Many small businesses may need a cash advance to make payroll, grow their inventory, purchase new equipment or expand or renovate their business. A business cash advance, or merchant cash advance, is a fast way to gain access to capital.
A merchant will give a business cash or capital in exchange for a portion or percentage of future credit sales. Rather than having a fixed payment plan and a set interest rate like traditional loans, lenders recuperate their funds by collecting a percentage of the total credit card sales each month from the borrowing business. Small businesses may find many benefits in this type of loan.
Little to No Paperwork
A business cash advance can often be applied for online, drastically reducing the amount of paperwork compared to a traditional loan. Because there are fewer lengthy forms to fill out and review, the submission process is typically easier than with traditional loans and the turnaround time is often much quicker.
No Collateral Required
Securing a traditional loan often requires more collateral, in property or in merchandise, than small businesses are capable of leveraging against a loan. With a merchant cash advance, the approval of the loan is based primarily on past credit card sales. Many businesses with strong sales will qualify for this type of loan.
Receive Cash Quickly
Small businesses may face situations where they are in need of collateral immediately. The approval time for traditional loans often makes them an inconvenient choice in these situations. Because of the reduced paperwork and the online transaction, a borrower can often receive money from a business advance in less than one day.
High Approval Rates
Getting approved for a traditional loan can be difficult for a business that lacks the market capital and name recognition to gain the trust of a traditional bank or lending company. Companies that offer merchant service cash advances will give borrowers a lump sum of money in exchange for future sales, so they can approve the loans with little consideration of poor or bad credit scores. This is especially beneficial to businesses that are too new or too small to have established a strong credit report or a relationship with a lending organization.
Although you may decide to use a business cash advance because your business needs money quickly, you should take some time to choose your lender. When choosing a lender for a merchant cash advance, carefully consider the credibility of the lender. Find a company with a good reputation that will work with you as a partner.