Merchant cash advance, also known as factoring, is a more flexible form of solution to financial challenges in contrast to a loan. Cash borrowed through factoring is later deducted as per the agreed amounts from the income. This is an emerging, trendy, efficient, means of financing one’s business.
Business owners can seek for the merchant cash advance online whereby the small or medium business owner fills and submits an application form requesting for the merchant cash advance. The form is then reviewed, and feedback is provided within a range of 24 to 48 hours from the time of application.
Persons and entities eligible to merchant cash advance include small and medium business owners who have, for at least six months, been in operation and may be having a rough financial time and haven’t built enough credit history time. Also, those who need fast cash, to finance an upgrade or offer services beyond their financial capacity at the moment but will later earn from the service entities that may be unable to fulfill banks credit requirements due to the nature of their businesses and those in need of cash of which time is of vitality are also eligible.
When to Apply
Merchant cash advance is beneficial when one’s business needs urgent funds which a traditional bank loan application that might take a week plus wouldn’t prove helpful. This is usually the case when one needs advance cash to pump into the business.
This type of funding has numerous benefits that are incredibly convenient for businesses in need of funding. The advantages include:
It is easy to apply. The process is simplified in such a way that one needs only to fill a form that is submitted online to the advancers. The form is reviewed in a record time of less than 48hrs. This efficiency is good for planning, and even faster pumping of funds for brands to begin their execution of the planned expenditure.
It requires no guarantor, security or pledges of any kind. The applicant only needs to submit their profit rates which are then used to calculate the factoring, i.e., the amount of money to be paid back after close of a business day.
Flexibility. There are no fixed rates as to the payment of the cash advance. Instead, on pays, a certain percentage of days’ income which is very workable as there is no pressure to meet an unrealistic goal but rather make a profit to make a payment towards offsetting the cash advance. Furthermore, the payment is automatic, and therefore someone doesn’t have to keep tracking whether the payments have been made or even have to keep writing cheques constantly.
The merchant cash advance doesn’t need to have a specified planned expenditure for the advance to be granted. Therefore, business owners can use the advance as to the business’ current urgent and stinging needs hence promoting ease to the business enhancing operation without any financial glitches.
While on qualification for factoring, the advancers look proactively at the future expected cash rates and give the advance based on them rather than banks that look retrospectively into the past of one’s credit history.
However, business owners should be apprised of the following:
It is prudent to be aware that the merchant cash advance might have its downsides that ought to be in one’s knowledge before committing to seeking the funds. First, the cash advance might end up having high-interest rates reaching up to 30% which may affect the cash flow because the payments are automatically deducted off the cash sales of the business. Therefore, the business owners ought to calculate their earnings and be sure about the sustainability of the merchant cash advance so that the advance does not end up being expensive.
Experts on merchant cash advance discourage a business owner against taking the advance to offset another merchant cash advance.
It should be clearly understood that the deductions are made on a daily basis; thus the business owners should make sure the business stays afloat and will not be killed by the cash sales.
Merchant cash advance is highly advisable to be invested in activities that raise revenue or in a resultant way raise the income of the business.
With all pros and cons measured, it is vividly clear that this way of injecting funds into a business is workable, convenient, business-friendly, realistic through flexibility, easy and definitely a to-go first solution for all cash problems for a company.
It is a method that has been tried and worked magic for the businesses as per the testimonials of business owners who have tried and are in current use of this method of financing and would definitely recommend giving it a try.