Running a business has its ups and downs, and you may also find yourself in sudden need of cash from an unexpected expense or a seasonal increase in sales that necessitates a quick buildup of inventory. If your business accepts debit or credit cards, you may have a financing opportunity that can provide you with the capital for any of the many reasons immediate cash can be important to your business. A merchant cash advance can be offered to you based on the predicted volume of sales that comes from your payment card receipts, and a business of any size can take advantage of this. A more mature business can get better options, such as extended repayment and preferred pricing, but any business with at least fair credit can find flexible repayment options.
During the approval process, the lender reviews the last several months of payment card processing and determines your average sales volume. Your approved merchant cash advance amount will be based on that, and the cash you will receive can be used in any way that you decide. You pay it back in increments as a percentage of your future payment card sales, and you do not need to adjust your credit card processor. Since repayment is tied to your sales, you pay back more or less depending on how brisk your business is, so you don’t need to worry about cash flow problems that you could have if you were paying back a fixed amount monthly on a traditional business loan.
A merchant cash advance could be a good idea for your business if you are having trouble obtaining credit, but make a fair amount of credit card sales in your day to day operations. You need to keep in mind that a cash advance is not a loan; you are not being charged interest. Rather, you are receiving cash up front in return for a percentage of your future sales. You must calculate whether you can continue to run and grow your business over the term of the agreement with a decreased revenue percentage from your customers. However, often it is the case that cash up front makes the difference on whether your business can recover from an unexpected event or meet increased demand and not lose market share. That can be more important than decreased revenue over number of months until the advance and the set premium is paid off. This can also be your best option if you do not have enough credit to get a loan that meets your cash needs.