Boldmont Lending, an Urbana, Illinois small-business funding service, explains merchant cash advances for Champaign County, IL businesses with steady card sales. An advance is not a loan: a funder buys a share of future receipts and collects it as sales come in. This page compares advances with revenue-based financing, factoring and daily-payment loans.
At a glance
- What it is
A purchase of future receipts, not a loan
- Collected by
Part of each day's card or bank receipts
- Who decides
The funder
How a merchant cash advance works in Urbana, IL
The funder pays you a sum now in exchange for a larger amount of your future receipts. It then collects a fixed share of each day's card settlements, or a fixed daily or weekly amount from your bank account, until the purchased amount has been remitted. The cost is set by a factor: an advance with a factor of 1.3 means $1.30 is remitted for each $1.00 received.
Illustration only, invented figures: a $20,000 advance at a factor of 1.3 means $26,000 is remitted, a dollar cost of $6,000. If the funder collects $260 each business day, the $26,000 is remitted in 100 business days (26,000 / 260).
Questions to answer before taking a merchant cash advance in Urbana, IL
- What is the total to be remitted, in dollars, and what is the amount received after any fees?
- Is collection a share of card settlements or a fixed daily amount?
- Can the collection amount be adjusted if sales fall, and how is that requested?
- Is there any discount for remitting the full amount early?
- How will daily collections fit beside rent, payroll and supplier bills?
If the answers leave doubt, compare the advance with working capital or a line of credit before signing. An advance fits a short need backed by card sales that are steady and well documented.
Daily payment business loans in Urbana, IL
A daily-payment loan and a merchant cash advance can both take money from your account every business day, but they are different contracts. The loan has a principal balance and a fixed schedule. The advance has no principal balance; it is a purchase of receipts, and the amount collected may be tied to sales. Read which one an offer is before comparing them, because the rights and the cost math differ.
How does revenue based financing work?
Revenue-based financing gives a business a sum in exchange for a percentage of future revenue until a set total, the cap, has been remitted. In good months more is collected, in slow months less. It is similar in shape to a merchant cash advance, but it is written for subscription or software businesses and collected monthly rather than daily.
Revenue based financing vs MCA: what Urbana, IL owners should know
| Feature | Revenue-based financing | Merchant cash advance |
|---|---|---|
| What is bought | A share of future revenue | Part of the card or bank receipts still to come |
| Collection | A percentage of monthly revenue | A daily or weekly share or fixed amount |
| Cost stated as | A cap, a multiple of the sum received | A factor, a multiple of the sum received |
| A loan? | Written as financing; read the contract | No; a purchase of receipts |
For either one, convert the multiple into dollars and set it beside the time it is likely to take to remit.
Reverse consolidation offers for existing advances, viewed from Urbana, IL
A business with more than one advance may be offered a "reverse consolidation": a new funder makes regular deposits into the business account that cover the existing advances' collections, and then collects its own, larger amount over a longer period. It does not pay off the existing advances at once. The new funder's total collected amount adds to what is already owed under the earlier contracts, so the total dollar cost has to be added up across all of them.
Revenue based financing vs factoring in Urbana, IL
Factoring is the sale of specific unpaid invoices to a factor at a discount; your customer then pays the factor. It fits a business that invoices other businesses and waits on payment terms. Revenue-based financing and merchant cash advances look at future sales overall rather than invoices already issued. Firms that bill on terms, such as contractors and professional firms, may compare factoring with a line of credit instead.
Revenue based financing vs venture debt, seen from Champaign County, IL
Venture debt is a loan made to companies already backed by venture capital investors, alongside warrants. It is a different world from a storefront's card receipts. A local business with steady card sales and a short-term need is comparing an advance with working capital or a line of credit, not with venture debt.
Compare all six options on the comparison page , see which trades run on card sales on the industry pages , read county figures on Boldmont's page on Urbana, IL , or begin with the online request .
By Boldmont Lending · Updated