Using San Diego Merchant Cash Advances To Stabilize Cash Flow
When your business needs to access cash quickly, a merchant cash advance is worth considering. Unlike other available business funding options, merchant cash advances are a fast way to access the funds you need, regardless of how the capital gets used. Depending on your situation, merchant cash advances can get used to finance new inventory or pay outstanding accounts payables.
San Diego Merchant cash services offer small and medium-sized business owners a way to maintain and operate their companies during slower business periods or used as a method to leverage up business operations. If you are considering taking out a merchant cash advance, it’s critical to understand how this financial product works.
Is A San Diego Merchant Cash Advance A Loan?
The short answer to this question is ‘no.’ Merchant cash advances are not a loan product. Instead, this financial service ‘advances’ a lump sum against the companies future accounts receivables.
San Diego Merchant Cash Advance Benefits
Merchant cash advances offer benefits that make them an attractive option for business owners who need access to funding. Here are some of the reasons this financial service is worth considering:
Easy To Apply – Applying for a merchant cash advance is simple and can get done online. Instead of spending precious time talking to loan officers at your bank branch, all you need to do is upload all required documents for consideration.
Fast Funding – For companies that are experiencing a cash flow crunch, time is of the essence! Merchant cash advances offer company owners quick decisions and fast funding on approved advances. For time-sensitive transactions, access to these funds can be the difference between making payroll, paying for emergency repairs, or buying needed inventory.
Credit Is Not A Factor – Unlike traditional lenders, merchant cash advances providers don’t solely use credit scores to determine whether the borrower qualifies. Consistent credit card sales and the length of time the business has operated are more critical factors in securing the advance.
No Collateral Needed – When applying for a traditional bank or business loan, collateral is often needed to back the loan. In the case of missed payments or default, the lender can collect the missed payments by repossessing the collateral that backs the loan. Merchant cash advance providers ask for little, if any, business or personal assets to qualify for a merchant cash advance.
Flexible Payment Plans – For company owners what experience seasonal trends or have uneven sales, fixed payments can become difficult if enough cash flow isn’t readily available to repay the loan.
Access To Higher Limits – Since personal or business credit isn’t a major consideration when issuing a merchant cash advance, company owners can get an advance for amounts anywhere between a thousand dollars to as much as over one million. No collateral needed!
Who Should Use a San Diego Merchant Cash Advance
Merchant cash advances are an excellent option for companies that have urgent cash requirements. Ideally, the company should have a well-established history of credit card payments from customers. Bricks and Mortar businesses such as retailers, restaurants, general contractors, and others who remit frequent and regular credit card transactions are ideal candidates.
While Merchant cash advances are convenient, it should come as no surprise that these financial services come at a cost. Unlike conventional business loans that charge an APR (Annual Percentage Rate), merchant cash advances use a Factor Rate. This factor rate is a decimal point number that indicates the amount that must get repaid to the cash advance originator. The fee varies but usually falls between 1.1 to 1.5.
It’s critical to understand that while this number appears low, that isn’t always the case when you evaluate it across the entirety of the advance.
For example, let’s say a business owner gets a merchant cash advance for $50,000 with a 12-month term and a 1.3-factor rate. To get the total cost of the advance, multiply the factor rate with the advance amount. The total amount to repay the cash advance is $65,000. Initially, the cash advance has an interest rate of 30%. However, the APR could increase based on the holdback amount.
Other Alternatives To San Diego Merchant Cash Advances
Company owners who are reluctant to pay the high price of a Merchant cash advance still have other options available for financing. Here are a couple of alternatives worth considering:
Term Loans – Term loans are similar to a mortgage loan. Borrowers take out a set amount and repay the loan over time. Interest rates on term loans can be variable or fixed.
Credit Cards – Business or personal credit cards that offer perks such as cash back, airline miles, or other incentives are a way to pay for operating costs and expenses.