If you run a medical spa, you know how important inventory is to the success of your business. You need medical inventory to be able to provide your spa services. You also require inventory that you can sell to your customers. After all, some people might be too busy to get the medical spa treatment; therefore, they just buy your products and apply them themselves. Due to the importance of inventory for your medical spa business, you always need cash to restock. But what happens when the sales are not performing, you can’t close down your business and disappoint your clientele. In such a case, you need an inventory loan. If it’s your first time considering this option, you can use the following tips:
How to Get an Inventory Loan
1. Determine the Exact Use of the Loan
Before you apply for an inventory loan, you need to decide what type of inventory the money shall purchase. For example, you might be planning to reward your most loyal and long-term customers with gifts, and you’re short of cash. For such a scenario, you can take an inventory loan to purchase the gifts that you intend to surprise these customers with. Perhaps you are planning a promotion where you give customers medical spa treatment at a discounted price, but you don’t have money to increase the inventory. In this case, an inventory loan shall be helpful in purchasing the much needed extra supplies.
2. Know your Options
If you want an inventory loan, don’t apply for a regular loan because you won’t get it. This is because financial institutions can have a hard time selling your medical spa inventory. Since they don’t know where to start looking for customers, the don’t approve your loan. The best way to approach this situation is to take up a line of credit with the lender. That way, you can access cash whenever you need it. Alternatively, you can go for a merchant cash advance that takes a shorter time to process than most loans. All the merchant needs from you is a record of your card sales before they give you the cash advance for inventory purchase.
3. Manage your Inventory Well
Before you go out to seek an inventory loan, make sure that your store is in order. You need an efficient system that allows you to monitor inventory and get rid of weak points. After all, having too much inventory can have crippling effects on your business. For starters, it takes up space that could have been used to serve a client. Second, it eats into your cash flow because you used the money to purchase too much stuff. Having too little inventory can also be damaging because it may leave customers wanting more from you. However, once you have a proper inventory management system, you can use your money well and meet your business needs more efficiently. In addition, a lender is more likely to approve your inventory loan if you can show them that you have a proper inventory management system to get rid of inefficiencies.
4. Think Beyond Inventory
Even as you prepare to apply for an inventory loan, you should be thinking about other loan options. For example, you can use a working capital loan to do some renovations to your space or expand to new territories. Your availability to repay your inventory loan on time is what is going to determine your spa’s eligibility for another type of loan. Therefore, make sure that you take proper steps to clear the inventory loan on time.
If you want to get an inventory loan for your medical spa, you should consider the above factors to guide you with your application and improve your chances of an approval. You should also remember that there are other loan options that can do wonders for your spa; therefore, consider them even as you apply for the inventory loan.
What’s A Merchant Cash Advance?
Merchant cash advances (or MCAs) is an alternative financing option that technically is not a traditional loan.
In an MCA transaction, an MCA company provides a business a cash advance in exchange for a set percentage of that business’s daily sales (plus fees).
A merchant cash advance is a easy way for businesses to get the cash they need to finance their business-without the credit score minimums and collateral requirements of a traditional business loan.
Advantages of Merchant Cash Advance
Merchant cash advances offer many advantages over traditional business loans:
- Fast, Simple Approval Process
- Instant Access To Funds
- Great Credit Not Required
- Works With Most Types of Businesses
Does Your Business Qualify for a Merchant Cash Advance?
Would your business be eligible for a merchant cash advance?
The key advantage to a merchant cash advance is the wide availability of this financing option.
Even with bad credit, minimum collateral, and have only been in business for a few years, you may qualify for a merchant cash advance.
Merchant cash advances are a great vehicle for short-term financing, especially if you operate a retail business such as a store or a restaurant. For such businesses with limited working capital, merchant cash advances can be a real lifesaver!
Typical Candidate for a Merchant Cash Advance
A typical candidate that qualifies for a merchant cash advance has ~$200k in annual revenue, a credit rating of at least 550, and has been in business for at least 2 years.
What You Need to Apply for a Merchant Cash Advance
Compared to a traditional business loan, what you need to get approved for a merchant cash advance is much simpler and more accessible.
The key requirement is level of daily credit card and debit card sales. MCAs are backed by these daily transactions, so in order to be approved you need to have sufficient volume to make a deal worthwhile for a merchant cash advance financing company.
MCAs may also require you provide credit and bank statement information as well.
Unlike a traditional loan, merchant cash advances can be applied for online, with a fast approval timeline (typically one business day).
The trade-off to this fast and easy process is the cost of such financing. Compared to a business loan, a merchant cash advance will always be a more expensive financing option.
What is the Cost of My Merchant Cash Advance?
The cost of merchant cash advance financing is calculated using a factor rate.
For example, let’s say your business is approved for a $25,000 advance that has a factor rate of 1.2.
This means that you will owe the merchant cash advance financing company $30,000 to repay the loan.
You will typically negotiate with the merchant cash advance company what percentage of your daily sales will be used to repay the advance; a typical percentage is 15%. If your credit card/debit card sales were $25,000 a month, this would mean it would take 8 months ($30,000/10=$3,750) to repay the merchant cash advance.
8-9 months is the typical length of time it takes for a business to repay a merchant cash advance.
A Merchant Cash Advance May Be Worth It
While this alternative financing option is almost always more expensive than a traditional bank loan, it is a much simpler way for a small business with a limited or bad credit history and minimum collateral to finance its operations.
The cost may be worth it if it can help take your business to the next level. For a business just starting out and looking to grow into a sustainable, profitable enterprise, a merchant cash advance may just be the right financing option.