In Hawaii and every other state in the United States, there are many options for small business owners who need extra capital fast. One of the best is a merchant cash advance. A merchant cash advance is not a loan but financing for small businesses to allow them to plump up their cash flow or expand. Essentially, it is a shortcut to gaining funds for a business on a temporary basis. There are a number of facts about merchant cash advances that are important to know if you are considering this route for your small business in Hawaii.

How Does a Merchant Cash Advance Work?

A merchant cash advance differs considerably from a traditional business loan from a bank. If you own a small business, you can qualify for it even if you don’t have good credit. Overall, in exchange for a merchant cash advance from a financing company, you pay back the funds through your credit and debit card sales. If your business relies primarily on card sales, you can easily be qualified for a merchant cash advance. Payments toward it are made automatically and on a daily basis through a percentage of your business’ credit and debit card sales. This repayment amount is generally determined by what is known as a factor rate.

Funding through a merchant cash advance is typically easier and faster than through other means. In most cases, you can be approved the day after you apply and receive the funds immediately. The approval rate is typically very high and most applicants receive funding from their merchant cash advance within one to two days. Additionally, merchant cash advances don’t require collateral, unlike with traditional small business loans.

Things to Consider with Merchant Cash Advances

It’s important to know all the details of a merchant cash advance if you are considering this route to gain funding for your small business. Although there are many advantages, there are also downsides. Knowing these can determine whether this is truly the best option for your small business. Generally speaking, merchant cash advances can be more costly than a traditional business loan. They usually cost 20 to 50 percent more than the amount being borrowed. They are also not federally regulated, which means you could potentially fall prey to dishonest practices.

How to Qualify for a Merchant Cash Advance

The majority of merchant cash advance providers offer easy applications that can be quickly completely online. Turnaround is equally fast and you can expect to be approved within as little as a single day. Additionally, a small business does not have to be in operation for many years to qualify for a merchant cash advance. Even a new business can be approved, as long as it primarily conducts its sales through credit and debit card transactions. If there is a consistently high sales volume, your small business can easily qualify. Financing companies that provide merchant cash advances can also advance funds anywhere from 75 to 250 percent of a business’ total sales as well. If you wish to apply for a merchant cash advance, you should include credit and debit card processing statements, bank account states, photo ID, business tax returns and credit check authorization along with your application.

Why Get a Merchant Cash Advance?

Sometimes, a merchant cash advance is a last resort type of financing. However, they carry certain benefits that make them attractive options when you require extra capital for your small business. Those benefits include the following:

You don’t need perfect credit: Merchant cash advances can be given even if you don’t have perfect credit. If your credit isn’t good to excellent, you would have a better chance of being approved for a merchant cash advance than a traditional small business loan from the bank.
Fast approval and funding: You can quickly approve for a merchant cash advance and receive the funds in as little as one day to a week. The only requirement is that your business’ credit and debit card sales are sufficient so that you can repay it.
No collateral needed: Merchant cash advances don’t require collateral on your part, so you don’t have to worry about losing your car or home if you default on payments.
When sales are down, payments are down: Since the repayment of a merchant cash advance is based on your business’ sales and are taken from a percentage of them, if the sales are lower, your payments may be lower as well.

If your small business in Hawaii needs fast funding, a merchant cash advance might be the best option. Doing your homework and determining if this is the case can give your business the financial boost it needs.