Not all small businesses can get a small business loan. For those that can’t, there are alternatives such as a merchant cash advance. What are the advantages of a merchant cash advance?
When it comes to borrowing money, small businesses have several options from which to choose. However, for those businesses without credit or in need of immediate cash, their options are much more limited. What are the advantages of a merchant cash advance?
Despite the less than positive press that Merchant Cash Advances have been getting as of late, they are a great alternative for certain businesses. They offer benefits to small business owners that cannot get traditional loans to fund their businesses.
Merchant Cash Advances can get businesses the funding they need, in as little as 24 hours. In contrast, traditional bank loans can take 2 to 3 weeks to approve because of credit checks. Many Merchant Cash Advance providers can fund a small business within 2 to 3 days at most.
In addition to fast turnaround times, Merchant Cash Advances offer small businesses additional benefits that they can’t get using traditional loans.
No Credit Checks
Most banks and credit unions make small business loans. However, they require good to excellent credit scores to be approved for a small business loan. For those businesses having a credit score of less than 700, getting a traditional small business loan can seem impossible.
With a merchant cash advance, no credit or bad credit will not hinder approval, which is a big benefit for many small business owners. Unlike banks and credit unions, merchant cash advances do not require a credit check to apply.
A merchant cash advance is an advance on credit card sales. This means you can get an upfront sum of cash in exchange for a slice of future debit and credit card sales. Approval is based in part on the capital in your business, unlike traditional loans that are based on your credit or personal assets.
Merchant cash advances are not small business loans so collateral and credit histories are not offered in exchange for a loan.
With a merchant cash advance, there is no risk to your personal assets, you simply use a small portion of your future sales to access the cash you need today. For the business owner with bad credit, this is perfect as they can get the money that they need quickly without having to put “skin in the game”.
Over 1 in 4 small businesses are approved for a business loan by big banks. For those businesses in need of cash quickly, waiting 2 to 3 weeks for approval is just not an option. Merchant cash advances can provide you with a funding decision in as little as 24 hours. Funding with a merchant cash advance is within 2 – 3 days at most.
For those small businesses needing money quickly, it means not having to wait to jump on new opportunities. For retail stores, manufacturing or construction companies, it means having the cash on hand to buy inventory, equipment, and raw materials to keep the small business going. For many small businesses, fast funding is essential to take on new opportunities.
According to a study conducted by Cornell University, 30% of small businesses may fail or change ownership.
Many restaurants find it difficult to fund their business and getting somebody to even consider looking at it, even harder. Meeting with banks can be very time consuming, especially when there are so many demands on your time. Even then, there is no guarantee that you will get the funding you need.
Merchant cash advances make funding in many niche industries easy. Service repair shops need to restock spare parts, medical offices often have to wait for payment from insurance companies, and retail stores need to stock inventory. All of these businesses need working capital to stay in business and a merchant cash advance makes funding easy.
With proof of sales, your business can be funded now by giving you access to future revenue when you need it most, now!
Flexible repayment options
Merchant cash advances are easy to pay. Depending upon your merchant cash advance provider, you can make daily, weekly, or monthly payment options.
Unlike traditional loans, which are a flat monthly fee, a merchant cash advance is based upon the percentage of your debit and credit transactions. How much you pay depends upon how much you made. If you have a great month, you have lots of revenue to pay for a large part of your MCA. If you have a bad month, they will only take a small percentage.
While there are many different types of small business loans, they are not available to everyone. Many options are off the table for small businesses with bad credit or no credit or need money now.
Some of the more popular advantages of working with a merchant cash advance include:
- Fast funding: Traditional loans often take 2 to 3 weeks to make a funding decision, merchant cash advances are often funded in as little as 24 hours.
- No credit checks: Most small business funding options require a credit check or that you use your personal assets as collateral. A merchant cash advance uses your business revenue to fund your advance.
- Industry-specific funding: Most merchant cash advance providers have worked with many small businesses across a wide range of industries. As a result, most can provide quick funding for most businesses.
- Flexible payment options: Most merchant cash advance provide flexible payment options, giving small businesses the option of day, weekly, or monthly auto payments.
You should also be advised that while there are many benefits associated with a merchant cash advance, they often come at a cost.