How do you know if a merchant cash advance is right for your business? First you should be aware of what other types of financing may be available for your business. When looking for small business financing or loans make sure that you have good information that will help you make the best choice depending on your circumstance for needing funding. If you business is able to meet certain criteria then a merchant cash advance may be a good idea. Lets go over who may want to consider this type of funding and how to begin.
Merchant Cash Advance – Tell Me More
In simple terms here is what you should know about a merchant cash advances… It is a one time lump sum structured payment to a business. The funder and business will agree upon a percentage of future debit & credit card sales to be collected automatically (daily or weekly) by the funder until all is repaid. The term lengths are generally 3 months and all the way up to 24 months, when applying for a merchant cash advance.
This is not a loan and there is no interest rate as a factor rate is used instead. This is short term working capitol used to solve a problem or take advantage of an opportunity. No collateral is required and the biggest underwriting decision factor is the cash flow / credit card sales of a business. They will look at credit, but it is not as important as is the company’s monthly sales and income.
How much money do you need? The amount of funding a business may qualify for is based on a few things. They will want to look at…
- Average bank deposits for 1 month
- Amounts for your credit card swipes
What they are looking for and will verify is to see that you are generating a stable monthly income and that the history of your company has sufficient revenue. This will be required in order to qualify for a merchant cash advance. If you qualify and are approved, you may be able to get the money in 1 to 3 days, on average. These do process quickly, as long as you do the same in regards to turning in your documentation.
When you contact us tell us how much money you are in need of and we will send the request to the funding organizations that we have partnered with. After reviewing your application, they will come back with an offer that will contain how much money they will fund and how much it will cost.
Merchant Cash Advance Details
You may find the following information helpful while you are discovering more about this financial product.
As I mentioned above that your revenue and income is so important for the qualification process. Many small businesses can benefit greatly by having access to this type of working capital, but lets look at what happens after funding.
When you use a merchant cash advance, you need to know what you are going to use the money for. What is your strategic path to a successful outcome when you receive this money? Are you prepared for a bit of a squeeze into your monthly cash flow?
In other words can you handle giving up ten to twenty percent of every dollar your business receives until this is paid off?
I just want to set expectations so that you can plan according and successfully repay this
A merchant cash advance is good for the following…
- Buying / purchasing inventory
- Flipping – seizing an opportunity
- Can help cover a business during slow season
- Make repairs / buy equipment
- Any other important needs of the business to keep it running smoothly
- Should be used by businesses with consistent revenues
Who Should Use a Merchant Cash Advance?
If you have been in business at least six months and you have credit issues, this can work. This also works for businesses or shop owners who may lack assets or collateral. The funding organizations are looking for businesses that have a big number or transactions. An example of that would be a bar or restaurant, retail in B2C, salons, ect. If you are able to forecast a a consistent flow of customers every month, then this will work.
If you business has cyclical revenue then a merchant cash advance is a good option for working capital. Many companies like to purchase additional inventory ahead of the holiday seasons and use a financial product like this.
Making the Right Choice
I have seen many companies that are launching a new product line or have needs for working capital because of a new client they got. Merchant cash advances work great because it is the fastest way to get money. Common funding amounts we see range from $10,000 up to $100,000.
The most recent client that we funded operated a restaurant and their oven broke down. These types of ovens in restaurants are expensive and usually cost between $10 to $20k. This restaurant was able to solve their problem by applying for a merchant cash advance by turning in an application, some bank statements and a few other docs. They got their money in 2 days.
So as you can see this is a good way to get access to working capital to keep your business running.