There are many times where a business may need to borrow money, whether they are launching, investing in new equipment, going through growth, or experiencing cash flow issues, just to name a few of the more common examples.
There are many different options when a business needs to borrow money, and it is essential to find the best choice for your company and requirements.
One of the best solutions in many cases – but a type of finance often misunderstood – is a merchant cash advance.
Read on to find out more about this useful finance option and how it could benefit your business.
What you will read in this article:
What Is A Merchant Cash Advance?
So, what exactly is a merchant cash advance? Unlike other forms of financing, this is not a loan because it provides access to money based on the future debit and credit card taking of the company or receivables.
Initially, this was a lump sum paid back using a percentage of the proceeds from future sales but is now used to describe short-term structures where repayments are made daily or weekly instead of monthly and more extended structures as you would find with more traditional loans.
When Is This A Good Option?
A merchant cash advance is one of the fastest available finance options available, so it is ideal for those that need quick access to the funds.
It is a smart type of loan if your business is seasonal, and sales tend to fluctuate as you will be paying a percentage as opposed to a fixed amount, which will make it easier to manage during quieter periods.
The fast nature of this option makes it best when there is an unexpected issue or a short-term cost to cover, but they can also be used for growth, buying inventory, and other reasons.
How Easy Is It to Apply?
A merchant cash advance can be relatively easy to apply and get approved for and much easier than a traditional loan.
You will want to use specialists like biz2credit.com, and you can often get approved even with a poor credit rating because lenders are getting paid from future sales, which makes credit scores less critical. In addition to this, these are unsecured loans, so you do not have to pledge any assets, and you are not liable if you are unable to repay.
Documents that you are likely to need to apply include:
- Driver’s license
- Voided business check
- Bank statements
- Credit score
- Business tax returns
- Credit card processing statements
What Else Do I Need to Know?
It is essential to understand that although they are easier and quicker to get, a merchant cash advance is more expensive than other forms of financing, so you always need to research to make sure that it is the best option.
Overall, a merchant cash advance can be a smart and convenient way for a business to access funds when required quickly and will see you pay back a percentage of future sales, usually over a short-term period.