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merchant cash advance companies what is it
Small business owners seem to have so much working against them as they get their business off the ground. You need money to make money. You can’t secure funding for your business without significant savings, an immediate profit, or without investors willing to provide you with more funding when it’s necessary. You can’t apply for a small business loan without meeting specific requirements, and most small business owners with a young business do not meet those qualifications. What happens when you need funding for your small business, and you have no way to secure it?
Small Business Loans
Small business loans are the go-to method of funding a small business, but these loans are not readily available to small business owners who don’t meet very specific requirements. Your business needs a great credit score, which takes time to build. You need a good personal credit score to qualify for a business loan. Your business won’t meet the requirements if it’s not already established. You can’t have a small business loan without a detailed business plan, and it must then be approved by a lender. They must see that your plan is detailed down to every last dollar they are lending you, and they must be able to see how your plans for their money will guarantee your business generates more income to repay them with. It’s a lengthy process, and it can take you months of business proposals, paperwork, and application work to either secure a small business loan or find out you’ve been denied the loan you need.
The Alternative to a Small Business Loan
If you don’t qualify for a small business loan or have the time to wait for one to be funded, what do you do? You have one option. You can apply for a merchant cash advance. It’s not a loan, but it is funding you can use to help your business grow or to replace, repair, or purchase new items to help your business succeed. A merchant cash advance works simply, and you only need the following to apply.
– Bank statements
– List of credit and debit card sales
– Voided business check
– Credit score
– Business tax return
– Driver’s license
Once you submit this information, you wait just a few days for funding. A merchant cash advance is typically funded in just a few days. You have cash in hand to make repairs or purchases before the week is over.
Repayment options are vastly different for a merchant cash advance than a traditional loan. A traditional loan is repaid monthly in one set payment amount. You can pay more than the payment to help lower the amount of principal you owe, which allows you to repay the loan faster and for much less. A merchant cash advance is not repaid using a monthly payment.
Merchant cash advance lenders require you to pay them a portion of your everyday credit and debit card sales. The amount of each payment you make depends on the amount of money you make that day through your card sales. The payment is higher if you have a more profitable sales day, and it’s lower when your sales are down for the day. This makes the repayment terms a little difficult to pinpoint. Most people are able to repay their cash advance in less than a year. It depends on how well your sales do any given day.
The one thing you should be aware of before you choose a merchant cash advance is the overall cost of the loan. The interest rate you pay is not small. A traditional small business loan is more affordable than a merchant cash advance, which can reach into the triple digits. Your credit score is not as important to a merchant cash advance lender as is it a bank or other financial institution, but it can make your rate so high you cannot afford to repay your loan and still make money as a business. Keep that in mind before you apply for a merchant cash advance.
A merchant cash advance is a great alternative for business owners who are unable to qualify for a traditional business loan. If you cannot secure a loan through a lender with a low rate, this might be the money you need to make your business grow. However, there is a time for some business owners when you realize it’s just not affordable enough. This is when you have to sit back and wonder if there is a way you can raise money in another manner. If you can afford the repayments and you need fast cash, a merchant cash advance is what you need.