Have you been considering a Merchant Cash Advance and trying to sift through and understand all of your choices?  There are several options calling themselves Merchant Cash Advances (MCA). One is known as an ‘ACH loan product’ where a daily ACH debits your business bank account (they are generally not loans, but merchant cash advances in a different package and sometimes referred to as a ‘cash flow loan’).  Another is known as a ‘credit card split processing product’.  Let’s discuss the advantages of the split processing product as opposed to the daily ACH merchant cash advance but, before we get into the differences, answer this question: When was the last time you wrote a paper check?

First, let’s establish the difference between the two:

• A credit card split processing product/Merchant Cash Advance is an advance based upon your regular and mostly predictable volume of credit card transactions.
• An ACH/cash flow loan/Merchant Cash Advance is based upon the gross receipts of the business.

Certainly, if you’re in business or using your personal credit, you’ve become accustomed to either having your business or personal bank accounts debited by vendors or creditors, or you’ve called in a payment resulting in a debit. The standard method of debit (or credit) in the United States has become ACH which stands for Automated Clearing House.

Each year, the ACH Network moves more than $40 trillion and nearly $23 billion electronic financial transactions, and currently supports more than 90 percent of the total value of all electronic payments in the United States. As such, the ACH Network is now one of the largest, safest and most reliable payment systems in the world.

With all this electronic traffic, it’s important to stay on top of who’s taking what and when. If you’re not careful and there are multiple debits at a time of inadequate funds, you can end up in a downward spiral of fees. It becomes easy to understand a recent article posted on CNN money that indicated America’s three biggest banks earned almost $6 billion dollars from overdraft fees alone in 2015. That equals $25.00 for each adult in the United States. The average charge for an overdraft is $34.  If the ACHs are returned to the company who provided a cash advance under a daily ACH contract, your business is now responsible for penalties accessed by the funding company as well as any overdraft fees accessed by your bank.  You may quickly find your business at risk and swimming in red ink.

In contrast to the above scenario, the split processing merchant cash advance product would not have incurred fees. Since the payment amount calculated is based on a percentage of your actual sales via credit card transactions, if your sales drop - the payments drop proportionally. 

Ask yourself, can you handle an unexpected business interruption if your daily ACH cash advance contract requires a daily ACH, when the funds just aren’t there? Wouldn’t you be better positioned to survive a sudden downturn if your merchant cash advance is based on a percentage of your actual credit card sales? The logical conclusion is the daily ACH product is more likely to put your business at risk should something unexpected happen. Additionally, Quikstone Capital Solutions never requests a banking login and password or daily online access to a merchant’s bank account.

This is just one example of the different types of merchant cash advances available. We encourage you to do your homework. It is best practice to thoroughly read any contract that you sign. Hidden fees seem to be the rule and not the exception when it comes to “business loans”. Most are really just repackaged merchant cash advances.

At Quikstone Capital Solutions, we encourage our customers to thoroughly read their funding contracts and we are more than willing to go over agreements with our customers in detail. More than 70 percent of our customers are repeat customers with Quikstone Capital Solutions. In fact, the customers who have tested the competition usually return to Sterling because of our honest approach. Growing your business is our business, and we’re happy to help you along the way.