You have big dreams for your small business. All you need to turn them into reality is cash. Unfortunately, convincing a bank’s loan officer that your brilliant plans deserve support can be difficult. Consider a merchant cash advance instead.
This kind of business financing, typically offered by credit card processors, involves a sale of your future credit and debit card receipts at a discount. For example, you might sell $15,000 of future receipts for $10,000. You get $10,000 in cash to spend right away. The credit card company keeps a percentage of the sales that they process until they have received $15,000. Here are three great reasons to use this alternative.
Manage Your Cash Flow More Easily
Unlike a traditional loan with a monthly payment amount, a merchant cash advance has terms that are tied to the fluctuations in your business volume. If you operate a seasonal business or simply weather a downturn in sales, the credit card company still only takes a percentage of the card charges. Specific arrangements vary. The company may take anywhere from 10 to 50 percent of your sales and then send you the rest of your funds.
Get Approved for Financing Quickly
Every day that you delay buying equipment means lost sales. Companies offering this kind of small business advance tend not to scrutinize your personal credit score and history as much as the strength of your business. Approvals may come quickly, possibly even within a few days, which means you can get back to making a profit. These kinds of financing opportunities generally focus on relatively small amounts, such as a few thousand dollars, that the credit card company can recover in a couple of years. You are more likely to reach an agreement with the company if most of your customers pay with cards instead of cash.
Protect Your Assets Better
Legally, advances are not considered loans. Therefore, you generally do not need to provide collateral like you would need to do for a loan. Instead of worrying about possible loss of your home or car when business slows down, focus on growing your profits. Your arrangement with the credit card company does not become a debt on your balance sheet.
A merchant cash advance may just be your ticket to success with your small business. You can pay based on how well your business does from day to day, you can often get approved easily and quickly, and you may not need to offer collateral. Think about what you could accomplish with just a little help on the front end. Don’t let lack of cash hamper your dreams.