Most small to medium-sized businesses would benefit from increased access to cash, whether needing to restock inventory or grow the company. Merchant cash advance loans can be a great solution for small businesses who may not have the collateral or credit history to apply for a traditional business loan or line of credit. Businesses can then use the money for their company's operations.
Merchant cash advance loans work by using a portion of a business's future credit card sales as a source of funding. In return, businesses have access to the capital they need. Here are five benefits of merchant cash advance loans for small businesses.
At one time or another, small businesses encounter short-term cash flow issues that can cause major issues for the company. This may stem from a client who pays their invoices late or from the need to front capital for inventory. A merchant cash advance loan can help small companies front the cash they need to resolve short-term cash flow issues, especially when the business owner knows where the money is coming from and is just waiting for it to show up.
Many small companies turn away work because they don't have enough capital to front for new projects. For instance, if a large project for an established corporation pays upon project completion, your company may not have enough money to keep staff working on this large project until it pays. This may mean that companies stay small as a result.
In general, applying for and accessing merchant cash advance loans is much quicker than traditional business loans. If your company needs to restock inventory, either for a busier than expected sales cycle or a large order, you'll be able to quickly buy the inventory, parts or supplies you need, without the delay and approval process required by other small business lending options.
One of the best reasons to choose a merchant cash advance loan is the repayment structure. With a traditional loan, you take out an agreed-upon amount of money and make designated monthly payments. How much your business owes on a monthly basis has nothing to do with how much revenue your business earned. Sometimes, making payments during a less than profitable month can be a burden that can further hurt your cash flow and profitability.
However, with a merchant cash advance loan, you pay a small portion of your revenue as repayment for the loan. If your business does poorly one month and generates fewer sales, you'll pay less for the loan that month. This can be a real lifesaver for many businesses. For new ideas, in particular, a merchant cash advance loans can lessen the risk of what happens to your business if the new idea flops.
It can be tough to secure business financing if you have bad credit. Fortunately, merchant cash advance loans focus less on your credit and have higher approval ratings, partially because repayment is tied to your credit card sales. This can be a great option for business owners who need funding with less than optimal credit.
For these reasons and more, merchant cash advance loans can help small businesses succeed. If you need a merchant cash advance loan, discuss your business's options.