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Case Study: How a Merchant Cash Advance Worked in a Pinch A last-minute shortfall led a restaurateur to a speedy merchant cash advance in exchange for a cut of future sales.

By Michelle Goodman

Opinions expressed by Entrepreneur contributors are their own.

Between His Own
$700,000 investment and $500,000 from his partners, Arturo Calderon thought he had the financing for his new restaurant in the bag. But construction costs of the 3,000-square-foot Yucatan Taco Stand in The Woodlands, Texas, ran $80,000 over budget, sapping much of the operating cash he had set aside for the September 2011 opening.Although business was brisk from the start, operating without that $80,000 was tight. So one month after opening, Calderon applied for a cash advance from ExpressBusinessLoans.com, which works with businesses doing a high volume of credit and debit card transactions in exchange for a percentage of future sales.

Considerably more expensive than a bank loan (Calderon's markup was 20 percent), merchant cash advances don't have a fixed repayment date. They're also fast--within 48 hours of applying, Calderon had the $80,000 he requested in hand. We talked to him about the road to quick cash.

Borrower Beware
Dozens of financial organizations offer merchant cash advances, without much regulation. Before taking their money, take these precautions:

Do the due diligence. Investigate providers online, check with the Better Business Bureau and talk to other entrepreneurs who have borrowed from them.

Crunch the numbers. Track sales for at least six months to ensure you're earning enough to repay the debt comfortably.

Be wary of extra fees. Application and funding fees are not the norm. Avoid providers who tack on these extra charges.

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