each trade. This way, you can keep losses at a minimum. Stop losses should never be too close to the initial buying or selling price as it is normal for the market (or an asset) to have a degree of volatility before following or changing its current trend.

5. Use Both Fundamental And Technical Analysis

Never leave your trades to luck. The two types of analysis that should be done in CFD trading are fundamental and technical analysis. Fundamental analysis involves the checking out of news or events that could have an impact on the value of a particular asset. For instance, when oil price goes up, companies that produce oil will most likely than not go up as well. Thus, a news that signals an increase in oil prices such as an agreement for freezing output among oil-producing countries is an indication that trading a CFD on oil or a large oil-producing company is a good idea. Technical analysis involves patterns and other indicators of the chart of a particular asset. With time, you can master both types of analysis.

CMC Markets is a platform where you can trade CFDs. Their platform can also be used in mobiles so any person can trade and use the innovative tools they provide from his or her smartphone.

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