How Merchant Cash Advances Can Help Your Business
Small business owners face some significant challenges when it comes to staying afloat those first few years. One of these is maintaining a cash flow that is enough to cover the bills and keep the employees paid. This task can be so frustrating for some business owners that they have to work another job to make enough money to fund the new business. Another way, and one that allows you to focus your energy on your own business, is through merchant cash advances.
How does this resource work? The cash advance provider is willing to offer you a lump sum. In return, you promise to pay a percentage of your future sales. Even if your start-up has no credit, bad credit, and/or no collateral, you may qualify for this type of funding. In many cases, the businesses who work with cash advance providers have already tried to obtain conventional funding and have been turned down. If your business relies on credit card payments and the credit card side of your business is strong, this option could be a business-saving solution. In fact, if you’re repeatedly being turned down by banks, this may be the only solution available to you.
Merchant cash advances are not loans and you won’t be tied to a specific monthly payment. Instead, your payments will be determined by the amount of credit card sales you make each day. A percentage of those payments will go toward the advance and the premium charged by the cash advance provider. This is generally accomplished in less than a year, but if your credit card gains are small, you’ll enjoy a certain amount of leeway because you don’t have a due date or fixed payments.
The specific percentage of credit card sales taken by the cash advance provider can vary. Responsible advance providers make an effort to keep the retrieval percentage low enough that a small business can survive. In some cases, this means pulling a smaller percentage of the credit card sales. The well-being of the advance provider is actually tied up in the success of the small business; if the business fails, the cash advance provider loses out on the rest of their advance.
Merchant cash advances could be the source of lump sum cash that you need as you struggle to keep your small business operational. If you’ve been turned down by banks because you don’t have the credit history or collateral to obtain a loan, this resource could be the option you need to keep your doors open.