Five Reasons to Consider a Merchant Cash Advance
When you own a small business, especially if it’s a start-up, there are always too many things on the to-do list, and not enough cash to pay for them. It’s easy to dream about expanding to the space next door, hiring an extra staffer for the morning shift, implementing a whole new advertising campaign, or updating the kitchen/computers/phone system/ whatever. It’s far more difficult to come up with the capital to do any one of those things, let alone all of them.
If your business is successful, well-established, has demonstrable assets, and if you and the business both have good credit profiles, you could apply for a small business loan. Of course, in the current financial climate loans of any kind are increasingly difficult to get, and the terms may be pretty stringent. There is, however, another option. You could look at a merchant loan.
In truth, merchant cash advance aren’t really loans at all, at least not in the traditional sense. Instead of borrowing a fixed amount of money at a specific interest rate with a set number of months in which to repay it, you’ll be taking an advance against your future credit card sales. Why is this a better option than a normal loan? Here are five reasons:
1) Merchant cash advances don’t have fixed payments. Instead of making the same loan payment every month, even in months when business is slow, you’ll pay back a small part of the advance with every credit card sale you make. While you may have to change your credit card processing company in order to do so, the advantage is that in months with slow sales, you’ll be making smaller payments. In busy months, on the other hand, you’ll make up for it, since more/bigger sales means larger payments.
2) Neither you nor your business will be put under a microscope. Unlike business loans, merchant cash advances don’t require lengthy applications where you provide endless amounts of information. Instead, you’ll provide a profile of yourself and your business, answer some basic questions, and provide documentation of your average and total credit card transactions over the past several months (generally six to nine).
3) The approval process is generally fast. Small business loans can take thirty days or longer to come through. Merchant loans are usually approved within 72 hours of a complete application, and are usually funded within 72 hours of approval.
4) You’ll pay less interest. Most merchant cash advances come with a much lower interest rate than the average small business loan, and many cash advance companies will reduce or waive their application fees from time to time during the course of the year.
5) You’ll get excellent customer service. Merchant loans generally come with 24/7 phone support, as well as the opportunity to take out a new advance once the original funds have been repaid. In this way advances are almost – but not quite – like revolving credit lines.
While these are all excellent reasons to consider a merchant loan or cash advance instead of a traditional business loan, here’s one more: merchant cash advances are also available to business that don’t do a lot of credit card transactions. If your business has a lot of invoiced receivables, there’s a variation on the merchant loan called a merchant invoice advance, which works in a similar fashion.
Low fees. Low interest. High flexibility.
Merchant loans may well be the future’s most common source of working capital.