Does your business need cash? Even highly successful entrepreneurs run into cash flow issues from time to time. When your business is short on cash, a merchant cash advance might be the best option. With this funding option, you get the cash you need when you need it.
What Is a Laundromat Merchant Cash Advance?
This type of funding is determined according to your credit card sales. The lender looks at your track record of sales to see if you qualify for an advance. If you are approved, you can have an advance in your merchant account within just 24 to 48 hours. This type of advance is not a loan. Instead, it is just a pre-payment for your future credit card sales.
What Is a Factor Rate?
The amount you repay is determined through something called a factor rate. This figure is generally between 1.1 to 1.5. If you get a merchant cash advance for $100,000 for 12 months with a factor rate of 1.5, then you will pay back $150,000. The factor rate is the best way to determine if this type of funding is the right option for you.
Laundromat merchant cash advances also use a retrieval rate or holdback. The holdback rate is the percentage of sales that you will pay back later on. If your holdback rate is 15 percent, then 15 percent of your credit card sales will automatically be used to repay the advance.
Flexible Funding When You Need It
When you get a traditional loan, the bank sets a fixed amount that you have to repay each month with interest. If your sales drop, you still have to pay the same amount. When you get a merchant cash advance, you only repay a set percentage of your sales. This gives you additional flexibility during slow or busy months. If your sales suddenly fall, you will end up paying a smaller dollar amount because your payment is set from a percentage instead of a fixed amount.
A merchant cash advance is designed to give businesses cash when they need it. The entire application process is online. You can turn in your credit card transaction history, your financial documents and everything else through an online portal. Once you turn your documents in, you will find out if you are approved within just a couple of hours. Then, the cash arrives in your account within 24 to 48 hours. If you need cash right away to cover a sudden shortfall, a merchant cash advance is definitely an option.
What Are the Other Options?
If you are looking for aLaundromat merchant cash advance, then you may have already discovered why other options do not always work out. Some companies try to get a term loan from a bank to fund their business. Unlike a merchant cash advance, a term loan requires a fair to excellent credit score and a long business history. It may also require collateral that you do not want to risk.
Other businesses get a business credit card instead. While this is a useful option, your credit line is limited to a certain amount. In addition, credit cards and term loans take time. When you need cash quickly, these options will not work.
Who Does a Cash Advance Work Best for?
A merchant cash advance is ideal for companies that need cash quickly. It also works if you have a poor credit score or want a flexible repayment plan. With a merchant cash advance, you get the money you need on your schedule.
Small business owners may find a merchant cash advance to be the perfect source of emergency funding when cash flow declines.
What Does a Merchant Cash Advance Involve?
A misconception exists about merchant cash advances. Small business owners confuse advances with loans. While similar to a loan, an MCA isn’t precisely the same as one. With an MCA, a financing company fronts cash to a business and, in return, receives a flat fee along with a percentage of credit and debit card revenues.
Merchant cash advances provide business with a simple, streamlined means of acquiring a business cash advance. Unlike a loan, an MCA does not require any collateral nor do applicants need a strong credit rating.
Loan and Fee Amounts
Many types of businesses may benefit from a merchant cash advance. The loan amounts range from $2,500 to $250,000. Fees are in the 1% range, and approvals can arrive within two days. The overall application process doesn’t require many steps. Business owners won’t agonize over filling out complex forms.
Be mindful that the fees will be higher than is the case with standard loans. Switching to a different merchant service provider isn’t easy, and cash flow decreases due to the deduction from credit and debit card payments. Many business owners, including those with bad credit, may discover an MCA to be a viable arrangement.
Applying for a Merchant Cash Advance
The average applicant owns a business in operation for more than two years and generates roughly $180,000 in revenue per year. Average credit scores rank in the 500 range.
When a business owner applies for a merchant cash advance, the financing company looks at the credit/debit card statements carefully. After all, these statements represent the means for repayment on the cash advance. Revenue streams here become more critical than credit scores.
However, credit scores, along with bank statements, will likely undergo some examination.
Merchant cash advance applications usually require online submissions. Online applications speed up the proceedings. Expedited processing makes it possible for news on possible approvals to arrive within one day. Applicants must submit certain items to be considered for a MCA.
Businesses Suited for an MCA
Certain businesses might find a merchant cash advance deal preferable than standard loan options. Retail stores and dining establishments deal with a significant amount of credit card transactions. Therefore, these types of businesses could be a proper fit for an MCA arrangement.
Businesses that require a short term infusion of capital to cover debt, inventory, unexpected expenses, and tax obligations. The process of applying for funds involves the submission of essential items such as a drivers license, bank statements, business tax returns, a voided business check, and credit card processing statements. Submitting the requested documents does not entail performing any unnecessary steps. As long as the applicant provides all required information, the application should move along on time.
Risks and Fees
The fee rate on a merchant cash advance comes with a rather high price. How do the fees compare to an annual percentage rate? The fees would be equivalent to an APR of more than 15%. While costly, paying the excessive fee may be the only option for the merchant. Not every business owner has multiple sources of emergency funding available.
The repayment time varies from business-to-business. On average, repayment takes around 8 to 9 months. Of course, some may pay their obligations off sooner while others may take a little longer. Terms commonly range from four months to 18 months. Applicants should select the most feasible terms with timely repayment in mind.