Merchant cash advances, a value-added service some independent sales organizations offer to retailers, are defined as lump-sum payments to a business in exchange for a percentage of its future credit or debit card sales.

But what happens when a merchant does not have many card transactions, wants to smooth out seasonal peaks and valleys, or simply prefers to know beforehand how much a creditor will collect in a certain time period?

In those cases, ISOs and sales agents can offer merchants a more conventional business loan, says Mark Lorimer, chief marketing officer of Rockland, Mass.-based NewLogic Business Loans Inc.

NewLogic began making loans through ISOs and agents about 18 months ago, he says. The firm is a sister company to AdvanceMe Inc., a Kennesaw, Ga.-based merchant cash advance provider. Parent for both is Scarsdale, N.Y.-based Capital Access Network Inc.

About 40% of the ISOs who offer cash advances from AdvanceMe are now making loans available through NewLogic, Lorimer says. NewLogic has not finished contacting and training the ISOs that use AdvanceMe to handle NewLogic loans, he adds.

Eventually, NewLogic expects 80% of the ISOs that offer AdvanceMe services to begin introducing merchants to NewLogic loans, Lorimer predicts.

The most common recipients of the loans include warehouses, manufacturers, doctors, dentists and clinics, he notes.

Those businesses repay by agreeing for NewLogic to debit their bank accounts daily through automated clearinghouse transactions, he says.

Loan applications are evaluated electronically on a Capital Access Network that relies on profiles based on transaction histories, and provides a lot of “yeses,” according to Lorimer.

NewLogic usually pays ISOs and agents an upfront bonus and residuals. However, some prefer a larger initial bonus and no subsequent payments, while others choose to receive residuals only, Lorimer says.

Merchants borrow an average of $40,000 and tend to pay it back in six months to 18 months, although some take two years to repay, he says.

The upper limit for NewLogic loans is $150,000 per merchant location, Lorimer says. That means a five-unit retailer could borrow up to $750,000, he notes.

The company is issuing about $10 million a month in new loans, according to Lorimer. “We intend to keep growing vigorously,” he says.

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