A merchant cash advance is a type of financing where you agree to pay back the money given to you through a portion of your credit card sales from each day. The financing company will also charge a fee, which is included in the amount you must pay back.
It is important to note that this is not a loan. It is a cash advance. You aren’t paying interest because you haven’t borrowed money. You have simply gotten an advance on money you will earn in the future. Since it is not a loan, you will not have to fill out a lengthy amount of paperwork and you will usually get your money within a couple days. You also should understand that the fee you will be charged is based on how much money you get advanced, so the more you get , the larger your fee will be.
If you understand how a merchant cash advance works, you can actually use this type of financing to help expand your franchise. Keep in mind, though, that in essence, you are borrowing from yourself, so you need to keep good records and you know what you owe and what you are taking in. Generally, it will take four to nine months to pay back the advance.
This type of financing is good to use when you need to maintain cash flow while you are expanding. You will have money on hand to fund whatever ideas you come up with and won’t have to mess around with trying to find financing or waiting for a loan to be approved.
It is also helpful when you need to increase your staff. You are anticipating more sales and more customers, so you will have the money in the future to afford more staff, but in order to make that money, you need the staff on hand now. With an advance, you can pay for the additional staff now
Best of all, this is a no risk option. With loans or other types of financing, you have to put up collateral. The only thing you are putting up here is future sales, which will happen. The financing company will only take a portion of sales each day based on how much your total sales are, so you won’t end up broke trying to pay it back.
A merchant cash advance is ideal if you do a lot of credit card sales and are ready to expand your franchise. You get the money you need right away with no risk and no wait. It can help you to get things moving so you can grow your business now instead of later.