Every small-sized business and medium-sized business has cash flow as a crucial element that has to be considered every single time. Cash is actually vital since it’s required for business growth, keeping inventory, and paying suppliers. It is extremely clear that the flow of cash is more vital than ever as the recession hit.
A company that requires funding would have access to various aids. One of the most popular ones is the merchant cash advance. It’s been utilized by various businesses to get out of difficult situations.
What’s a Merchant Cash Advance
The merchant cash advance offers a substitute business source of funding that the business can utilize when they lack credit rating or collateral. Unlike a traditional loan, a merchant cash advance means purchasing a portion of the future business credit card sales for a particular discount. Whenever the contract is signed, the business obtains a lump amount. A contract is vital to avoid merchant cash advance legal issues. In return, the lender has the right to get a portion of the business’ credit card sales each month until it reaches the contracted amount.
Benefits of Merchant Cash Advance
- Collections Based on Revenue
A huge issue with commercial bank loans is that the business will have problems making the payments every month when sales aren’t made. This isn’t an issue with the merchant cash advance because repayment only occurs whenever the business makes money.
- Extremely High Approval Rate
It immediately becomes clear that the merchant cash advance has the biggest approval rate when you compare the approval rates of a traditional commercial bank loan and the merchant cash advance. The truth is that the advances are denied rarely. Usually, negotiations are started whenever they notice some issues.
- Immediate Access to Cash
There aren’t many documents that are required. Thus, the turnaround of the merchant cash advance is extremely fast. A traditional bank loan could even take several weeks until it is approved. On the other hand, the merchant cash advance funding is typically available within a week. This is especially vital if you need immediate funding.
- Fast Applications and Collections
Funding will always be extremely quick. In addition to that, the process is direct. A commercial lender will examine the current business plans, financial statements, and tax returns. Typically, providers will consider 2 primary aspects. The monthly returns through credit cards and the length of time business. For instance, getting accepted is almost always certain if your credit card sales are over $6,000.
- No Need for Credit or Collateral
The merchant cash advance will be a pretty safe approach to obtain funding. Traditional loans can influence credit ratings. However, the merchant cash advance will vary on future sales. Because of this, it isn’t present on any credit report. It isn’t a risk to lose the collateral. It does not matter what happens with the business.
Though the traditional loan is one popular funding source, the merchant cash advance will be preferred on several occasions because of the benefits that we have listed above.