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Merchant Cash Advances – Are They Right for You?

Posted by Nancy Bakanowicz on Apr 13, 2016 1:04:49 PM
   

merchant cash advanceWhen you need some money for your business, whether it’s a little or a lot, the odds are generally not in your favor for obtaining a conventional bank loan. According to a Huffington Post article, about 20 percent of small businesses owners who applied for a traditional bank loan in 2014 were approved for them. Low credit scores and not enough time in business are among the key reasons small business owners are turned down for loans. If you have been turned down by a bank but you still need money for your business, where can you turn? Enter the merchant cash advance, which can be a very helpful tool in getting your business the cash it needs quickly, with minimal paperwork and reasonable payback terms.

Many businesses seeking loans are doing so because of cash flow issues. Businesses need cash for several reasons, whether it’s to improve or expand a growing business or help ease a financial burden, and sometimes getting the cash can make the difference between staying open or closing the doors for good. More often, the money is needed to spruce things up, like a new coat of paint, or new equipment and supplies. When businesses are turned down by conventional banks, merchant cash advances, like those offered by Capital for Merchants are practical options to get the necessary cash. Many business owners are attracted to merchant cash advances because they are fairly easy to secure, require little to no paperwork and the turnaround period is short – most merchant cash advances take less than 48 hours from application to having the cash in hand. They also do not have the same requirements as bank loans, such as collateral, a long business history and/or a good credit rating.

However, the decision to apply for a merchant cash advance is still a serious financial one about your business, so you need to ask yourself some questions before applying for a merchant cash advance, to ensure that it is a good fit for your needs. Some things to consider are:

  • Do you need immediate cash but do not qualify for a traditional bank loan? Not only do merchant cash advances give you fast access to your money, but they are also a practical funding source for those who don’t qualify for a bank loan.
  • Are you looking for flexible repayment terms? Rather than make static monthly payments, most merchant cash advances are paid back with a percentage of each credit or debit transaction. Because repayment is tied to sales, the more you sell, the faster you pay back the advance. Or, if you’d rather have regular payments, some merchant cash advance companies, like Capital for Merchants, also offer the option of ACH, in which a select amount is debited from your business checking account on a set schedule.
  • Do you have a steady volume of credit card sales each month? Because the payback terms are most often tied to credit/debit sales, many merchant cash advance companies require a business to have a steady or increasing level of sales each month, to ensure against default.
  • Can you afford the advance? While a merchant cash advance is technically not a loan, you still have to pay it back. As much as your business may need the money, make sure the repayment terms are reasonable and you can pay back the advance. The last thing you want to happen is for the advance to turn into a financial burden, for you or your business.

If you can answer “yes” to the above questions, then a merchant cash advance may be the right fit for you and your business. If you need to infuse some cash into your business quickly and either can’t or don’t want to go the traditional bank loan route, a merchant cash advance could be just what you need to fund the purchasing of new inventory or equipment, or even growing your business to a new location.

Topics: Business

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