Do you need to get access to capital for your operational business quickly? If so, a merchant cash advance could offer a fast, flexible financial solution for your cash flow problem.
Merchant Cash Advance Benefits
Access Funds Rapidly – For company owners experiencing an immediate cash crunch, time is of the essence. Unlike traditional loans and banking products, qualified borrowers can get access to their funds within hours or days, not weeks or months. Another significant benefit of using a merchant cash advance is that funds can get used for anything you need, whether it’s to cover payroll, to buy new inventory, to pay for repairs or maintenance, to stabilize business during slower periods, or to finance new equipment. When working with traditional lenders for a business loan, many times you must state the reason you’re seeking capital. If approved, any monies that get distributed to the company must then get used for that explicit purpose.
Bad Credit Is Not An Issue – Depending on your situation, you may or may not have good credit. When applying for traditional business loans, this can be a big issue. Merchant cash advance services do not rely so much on a personal or business credit score. Instead, merchant cash advance providers base their decision on volume and amount of credit card transactions getting processed. Depending on the merchant cash advance issuer, borrowers may get asked to submit anywhere from two to six months of credit card receipts to get a clear vision of the company financials.
Straightforward Approval Process – There’s nothing more nerve-wracking than knowing that your business needs a cash infusion. Not knowing whether or not you qualify for the funds you’re seeking makes you even edgier. Merchant cash advance providers offer a convenient and secure portal to upload all needed documents online for consideration. You don’t have to spend time at the banks talking to loan officers that can’t help you with your situation. Upon receipt of all required documents, applicants get an approval answer within a day. Funds get made available shortly after that if the terms are agreeable to both the lender and the borrower.
Available To Companies Of Types And Sizes – In a time of burdensome bank regulations, not all sizes and types of companies and businesses qualify for traditional banking products or services. Merchant cash advances offer underbanked companies a way to get access to a lump sum of cash without the red tape put in place by conventional lenders.
No Collateral Necessary – Another benefit of using a merchant cash advance is no collateral is needed to qualify. Funds made available through a merchant cash advance get repaid by taking a percentage of the companies daily credit card receipts. Borrowers don’t have to worry about writing checks or remitting online payments. It’s done automatically at the end of every business day.
Merchant Cash Advance Disadvantages
High Fees – The one thing to keep in mind is that merchant cash advances are not loans. Instead, they make you an ‘advance’ on your companies future credit card receipts. Fees get based on what’s known in the industry as ‘factoring.’ The factor rate is a decimal point number that represents the amount you’ll repay to the cash advance provider. Typically, the factoring rate falls between 1.1 and 1.5. Read the fine print or ask a representative for clarification to avoid confusion later.
Repayment Made Daily – Merchant cash advances differ from other financial services in that the borrower/company pays the advance back daily using an agreed upon percentage rate, usually around 15% until the loan gets paid off in full. That means that for $1,000 the company does in credit card receipts, $150.00 would get deducted and put towards the balance of the advance. The more your company makes, the faster you can pay off the balance of the advance.
Merchant Cash Advances Must Get Paid In Full To Get Another Advance – Another drawback of using a merchant cash advance is the fact that borrowers must pay off their first advance to qualify for a second one.
If your business has a cash flow crisis, a merchant cash advance could solve your short-term problems. It saves frustration and time that often comes with dealing with traditional banks that are unable to help you for whatever reasons.
Merchant cash advances can ‘front’ as little as a couple of thousand dollars to well over a million for qualified applicants. The amount these services advance to your company get based on the business’ daily credit card receipts.
As with all financial services, do your own research to decide whether a merchant cash advance is right for your company.