What is a merchant cash advance?
A merchant cash advance can be thought of as a payday loan for businesses. They offer a way for businesses to get money quickly and usually require less red tape then a traditional bank and the funding is generally a lot quicker than a traditional bank loan.
What businesses are merchant cash advances suited to?
Merchants with poor or no credit, no collateral, or new businesses without an established and solid history.
How much can be advanced?
Generally up to $500,000.00. However you may be eligible for more (or less) based on individual factors.
How are they repaid?
Most commonly, the provider purchases a percentage of the merchants credit card sales until the advance has been fully repaid. Merchants generally find this to be more convenient as they are not bound to monthly payments and the advance is repaid as you make sales.
When are merchant cash advances ideal?
This will depend entirely on your current situation. Some examples are: cash-flow problems, the need for new equipment, new inventory, remodeling, a new website or expanding into another market.
What to watch out for
When getting a merchant cash advance, ensure you are fully aware how much you will owe. Make sure you shop around to find the lowest interest rate possible. Also, be sure you can handle the repayments.
One of the key things to ask yourself is: “Is what I’m spending the advance on going to pay for itself”. If you can’t answer yes confidently you might want to explore more conventional options.