Platinum Rapid Funding

Small business owners who need quick access to capital possess a burgeoning sector excited to fund them: retailer cash advance providers. The decade-old business has exploded significantly before two years, to over 50 providers, observers say, along with the tight credit surroundings is fueling demand. As curiosity within their company grows, suppliers--who bill premiums of 30% or more to the cash that they advance--are attempting to market industry standards to avoid scrutiny from regulators.

Cash advance providers like Platinum Rapid Funding Group offer businesses a lump sum payment in exchange to get a share of potential sales. They mostly target retailing, restaurant, and service companies which have strong credit card sales but don't qualify for cash advances as they will have poor credit or small or no collateral. The grab for takers is how much cash advances cost compared with curiosity on an advance or credit line. The equal rates can range from 60% to 200% APR, according to Leonard C. Wright, a San Diego accountant and "Money Doctor" columnist for the American Institute of CPAs. He claims that could be satisfactory for firms with no alternatives, but business owners need to treat the advance just like financing and comprehend exactly what the prices are.

Merchant cash advance businesses like Platinum Rapid Funding take pains to point out that advances are not regular credits; instead, the offer is a "buy and sale of potential income." Meaning that merchant cash advances will not be bound by laws that regulate lenders and limit rates. As an alternative to requiring regular fixed payments, they directly collect a set percent from a merchant's daily credit card sales until they regain the advance and their premium, generally in less than 12 months. Advance suppliers say companies benefit as the sum of money they pay changes using their cash flow, so that they pay less in slower months says Platinum Rapid Funding. "When a company takes an advance, they will have a company date that it must be reimbursed; they have fixed payments that must be made on a program," states Mark Lorimer, chief marketing officer of Kennesaw (Ga.)-centered AdvanceMe, which pioneered the industry in 1998. "In a merchant cash advance, there's no due date, there is no set payment."