If your business needs capital quickly, a business cash advance is a good option. This type of advance helps your business raise funding within just 24 to 48 hours. Once the money arrives in your merchant account, you can use it for all of your business needs. Whether you have a new business opportunity or need to cover payroll in a slow month, there are a number of advantages of getting a merchant cash advance.
The Mechanics of a Merchant Cash Advance
This is not a loan. Instead, it is an advance on your future sales. The provider looks at your recent history of credit card sales per month. With this information, the provider can offer you an advance from 50 to 250 percent of your monthly credit card sales.
Once you are approved, you instantly begin to repay the advance. Normally, your repayment amount will be 5 to 20 percent of your credit card sales. The percentage that you repay to the lender is known as the retrieval rate or the holdback. The percentage changes based on your credit card sales, the size of your advance and the repayment period. The terms may be for as short as 90 days or as long as 24 months.
The provider will determine the amount you can get according to the average credit card sales you make each month. They will normally look at two to six months of your sales to calculate the average amount and the stability of your sales. Then, you can get an advance of 50 to 250 percent of your credit card sales each month.
The Benefits of Getting a Business Cash Advance
There are several useful advantages to getting a merchant cash advance. For business owners in need of funding, this type of advance is a convenient option.
Money in your account the next day: The approval process can be done entirely online in just a couple of hours. Then, you get the funding in your account within just 24 to 48 hours.
No collateral: Unlike a standard bank loan, you do not have to have collateral. A bank wants collateral to make sure that they can recoup the loan if you default. With a merchant cash advance, no collateral is needed.
Easy applications: A typical loan takes a lot of paperwork. With a merchant cash advance, you can upload all of your bank account statements, credit card transactions and more in just minutes. The entire process can be completed online from the comfort of your home or office.
Flexible options: When you get a merchant cash advance, the amount you pay each month is flexible. While you have to repay the holdback percentage, the actual amount can vary based on your sales. If you have a slow month, then you get to repay a lower dollar amount.
Bad credit is not a problem: When it comes to credit, most merchant cash advances are fairly lenient. They care about your credit card sales and business history instead of your credit score. While an advance will not help you boost your score, it does give you a funding option if you have bad credit.
Higher limits: The advance is based on how much you bring in each month in credit card sales. You can get an advance for just a few thousand dollars. The upper limit for an advance can be as much as $2 million.
Who Does This Work Best for?
A business cash advance is ideal for a company that has a well-established transaction record. If you need cash quickly, then it is a viable option. Keep in mind that the fees can be expensive. If you take longer to repay the advance, the factor rate can quickly add up. Make sure that you know the terms, holdback amount and factor rate before you apply for a merchant cash advance.
The merchant cash advance must not be confused with a loan. It is not a loan. The reason that you are not applying for a business loan may be because of your personal and business credit scores. Traditional lenders determine whether they will grant you a loan or not based on your credit scores. If you have low credit scores, you are not likely to receive a loan from a traditional lender.
This does not mean that you cannot get the money that you need for your business expenses right now because you can apply for a merchant cash advance. A merchant cash advance does not depend on your credit score. Traditional lenders will refuse to offer you a loan if you have a low credit score, or they will charge you a very high interest rate. On top of that, you may not be able to qualify for the large sum of money that you need to pay your expenses.
With a merchant cash advance, we will determine whether or not you qualify for an advance based on your daily credit card receipts. The money that you will receive from us for an advance will be a portion of the amount of money that you are expecting to receive from your future credit card sales. That’s why it isn’t considered to be a loan.
The Differences between a Loan and an Advance
You will not need to offer your house or other property as collateral. When you present your home as collateral for a loan and you find that it is necessary to default on the loan, the lender has every right to seize the property and sell it as payment for the loan. Therefore, a cash advance is not as dangerous to you as a loan because you will not be in peril of losing your home or other valuable property.
The amount that you will borrow will depend on your average credit card receipts. Then, you will be able to repay the advance right away because we will receive a percentage of your daily credit card receipts. This could mean that you would receive a larger sum of money than you would qualify to receive from a traditional lender. Your interest rate will range from 5 percent to 20 percent, and the terms of the advance will last between 90 days and 18 months.
Because this isn’t a traditional loan, you don’t have to use the money for any particular purpose. For example, you can use it to make payroll or to purchase the inventory that you are lacking. You can also use it to pay for the repairs that your building needs or to pay for new appliances or equipment.
A merchant cash advance is better than applying for a traditional business loan because a traditional lender would take approximately two weeks to let you know whether or not you will be receiving it. Merchant cash advances do not take that long, so if you need money very quickly, this is the type of transaction that can help you right away.
Merchant cash advances will be approved in about one week. You don’t need to fill out all of the paperwork that is required when you apply with a traditional lender. You may even be able to receive the money that you need in one day. Sometimes, it takes two days.
Even if you have not been in business for very long, you can apply for a merchant cash advance. This would not be the case for a traditional lender, but we know that it can be hard to start a new business. A merchant cash advance will replenish your coffers, and you can be back in business immediately