For generations, small business owners stayed under the impression that traditional bank loans were the best (and sometimes, only) way to fund their companies. The reality now, however, is that there are many alternative sources of funding that can help entrepreneurs when they need an influx of cash. A merchant cash advance may be a great choice for many businesses in this situation.
How Does a Merchant Cash Advance Work?
Simply put, a merchant cash advance is an advancement of cash given to a business in exchange for a percentage of future earnings, which are collected through electronic credit and debit card transactions.
What Can I Use a Merchant Cash Advance For?
One of the great advantages of a merchant cash advance is that it does not carry the restrictions that usually accompany a bank loan. Bank loans are tied to specific expenses while merchant cash advances can be used for almost any business expense. These include the purchasing of new equipment, physical expansion or remodeling, opening new locations, expanding your product line, and even advertising.
It’s worth noting that merchant cash advances are not restricted to expenses tied to growth. They can cover payroll, debt, insurance premiums, or the cost of hiring new employees. Lenders evaluate the businesses’ ability to pay back and are not overly concerned with what the money is used for once they’ve determined it is a good investment.
What are the Benefits of a Merchant Cash Advance?
The major benefits of a merchant cash advance over a traditional bank loan are the shorter time needed for approval, the flexibility of what the cash can be used for, and the fact that they may be extended to businesses who have credit that is not good enough (or not established enough) to qualify for a bank loan.
Another advantage that many businesses enjoy is that once the advance is in place, the payments are taken automatically out of credit card transactions, which means you do not need to send a monthly check and worry about budgeting for them.
What Do I Need to Do to Apply?
The process to obtain a merchant cash advance is quite simple. Depending on the merchant cash advance company that you work with, you may be able to complete the entire application process online, supplying only basic information such as a Federal Tax ID and some figures. If approved, you will likely see the funds within a week.