There are many options available for small businesses that need fast cash. One of those is a merchant cash advance. If you own and operate your own business and need to raise capital quickly, you should learn about the process of a merchant cash advance.
How Does a Merchant Cash Advance Work?
It’s important to know that a merchant cash advance is not a loan. It is actually an advance payment against the future income earned by your small business. The provider who gives you the merchant cash advance gives you the money in a lump sum. This monetary amount is repaid through a percentage of your business’ credit card transactions.
Generally speaking, the amount paid toward the merchant cash advance is known as the retrieval rate or holdback. It can be anywhere from five to 20 percent depending on how much is made in sales through credit cards during the repayment period. The terms of a merchant cash advance can be anywhere from 90 days to 18 months and the repayment begins as soon as you receive the funds.
Additionally, a merchant cash advance amount is determined through three to six months’ worth of your business’ credit card receipts. You can qualify for anything from 50 to 250 percent of your credit card transactions.
Who is Best Suited for a Merchant Cash Advance?
A merchant cash advance is most appropriate for businesses that require fast cash and have an established credit card sales history. In general, restaurants and retail stores would be among the best candidates. New businesses that already have solid credit card sales but are too new to have yet established a credit history would also be good candidates for a merchant cash advance.
Benefits of a Merchant Cash Advance
There are a number of benefits that businesses can enjoy from getting a merchant cash advance. The application process is simple and can be completed online in only minutes. In addition, you don’t need excellent or even good credit to qualify for a merchant cash advance. Instead, all that’s required is that you have sufficient credit card sales to ensure that you can pay it back.
Funding is fast with a merchant cash advance, which is another reason why it’s such an attractive option for businesses requiring fast cash. After your application is approved, you can receive the funds in mere days. Also, unlike with a traditional business loan, you don’t have to put anything up as collateral.
Merchant cash advances give the borrower more flexibility when it comes to making payments. The terms are more flexible and the amount paid each month varies depending on your business’ total sales for that month.
Having a better understanding of merchant cash advances and how they work can determine whether it is the best option for you. It can help you make a better business decision so that your company can flourish.