Small businesses often need additional funding during slack seasons or periods of crisis. One financial product that can assist you during times such as these is a merchant cash advance. Here is some information to help you determine whether a merchant cash advance is right for your business.
Merchant Cash Advance Basics
When your application for a merchant cash advance is accepted, you receive a one-time prepayment based on your company’s future credit card sales. To pay for the advance, you remit a daily percentage of the income you make from credit card sales to the financial provider. The amount you pay daily varies depending on the volume of sales.
Advantages of a Merchant Cash Advance
This form of funding can be easily and quickly obtained even by companies that may not qualify for traditional loans. Because payments on merchant cash advances are based on sales, you don’t have to stress about being unable to make payments when sales are slack and cash flow is down. This is particularly beneficial for seasonal businesses, which find it difficult to make steady payments on traditional loans during off-seasons. Merchant cash advances are attractive options for businesses that sell products online because their sales are accomplished mainly through credit card transactions. A merchant cash advance is also a good funding alternative for businesses that don’t want loans to show up on their credit reports.
Qualifications for a Merchant Cash Advance
Although lenders of traditional loans are concerned with your company’s overall financial situation, financial providers of a merchant cash advance are mainly concerned with the volume of your business’s credit card sales. You are required to use a credit card processor that the merchant cash advance provider verifies. If the credit card company you are currently using does not qualify, you may need to switch to another company.
For more advice on how a merchant cash advance can boost your company’s cash flow, get in touch with POM Capital & Finding Services.