Most business owners will find themselves in need of cash they don’t have at one point or another. It might be a few thousand dollars or tens of thousands of dollars. You may need to pay an invoice, maintain stock from suppliers or take ripe growth opportunities. The capital to do these things isn’t always there, though, and it may leave you looking to banks and other lenders for a loan. While traditional financing is a great option for many businesses, simple factors such as bad credit will often lead to an immediate denial. What’s a business to do in situations like these?
Merchant cash advances, or MCAs, offer an alternative funding option. Through this method, a financier provides businesses with a lump sum of cash in exchange for the proceeds from their credit card sales. This is typically negotiated by assessing the business’ average credit card transactions each month and determining how much business can be expected. After this, the provider purchases future sales at a discount, and the agreed upon sale price is transferred to the business as a lump sum. Rather than borrowing money, then, the business is able to access capital and continue normal operations.
There are a number of advantages MCAs offer a small business. Unlike many financing options, applicants with poor credit are still eligible for a merchant cash advance. Qualification is not based on your prior borrowing history, so it isn’t relevant to the application. This also means that the rate of approval is high among applicants. An easy application and simple payback process make is clear why so many small business owners opt for MCAs when they are in need of capital.
These four advantages can make a big difference in your business’ finances. Obtaining cash is tricky, but with the right tools, you can keep your company afloat with minimal damages. It’s always best to do rigorous research before applying for any kind of financing and ensure it is the right choice for your business’ unique needs. If you think MCAs may be the right option for your company, you will need to prepare documentation of sales and finances for the process. No matter what kind of funding you choose, however, you can best protect your interests by maintaining caution and an awareness of long-term impact. These principles will help you sort through exploitative funding opportunities and find the ones that will truly benefit your business and your goals for success in the future.