Hey! It’s Jonathan Gabel here. Here’s an interesting topic of conversation
in the credit card world… MONEY! Right? Pretty, pretty, common right? We process credit cards and we give you money. Works out pretty good. It’s kind of the foundation of most business these days is cash flow. But what happens when you run out of money? Or your business is slow? Or you’re
super seasonal like we are down in my immediate area which is Southwest Florida where we go gangbusters from January to March or April and then Easter hits
and then everyone just takes off! It’s like they got on a plane and left. It’s crazy! Some businesses have a difficult time
managing that cash flow to keep it stable throughout the course of the year. One of these products that kind of came down the pike about five or seven years ago
is this merchant cash advance or “MCA” for short. And it’s basically like a… a “no
collateral” type of loan. But it’s not a loan.
They’re not allowed to call it a loan for legal reasons. But technically they’re giving you money so it’s kind of like a loan. But, not a loan for legal purposes. So what happens is you’re
basically purchasing future receivables is the technical term. So if I process
a hundred thousand dollars a month in my restaurant every month or on average I can get from these
merchant cash advance programs or companies generally about 110% of that. deposited right into my bank account! Right? …which sounds pretty good! so if you have a… I don’t know…for whatever reason you have an oven go out, you have a freezer go out, something happens where
you need cash super fast, IT ROCKS! It’s super cool! If you need to expand, you want to open up another location, need some cash down… these are all things that you could do with this money because it’s your money,
you can do whatever you want with it. You got to be smart about it cuz it ain’t cheap. IT IS NOT CHEAP! Generally what happens is… it’s a cash advance so you’re again you’re
purchasing that future receivable. If I were to give you
$100,000 today of your future income would you pay X for it? And that’s the
logic, which sounds kind of funky and a lot of these guys that are selling this thing a ton, that’s the way they sell it. Sounds confusing? It is confusing! What it boils down to is you’re gonna pay… …$150,000 back. And the timeframe is generally about 6 months. So we do the math on that and you could
relate it to a loan and an interest… …I mean its astronomical! This tool used properly, can be beneficial. But… you want to be super careful
if you’re going down this route. There are other options out there that are probably more conventional from your local bank stuff like that. Since this industry got really popular and people started realizing how
there’s a fine line in the sand if it’s gonna just send you down off the cliff
or it’s gonna help you out… you really need to use it smart. One of the products that came out recently is American Express does a cash advance
or a merchant funding program, where it’s generally anywhere from about
6% to 10% actual interest. So if you take $100,000 out over the course of the year, you’re gonna pay about 8% on that.
It’s an awesome product! We love it! For businesses that are looking for funds that we’re able provide them, that’s our first… first attempt is to go that route. And if they can’t get approved on that aspect because of… time in business which has to be two years, we have other options as well, but a little more costly. But we try to give it to you in such a way that we’re giving you the information you need to do it wisely, do it smartly, make sure you’re not setting yourself up for failure down the road. But cash advance, merchant funding, it’s a tricky slope! We’re here to help if you need some money. Try to give you some best practice,
let you know, give you a checklist, say “what am i using this money for?
Is it a freezer or is it a midlife crisis Porsche?” Because if it’s a midlife crisis Porsche,
I don’t recommend it. But it’s up to you. I’m not gonna stop you. But I’m gonna say “Don’t buy Porsche.” Go buy another location. Go buy a refrigerator.
I don’t know. Do whatever you need for
your restaurant or your business. Doesn’t have to be just a restaurant. Could be any business at all if you’re accepting credit cards But let us know. Love to help you out. Get you some money. Fix some stuff. Build some stuff. Grow some stuff. And ahh… that’s it.