Cash flow is one of the most important things for small and middle range businesses. Cash is literally vital if you want to maintain inventory, pay your suppliers, and grow the business year by year. This is why the search for cash never stops. In this article you will learn about what merchant cash advances are and why they are a great business cash advance loan for your business.
A merchant cash advance is an alternative source of funding a business to entrepreneurs who do not have sufficient credit rating or collateral that will secure a commercial bank loan. This type of business cash advance loans funding is based on the idea that the lender purchases of a portion of a business’s future credit card sales at a discount price. As a result, a business gets a lump sum paid at the outset of the agreement. The lender, or the MCA provider, in its turn buys the right to retrieve a portion of your business credit card sales each month.
Advantages of business cash advance loans
- No credit or collateral at stake. Business cash advance loans are one of the safest approaches to accessing cash. Traditional commercial loans for business can and usually do affect a business credit rating; a merchant cash advance is basically only a sales transaction and as a result stays completely off the credit report.
- Easy application and collections process. While application for regular loans for business can be a long and painful process in terms of documents required, business cash advance funding is an absolutely painless and straightforward process from start to finish. Commercial lenders will only evaluate financial statements, tax returns, and business plans that you provide. Your business will be evaluated based on two simple criteria: length of time in business and monthly credit card returns.
- Quick access to cash. As you remember, business cash advance loans do not require much paperwork to be shown consequently they offer a fast turnaround. Application and approval process of classic loans for business may take weeks and even months to process, while merchant cash advance funding is usually available within only a week after you submit the application.
- High approval rate. Merchant cash advance loans evaluation process is based on the real performance of a business rather than its credit. This approach allows any kind of stable business to qualify for these advance loans.
- Revenue-based collections. As experts from ThinkingCapital.ca loans for business explain, the motto of merchant cash advance loans is “we get paid only when you get paid”. The slogan perfectly describes the most important advantage of this loans type. Traditional loans for business require business owners to pay a fixed monthly payment regardless of any circumstances, while merchant cash advance loans require payments based only on the merchants sales volume. This means that you will never get below the profit line. When the times are better, you pay more; if the business got a little frozen for the down season, you don’t have to invent a wheel to pay back the lender.