Enter, Merchant Cash advances. This system of loans is also called factoring. It was developed to become traditional bank loans’ alternative. These advances aim to boost growing businesses by offering easier ways of acquiring finances. The companies offering Merchant Cash advance believe that lack of money should not be a hindrance to business success.
Advantages of Merchant Cash Advances over Traditional loans
Merchant cash advances are very distinct from traditional loans. While banks offer loans, they do so in a much slower manner. Due to their manual nature, it could take over a week to secure a loan with a bank. With Merchant advance, it takes only 24 hours and a maximum of 48 hours to get the money. This is because the process is short. It entails filling an online form, and the requirements for approval are not many, so it takes less time. The short time it takes is beneficial to its clients who often require urgent resources to run their businesses.
Merchant Cash advance also require very little requirements to qualify, unlike banks which require a lot of formalities. Banks may require businesses to fulfill countless standards including having viable security or collateral, tax compliance forms, good credit ratings, good business turnover and many more. Failure to meet these requirements jeopardizes one’s chances of getting the much-needed cash flow. Cash advance only requires that a company or business is over six months old, uses credit card sales and that these sales should be of 4000 to 5000 USD consistently. One should also give reasons as to why they deserve the advance. It is, therefore, easier to qualify. These are simple requirements that favor business people from all sectors of the economy and at different points of business growth.
Merchant Cash Advances follow a very easy process to acquire. As stated earlier, one only needs to fill an online form giving details and then wait for approval and the money. This saves time as well as one’s effort. This is because, in traditional loans, one has to go through cumbersome processes of filling and signing forms, obtaining various documents among other processes. This aspect of Merchant Cash advance has made it popular since people are on the look for convenience and therefore prefer non-stressful methods of getting whatever they need
Repayment of merchant finance is fundamentally different from that of traditional loans. While traditional loans require payment of lump sums over a period of time, merchant cash advance uses a method where a little amount of money is deducted daily, weekly or monthly from credit card sales. This process is fully automated; therefore the client does not have to worry about planning payments, signing cheques or visits to the bank. The little deductions also relieve the client from worries of the struggle to obtain a large amount of money in a limited time. The amount deducted is calculated depending on the clients projected sales. It is not a one size fits all; therefore, clients are assured that their interests are well taken care of.
Unlike bank loans, Merchant Cash advances are flexible. The client can use the money acquired for any function in his or her business, be it financing daily running of the company, settling the payroll, expanding operations or even hiring new employees. Some traditional bank loans set the purpose for the loan given, and the client should stick by it. If. It is expanding the business; the client cannot use the funds for anything else. This restricts them. Merchant advance is, therefore, the best alternative for any business.
Disadvantages of Merchant Cash Advance
Merchant Cash advances are very enticing. Everything has its weaknesses. These types of loans are quite expensive. This is a cost that one pays for getting funds at such a short amount of time. Here rates can rise to 30%, which is high despite the fact that it is paid in small amounts.
The cash advances also have an effect on the cash flow of the client. This is because payments are deducted from the credit card sales. This effect will be felt especially when the deductions are set to be done daily. It is therefore advisable that one should not take a merchant advance loan if the business is failing this is because, after the deductions, one might be left with very little or nothing at all to sustain the business.
Merchant Cash Advance is very beneficial and convenient for business people. It is however important that one understands the inner workings of the advance before committing to it. When one does this, he or she is sure to reap its benefits and avoid its harsher consequences.