Business owners know that having the right amount of capital is crucial to their success. Acquiring that capital, however, is not always an easy thing to do. In the event that capital is needed quickly, many business owners will apply for a merchant cash advance. This is often used to acquire the start-up cash needed to launch a new business. Since borrowing money from a bank can be a timely and complicated process, a merchant cash advance allows business owners to help their company out financially.
How It Works
The way a merchant cash advance works is that the amount of money a business can get is dependent upon their projected sales for the future. The amount of money the business will receive is determined by a certain percentage of the amount they do in credit card sales.
There are several reasons why acquiring a merchant cash advance is a better option than applying for a loan from any bank.
- It is easier for a business to meet the requirements for a merchant cash advance than it is for them to meet the requirements for a bank loan.
- Unlike banks, merchant cash advances do not involve any hidden or late fees and the business will never need to write a check at any point during the process.
- A business does not have to offer up collateral, as they would with a bank.
- While banks may make a personal guarantee, a merchant cash advance will not.
- A business will not lose any of their equity.
- When applying for a merchant cash advance, a business does not have to submit as much documentation as they would if they were applying for a bank loan.
- Unlike banks, a merchant cash advance can be approved within 48 hours of the initial inquiry.
Repaying Merchant Cash Advances
Paying back a merchant cash advance involves the business and the company repaying an additional percentage of the total original loan amount. This percentage is agreed upon before the money is given to the business. The percentage for each payment is taken from the business’s credit card. The money is then sent from the business’s processor to the company that offered the merchant cash advance. This process continues until the cash advance is paid off in full.
Merchant cash advances are often granted to struggling businesses to help them afford their expenses. More and more business owners are finding that applying for a business loan from a bank is a stressful task that leaves them frustrated and takes up a lot of their valuable time. This is why merchant cash advances are becoming increasingly popular among new and struggling businesses. Many times small business owners need this kind of cash advance in order to help build their company or pull themselves out of a temporary financial slump. Merchant cash advances are a strategic way for business owners to gain the capital they need.
Victoria Heckstall is a finance writer who suggests that those who want to learn more about merchant cash advances visit Business Credit and Capital.