Syndicated advances represent a tremendous opportunity for business investors and businesses alike. Whether you’re considering becoming involved in syndication investing or are interested in using a syndicated advance to raise capital for your business, here are the answers to some common questions you may have.
What are syndicated advances?
Syndicated advances take merchant cash advance deals and spread the risk amount multiple investors. When you become part of an advance syndicate, you lend money to a business, but you are not the sole investor. Multiple investors contribute money to fund the full cash advance the company needs, so that no single investor is carrying all of the risk. The idea is very similar to crowdfunding. Generally, a syndication management firm can bring investors together, supervise the syndicate investments, and ensure that payments are distrusted to investors appropriately.
How do merchant cash advance deals work?
Merchant cash advances are an alternative to traditional small business loans from banks. Businesses are paid a lump sum of money as they would be with a loan, but instead of making regular loan payments, a portion of each credit card transaction is withheld to pay back the investment. For businesses, merchant cash advances are attractive because they don’t require the same kind of credit check as bank loans and they can usually be approved and paid out much faster than traditional loans.
What are the advantages of syndicated advances for investors?
Investors appreciate that they don’t carry the risk of investing in a business alone. It also allows investors to tap into the potential of a business even if they do not have the capital to invest the full amount that the business needs. The ability to have syndication management handling the investment means that there is no need for investors to keep track of payments on their own. Many investors also like that sharing the risk makes it more practical to take a chance on investments that can’t get funding elsewhere that could eventually grow into successful businesses.