When your small business is still new or struggling to qualify for a regular loan because of poor credit, you may think there are no options available to you. However, there is one, in particular, that you might want to try. A merchant cash advance can be exactly what you need to get the finances you need to advance your small business or start a new venture you have had in mind.
At Delancey Street, we offer small businesses merchant cash advances when they are in need of fast money. However, before you apply, you should know what they are and how they work to ensure that it is the best option for your business.
How Merchant Cash Advances Work
In the past, a merchant cash advance is used for small businesses that rely on credit and debit sales for their revenue. Namely, retail stores and restaurants were prime candidates for merchant cash advances. However, today, things have changed and other businesses that don’t necessarily rely primarily on credit and debit card sales also take advantage of merchant cash advances. While the option is not technically a loan, they provide you with money upfront in exchange for a percentage of your business’ future sales.
Repayment of a Merchant Cash Advance
There are two ways in which a repayment on a merchant cash advance can work. One, you can have fixed daily or weekly debits made from your bank account, which are known as Automated Clearing House or ACH withdrawals. The other is increasingly becoming more common and involves making daily or weekly payments in addition to fees.
Delancey Street can provide your small business with a merchant cash advance that includes a holdback/retrieval rate of 5 to 20 percent. The rate depends on the amount of money you get, the terms of repayment and your credit card sales. You can choose to pay back the merchant cash advance in as little as 90 days or up to a maximum of 18 months. The repayment also begins immediately after you gain access to the funds. The specific amount you receive from Delancey Street depends on your average credit card sales.
What Businesses are Eligible for Merchant Cash Advances?
Merchant cash advances are usually described as options for small businesses that are not eligible to secure a traditional loan. When a merchant cash advance is extended to your business, the lender is generally more concerned with the current state of your cash flow, not your future profits. If your company has a good, steady, strong cash flow, then you would be a good candidate for a merchant cash advance even if your credit score isn’t the best and your business has been in operation for a short time.
Overall, if your small business is at least three months old, you have a credit score higher than 500 and have a steady cash flow, you would be considered a good candidate for a merchant cash advance from Delancey Street.