The Top Merchant Funding Myths Expelled and Explained

Just like any trend that bucks the mainstream, merchant funding has a swirl of myths that surround the concept. A true departure from traditional lending, arrangements such as the merchant cash advance can be intimidating until you understand the true value. Here are three of the most prevalent merchant funding myths and the reality behind the beliefs.

Myth #1 - Merchant funding arrangements are expensive in the short/long term.

The Truth - Merchant funding is perhaps the cheapest form of financing available to businesses because they’re the opposite of the traditional loan.

According to the US Business Finance Blog, the business transaction is not a loan but a sale. That means no collateral, no down payment, no APR, and no minimum monthly payments. Financing is advanced to you as a percentage of your future invoices or accounts receivable. And the sliding scale repayment means seasonal ebbs and flows can be accounted for.

Myth #2 - Merchant funding arrangements are too complicated to understand for the lay person.

The Truth - Merchant lenders take the time to go over every aspect of the financing agreement.

Western Independent Bankers reveal that more merchant funding banks are creating incentives for new businesses using such financial vehicles as debit cards and linked accounts. In fact, merchant activities are driving the thinking with such lenders as Capital One and other major players.

Myth #3 - Merchant funding arrangements are largely unregulated.

The Truth - The industry is cracking down.

Vendorseek points to the arrival of The North Merchant Cash Advance Association as evidence that the merchant funding and merchant cash advance industries are becoming increasingly safer realms to do business. Federal rules also assist business owners in securing legal, ethical financing.