How a Merchant Cash Advance Can Help Your Business In a Rough Lending Environment

Owning your own business is a risky venture, particularly in this day and age of financial insecurity. However, the reality is that with so many people being made laid off from their jobs, those who feel empowered by this and start up their own business deserve all the help they can get. A merchant cash advance is one way to fund and keep you business afloat. This will allow you to stay in business and not have to lay anybody off either. More and more lenders are offering merchant cash advance options as an alternative way of lending. This is mainly because bank loans are very hard to get nowadays, with banks being very reluctant to part with their money, but also because a business loan from a bank often doesn’t quite meet the needs of a small business. A merchant case advance is a very unique method of funding. Basically, a lender will buy your future credit card sales. As such, it is not a loan. This means that you don’t pay interest rates, but you pay things such as a payback rate and a discount rate. These types of advances are best compared to factoring, only they are based on sales that have yet to take place.

What Is a Merchant Cash Advance?

Lenders who provide merchant cash advance options will provide a small business owner with a cash advance. The business owner then agrees to pay this sum back with an additional fee by giving the lender a daily percentage of all sales that take place on their credit cards (usually visa and master card), until the amount has been paid back in full. The percentage that has to be paid back will generally not be more than 10% of the daily gross sales, but it is mainly based on the monthly volumes of credit card sales that a small business has. Usually, the lender will require the advance to be paid back within six to nine months. However, this is not always fixed and can often be very flexible. Very often, in order to be eligible for a merchant cash advance, business will have to change the credit card processor they use. This way, the advance is paid back automatically whenever a sale is made. It is possible to pay back more as well, which can be particularly useful for those periods of time where a business has increased sales. A merchant cash advance really is very different from traditional bank funding opportunities. Basically, a lender buys money from the small businesses. Because getting cash through banks is so incredibly difficult, this really is a fantastic opportunity. They are mostly available for businesses that are involved in retail, restaurants, and store franchises. This is because these types of businesses mainly use credit cards for their sales.

The Benefits Of Merchant Cash Advances

So what are the benefits of opting for a merchant cash advance? Well, firstly, the money is generally available much quicker than through a bank loan. Furthermore, the advances are usually unsecured, meaning that you don’t have to put up any collateral. Most lenders who provide merchant cash advances will advertize that the money will be available within ten working days or less. Banks, however, take much longer to pay out their loans. Furthermore, bank loans have fixed interest rates, regardless of how much money a business makes. With a business cash advance, however, if sales go down, the amount of money that is paid back also goes down. Hence, a business’ cash flow is never negatively affected by heavy repayment terms. This is particularly important for businesses that experience tremendous ups and downs in their cash flow, in particular seasonal businesses.

Of course, bank loans also require a fixed set of payments to be made each month on a set date. If your business has not made any sales, then the payment still has to be made. With a merchant cash advance, however, the payment is a percentage of your actual credit card sales. This means that if your sales grow, you will pay your loan back quicker. If you business is stagnant for a while, your payments will drop and the period of repayment will be longer. However, it means that there is no great unnecessary strain on your profits. Last but not least, because these types of loans are unsecured, in the unlikely event that something goes wrong, you will not lose your personal assets. This is an incredibly important factor for many business owners who worry about being personally affected by business losses.

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Is A Business Cash Advance Right For Your Small Business?

When you think of a cash advance, most often the word that is going to come to mind is ‘fast’. That is exactly what a business cash advance can offer that makes it different from other types of loans out there. There are a lot of considerations, though, that need to be thought through before you decide if this is the right choice for your business. Let’s take a closer look and find out what these business cash advances are all about, what you might want to use them for and how the process typically works.

What is a Business Cash Advance and Who Can Use Them?

The name itself obviously tells us quite a bit about this kind of financing. A business cash advance is generally going to be chosen when a traditional loan would be a slower and more tedious choice that would impede a company. In recent years, the global financial crisis has really changed the way that banks and many other lenders operate. Unfortunately, those changes mean that a lot of business owners are not getting the loans they used to have access to at their local banks. Instead, companies are being declined much needed funding due to a variety of different processes that lenders now go through to determine who is or is not eligible for funding. This means that a business cash advance can be a smarter choice for a business, but the business will typically need to have been in operation for over 6 months first. If your business fits that, then chances are good that this could be a smart way for you to get funding.

What Makes a Business Cash Advance Different From Small Business Loans?

Obviously, the fact that this is usually a faster route makes it different, as does being able to get money with fewer hurdles from the lender themselves. The process typically does not involve a high need for collateral or cosigners and is generally going to be unsecured by nature. This means that a business cash advance is easier to get as long as your business looks stable enough to warrant approval. Also, the fact that there are normally far fewer restrictions on how you spend the money means you can put it towards the things in your business that are going to be most important to its continued operation and have the most profitable impact. This, combined with the fact that repayment is generally more flexible than what banks expect means that you are certainly going to have an easier time getting the funds you need this way.

How Long Does It Take to Get a Business Cash Advance?

Most approval times are far, far faster than any bank can offer these days. Most places that offer a cash advance for businesses are going to give approval in anywhere from 24 to 72 hours. The forms are generally a lot less of a hassle to fill out and that certainly will be a help, too. For many businesses, loans take too long to get approved and the window of opportunity they are trying to take advantage of is then closed. With the cash advance approach, getting the right money to get the job done is a great deal easier. When time is of essence, this is definitely the kind of funding to look into because the lower your waiting time, the easier it can be to get a variety of things done on time. As the saying goes, time is money.

What Are the Best Things to Do with a Business Cash Advance?

Many businesses will put the cash to work right away, purchasing or repairing equipment, tools or other needed parts of their business so that there is no slow down in the way they serve their customers. Others will use the business cash advance to purchase seasonal merchandise to take advantage of opportunities or expand their inventory. Some remodel, expand or simply pay down debts that might otherwise turn into an issue for them. However, you should definitely consider putting some of the money towards advertising to help expand the demand for your products or services. This way you start earning back a return rapidly which is going to make it a great deal easier to pay back the advance. Any kind of expansion in this direction is going to make life a great deal easier for a business owner and that is one core reason why they may prefer to do things this way.

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