Slide background

Business Financing
as it Should be

Funding the Pace of Business

When you receive merchant funding, you get a lump sum advance, and in turn remit a percentage of your sales. Therefore, the remittance is tailored to the flow of your business’s sales.

Merchant Funding with No Limits

Harbinger does not restrict how you use your merchant funding. While your business may benefit from financing for new equipment, another business may need it for payroll. We provide the merchant funding, and you choose how to utilize it.

Support Every Step of the Way

From completing your application to receiving your merchant funding, we’ll be there to assist you. If you have any questions, our Customer Support team is available to help. We are dedicated to ensuring that your business operations are a success.

Merchant Financing! What does it mean? And can it fund your business quickly and affordably?
Merchant financing is an “umbrella term”  often referred to as a merchant cash advance.  This umbrella term can more accurately be referred as “business funding repaid through future credit card sales and/or cash deposits”.
In simple terms:  Merchant Financing is an “advance payment” against a business’s future income, i.e., credit card sales and cash deposits, which are collected by the funder until an agreed upon total amount is made.

How Does Merchant Finance Work?

Basically, the merchant financing lender will set up a system for intercepting sales (money) that a business takes in either as credit card transactions or bank deposits.  Through that system, the lender will take a daily percentage of sales as a form of repayment. This will go on until the full amount is paid back.

This repayment structure means that on a day when business is good, the business will be paying more than if business is slow. Plus, on holidays or any other day when your credit card transactions are a solid $0, you won’t pay any at all. In some instances, merchant financing can be structured so that payments are a flat amount each day or weekly.

How is the Cost of Merchant Financing Calculated?

The cost of merchant financing typically isn’t expressed in the same, time-based APR as other types of funding. WHY? Because there’s no way to know how long it will take for a business to pay off the merchant financing.  Instead, merchant financing will carry a factor rate, which is essentially a value of how much the advance will cost overall.

For instance, receives $10,000 of merchant financing at a 1.15 factor rate, the total amount to be repaid by the business is $11,500.  ($10,000 times 1.15 equals $11,500).  The difference between the advance and the amount paid back is best looked at as the “premium” which is determined by the factor rate.

Though factor rates on merchant financing products might seem daunting at first, they are actually a pretty straightforward way to see how much a merchant financing transaction will ultimately cost the business.

Factor Rate vs. Interest Rate

As mentioned, the cost of merchant financing will not be expressed with a typical interest rate or APR. This is because most times, the financing does not have a predetermined date of maturity. Instead, a factor rate tells us how much the financing will end up costing, regardless of how much time it takes to pay.

Generally speaking, a typical merchant financing may come with a factor rate from 1.14 to 1.40. However, some sources of merchant financing will come with factor rates that are much higher than this. In fact, if translated to a traditional APR, the cost of merchant financing could be expressed as an APR in the triple digits.

For instance, receives $10,000 of merchant financing at a 1.15 factor rate, the total amount to be repaid by the business is $11,500.  ($10,000 times 1.15 equals $11,500).  The difference between the advance and the amount paid back is best looked at as the “premium” which is determined by the factor rate.

Though factor rates on merchant financing products might seem daunting at first, they are actually a pretty straightforward way to see how much a merchant financing transaction will ultimately cost the business.

Links

https://bondstreet.com/blog/merchant-cash-advance/#how-it-works

https://www.fundera.com/business-loans/guides/merchant-financing#how

https://dharmamerchantservices.com/knowledge-base/

Why Would a Business Seek a Merchant Cash Advance

They’re quick. You can often get an MCA within a week or so with no heavy paperwork.

Unsecured so you don’t have to forfeit any personal or business assets if your sales plunge and you fail to repay. 

When the repayment schedule is based on a fixed percentage of your sales, repayments adjust based on how well your business is doing.