Merchant Cash Advance Loan Covenants
Merchant Cash Advance Loan covenants often restrict what the company can do with excess merchant cash. They can also put limits on how much the company can spend, and on what type of expenditures, as well as demanding that the company maintain certain balances in their accounts, collect their receivable within certain limits, even determine the credit policies that the company extends to its customers. The company may not be able to take advantage of some opportunities because of these restrictions.
Equity investors can demand the same restrictions and in addition require that they have veto power in certain instances, or expenditure approval, even if they are in a minority ownership position.
What Impact Will The Merchant Cash Advance Financing Have On The Ownership Position?
The last issue and probably the most important one is, how will the owners react to having their ownership and management control diluted. An investor can often contribute experience and management expertise, as well as Merchant Cash Advance money, and has a vested interest in the success of your company. A lending source has no impact on the company (other than any loan covenants discussed above); its primary objective is to be repaid.
So Debt Or Equity? The choice is yours with Merchant Cash Advances.
Merchant Cash Advance Blog Home Page for Applications.
Posted on: August 28, 2011 12:24 AM