Have you ever feel like your business is on a financial thrill ride? One minute you’re on top of the world, the next you’re white-knuckling a cash flow dip. That’s where merchant cash advances (MCAs) can be a lifesaver.
Need a quick cash boost to snag a hot deal, cover a surprise cost, or just smooth out a blip in your income? MCAs are like short-term funding designed specifically for businesses that take credit cards, enabling you to get the money you need now in exchange for a cut of your future sales.
If you’re not sure about getting merchant cash advances, read below to discover how they can help your business win the race.
Applying for the Merchant Cash Advance
Applying for a business cash advance from Credibly and other service providers is often faster and more streamlined than traditional bank loans. While banks might require a comprehensive business plan, tax returns, and personal credit scores, MCA providers often focus primarily on your business’s recent financial performance.
Most lenders will ask you to submit basic business documents, such as your business license and bank statements, along with recent processing statements from your merchant account. This streamlined approach allows them to assess your eligibility quickly, typically within a few days.
In addition, MCA providers tend to be more flexible with credit score requirements. Whereas a bank might deny a loan application for a less-than-stellar credit score, an MCA provider might still approve you based on your business’s strong sales history.
However, even though credit score is not the only thing lenders care about, it can still influence the interest rate you’re offered. So, it doesn’t hurt to work on improving your credit while you’re at it.
Receiving the Funds
Once approved, you’ll receive the cash advance directly deposited into your business bank account. Getting that cash advance straight into your business bank account is a game-changer. With those funds at your fingertips, you can stock up on inventory, expand your product line, and really take advantage of all the sales opportunities out there.
You may also use the MCA to invest in other areas of your business, like securing vital small business equipment loans you might not have qualified for otherwise. This could be anything from new computers and printers to restaurant kitchen appliances or manufacturing tools. An MCA can help you secure the equipment you need to operate more efficiently and take your business to the next level.
Repaying the Merchant Cash Advance
Unlike a traditional loan with fixed monthly payments, you repay an MCA through a daily or weekly automated debit from your merchant account. This debit is a predetermined percentage of your sales, calculated using a factor rate. The factor rate is a single fee that encompasses the total cost of the MCA, rather than a traditional annual percentage rate (APR). So, instead of paying interest on the outstanding balance, you pay a fixed fee on the total amount advanced.
The key benefit of this repayment structure is its flexibility. Because the debits are tied to your sales volume, you pay more when sales are strong and less during slower periods. This aligns with your cash flow and helps avoid putting a strain on your business during slow months.
The Benefits of Merchant Cash Advance for Your Business
So, how exactly does a merchant cash advance support your business? Here are some key benefits:
Fast Access to Cash
MCAs offer a much quicker turnaround time compared to traditional loans. This means you can get the funding you need within days, allowing you to address urgent needs or capitalize on fleeting opportunities.
Flexible Repayments
There are no fixed monthly payments with MCAs. Your repayments are tied to your sales volume. This provides flexibility, especially during slower sales periods, as your repayments automatically adjust.
Minimal Credit Score Impact
Unlike traditional loans, MCAs don’t rely heavily on your credit score for approval. This makes them a viable option for businesses with less-than-perfect credit or those that are just starting out.
Improved Cash Flow
An MCA can bridge the gap between your current cash flow and your future income. This allows you to invest in your business, manage inventory, and meet operational expenses without compromising your day-to-day operations.
These benefits demonstrate how MCAs can be a practical and flexible financial solution for businesses seeking quick and adaptable funding options.
Conclusion
Merchant cash advances can be a powerful tool to propel your business forward. By understanding how they work and carefully considering the pros and cons, you can make an informed decision about whether an MCA is the right financial fuel for your entrepreneurial journey.