Let’s face it: at one point, a ton of small businesses experience financial hardships, which means they’ll need more cash at hand.
And managing cash flow for your business is indeed crucial. Sadly, even the most stable business owners often face financial hardships, forcing them to look for financial help.
The good news is that you have a variety of financing options you can choose from. These funding options can turn things around by delivering liquid capital directly into your business account to help you during your hard times.
In this post, I’m going to walk you through a merchant cash advance, what it is, how it works, and how it can directly impact your business.
Merchant Cash Advance Definition
A merchant cash advance is funding that doesn’t qualify to be called a loan, but it is a funding option that offers businesses fast cash based on your business’ credit card sales receipts.
In other words, when you go for a merchant cash advance, you are selling your business’ future revenue from credit sales for instant payment to help you run your business.
How Merchant Cash Advances Work
Now, a merchant cash advance will offer your business capital depending on your expected credit card sales for a specific time. For example, if your business secures a merchant cash advance of $100,000 in a term of fifty-two weeks and at a rate of one-point two-five, you will have to pay the merchant cash advance institution $125,000.
Pros of Merchant Cash Advance
- You are guaranteed instant lump-sum payment.
- You don’t have to worry about your credit score because the qualification depends on your sales.
- The approval process is fast.
Cons of Merchant Cash Advance
- A merchant cash advance is expensive to repay.
- It comes with one-time influx capital.
- There are restrictive requirements that you have to meet.
The reality is that merchant cash advances can bring your business back to life when the business is facing hard financial times. But you must be careful when taking this financial help, hoping you’ll generate more sales in the future.
Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their merchant cash advance solutions. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favourite job is the one he’s now doing full time — providing business funding for hard-working business owners across the country