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Are you in need of finances to give your business merchant cash advance some sustainability, but don’t want to borrow a loan? Then a small business merchant cash advance might be what you are looking for. Does the thought of repayment and falling into debt make you worried and restrains you from acquiring some funds?
Is your venture experiencing a gradual decline, but you are finding it hard to make a decision? If such is the case, you needn’t worry because there are more ways of earning some cash than through a loan.
Merchant Cash Advance Leads
A small business merchant cash advance refers to the receiving of some cash upfront in return for your future credit card sales. Since the cash advance accounts for a lump sum payment, it differs from the regular repayments or tranches each week or month over a specified period. Also, there are no conventional terms and conditions, as is the case with the loans. The repayments are made based on daily or monthly transactions.
The financing method has been designed primarily to provide funds to small businesses and help them survive the tide of recession or unexpected circumstances. It also suits ventures looking for quick ways to regain their feet in an era of cutthroat competition. If you are still confused, you may read the following pros and cons and find out precisely what small business merchant cash advance companies have to offer.
Pros of Merchant Cash Advance in Small Business
1. Expeditious Access to Cash
The most significant advantage of a small business merchant cash advance is you can have the cash in your hands as urgently as you want. Let’s think about this scenario: You need a resource that can provide immediate access to funds for business expansion.
Your business has witnessed a sudden surge, and you do not want to miss the opportunity to make a more substantial impact on the market. If you’re late, your competitor in the focal city or region will be the one to take the lead. In the current situation, a small business merchant cash advance can genuinely be the sole resource to fund your business.
2. Easy Application Criteria
If you compare this financing method with a traditional loan borrowing, you will find that it has a higher acceptance ratio. With a conventional way, you need to have a stable revenue generation history, considerable time in business, and a positive credit score. It presents a massive problem for those striving to establish themselves.
A small business merchant cash advance is specifically helpful because you can apply for it without an excellent credit score. It is also advantageous if you have not been running your venture for a considerable time. You pay simply through a certain percentage of your sales in the future. Also, it doesn’t take much time to find out if you have qualified for the cash advance, thus helping you to make decisions without delay.
3. No Collateral Needed
With all types of a loan, you are required to collateralize your assets. It may put your hard-earned personal or professional achievements at stake. It may also keep you under constant pressure and fear of losing your belongings in case of a potential default.
However, there is no collateral required for a small business merchant cash advance. Let’s understand how. With a loan, the lenders look at your credit history, but with the advance, a company reviews your credit card sales record. If you have a positive record, it is going to be an additional benefit for you.
4. Access to Smaller Amount
Usually, you have to acquire all loans through the bank, which has a particular set of terms and conditions. They incentivize more significant amounts and may not take the size of the business into account. It leaves no chances for smaller companies that might require costs as low as $5000.
On the other hand, a small business merchant cash advance company lends smaller chunks to all businesses. That truly and substantially saves ventures from debt, thus providing convenience.
If you think about it, borrowing a more considerable amount could defy the entire purpose of borrowing because you may then have to deal with more debt and more worry.
Cons of Merchant Cash Advance in Small Business
1. Access to Cash
Unlike a traditional bank loan, the cash advance may lack in lead the ‘incentive’ factor. As human beings, we like rewards and strive to attain them. But because the method is solely based on a lump sum payment, you would not likely feel rewarded as you do when you repay a particular tranche or installment early with a bank loan. In the longer run, this might urge you to begin to think of other options for financing your business.
2. Interest Rates
Since a small business merchant cash advance is feasible, it is often one of the most sought-after financing options. Therefore, it has a higher interest rate as compared to other lenders. Moreover, you may not find out what your interest rate is unless you inquire about it.
Likewise, issues such as hidden fees may prove problematic for your business, so it is imperative to check this with your lender before you sign the deal.
3. Cash Flows
The repayment of the lump sum amount is made through the credit card sales taking place each day. It is beneficial as all deductions are proportionate to the earnings. However, for a small business, it might become challenging to maintain good cash-flow. If it gets to a point where you find it difficult to manage other expenses, you may need to opt for another option.
While many small businesses may choose a conventional loan, it is not always the best option. It is because the method may involve stringent credit checks plus a strict repayment schedule. A small business merchant cash advance allows some freedom with the business finances, provided that the borrower can make persistent efforts to maintain the cash-flow.
Last but not least, whether or not you should choose this method depends on your lender. If you manage to find a good cash advance company, you will have market-competitive rates. Also, you will be less likely to suffer from a hidden fee in the agreement. Regardless of the ongoing debate, be sure to pick an option that suits your business needs.