Business Lines of Credit

Business lines of credit are enticing to many business owners because they represent a money reserve that can be tapped into whenever needed.  Usually a business line of credit specifies a maximum amount of debt that the business can have outstanding at any given time.  The business owner draws on the line of credit as needed, and only pays interest on the amount they have drawn down.   

Unfortunately many business owners - especially small businesses -- aren’t qualifying for lines of credit as easily as they used to. 

First Merchants offers an alternative solution in the form of a business cash advance.  The way it works is that First Merchants purchases a fixed amount of your future credit card sales in return for cash today.  Then over time, a small percentage of your credit card receipts is deducted until the amount originally purchased has been collected. 

First Merchants has many advantages over other cash advance companies.  One of the key advantages is that our advances really do work like a business line of credit.  When you need additional funds - even if you haven’t fully paid off the initial advance - you submit a request for funds and we review that request within 1-2 days.  If your business remains healthy, we will advance you further funds without any fees or charges at all.  We just add the new outstanding amount to your line of credit.

In contrast, most other merchant cash advance companies require that you pay off the existing advance with the new money, therefore re-discounting the funds you have already received.  It’s like paying double interest!   Here’s a concrete example. Let’s say you used The Great Cash Advance Company (a fictional name) to get $100,000 in June at 85 cents to the dollar.  That means that they would be looking to collect $117,647 ($100,000 divided by .85) from you over the next 12 months.  Now suppose you went back to them to get another $75,000 in January, when they had collected $70,000 of their receivable (leaving a balance of $47,647 still to be collected).  Great Cash Advance might fund you another $75,000, but they would apply $47,647 of that to pay off the existing balance owed, and you would only net $27,353. More importantly, on the $47,647 used for the payoff, you effectively paid a double discount because you owe Great Cash Advance $56,055 on that money ($47,647 divided by .85).  You’ll end up having put a grand total of $127,353 in your pocket, and you’ll have to repay them $173,702 - a net discount rate of 73 cents to the dollar.   

With First Merchants, you never pay a double discount or extra funding fees.  In the same scenario as above, we would simply advance you another $75,000 at the normal discount.  So when the dust settles, you would have gotten $175,000 in cash and would repay First Merchants $205,882 over the next 12-18 months - keeping you at a steady 85 cents to the dollar. 

Find out more about our underwriting process!

For more information, call us at (866) 936-2530