Friday, December 11, 2009

Merchant Cash Advance – It’s in the Way that You Use It

In November, the Green Sheet, an important publication serving the payments industry, wrote an interesting article entitled “The Squeeze in Merchant Cash Advance.”

The focus of the article is how the Merchant Cash Advance (MCA) industry has seen changes in the past few years. (Note: an MCA is sometimes called a Business Cash Advance)

While there are many interesting points addressed in by the article, perhaps the most pertinent to businesses considering an MCA is the idea that how an MCA is used is becoming increasingly important to providers evaluating the applications.

Our own Chief Marketing Officer, Mark Lorimer, is quoted:

“Lorimer said AdvanceMe has seen a shifting mentality among merchants, likely springing from the economic downturn. Before most [Merchant Cash A]dvance recipients were looking to simply expand their businesses by increasing existing inventory, opening new locations and building on current ones, but now the money tends to be used for a more strategic brand of repositioning.

‘It may be a retail store moving from high-end clothes to more accessories, or a high-end automotive place maybe using it to stock up inventory that's not quite so expensive,’ Lorimer said. ‘Two or three years ago people were using the money a lot more for opening new locations and expanding and buying out a partner. We're seeing a lot more merchants now using the money to refine their concept or change slightly to reflect what they're seeing in their local marketplace.’"

In this blog, we have highlighted many times that how you use an MCA is crucially important. There are definitely going to be good and bad uses of this working capital, so we suggest that you learn all you can to ensure you continue making the best possible decisions for your business.

Curious as to the difference between a “good” and “bad” use of this product?

Refer to these previous posts for clarification: Merchant Cash Advances for Handling Remodeling Costs, Buying out a Partner with a Merchant Cash Advance, Using a Merchant Cash Advance to Fuel Growth, Use a Merchant Cash Advance for Trade Show Participation, Get a Merchant Cash Advance for Training, Using a Merchant Cash Advance to Prepare for the Holidays .

We also covered this topic very specifically here: Comparing "Good" and "Bad" Uses of a Merchant Cash Advance.