5 Advantages of Merchant Cash Advances
If you need cash flow to keep your startup humming, a merchant cash advance may be the answer. There are multiple benefits to using these financial instruments. Here are five that might make you consider taking one out over a traditional bank loan.
In business, timing is everything and sometimes enterprises need immediate funding. One example would be a sale tied to a particular holiday. Unlike traditional bank loans, funds from cash advances typically arrive with great speed. The odds are that you won’t have to wait more than a week to get what you need and the money arrives in one lump sum.
Traditional loans are heavy on requirements. Besides demanding a raft of paperwork, an imperfect credit report can result in a rejection. These financial providers are more likely to accept your application. As long as you have a certain level of sales activity on your business credit card, there is a good chance you qualify. Applying is simple and can usually be done online.
Unlike traditional loans, a merchant cash advance does not require that you make set monthly payments. Rather, you are accepting funds in exchange for a percentage of future sales made by credit card. This means there is no possibility of falling behind on payments unless the business fails. The amount you owe each month is determined by how much you make.
The money you are given can be used in any manner you wish. This differs from small business loans, which often come with restrictions. When you’re limited by the ways in which a loan can be used, you may need to find more than one lender to fulfill your needs. Cash advance monies have no limits. They can be used to pay off debt, conduct product research, fund marketing campaigns, or anything else that’s necessary.
Under many lending agreements, collateral is required. If you are unable to pay back the loan, the asset you used to back the agreement could be repossessed. Failure to meet repayment terms could hurt your credit score or may even have legal implications. With a cash advance, your credit rating cannot be affected and your business’s operational resources remain untouchable.
A merchant cash advance isn’t the right choice for everyone under all circumstances, but it’s the ideal solution for many. Weigh the benefits of these funds before rejecting them out of hand, as the perks they offer might just make them the better option.