One factor that is crucial to small business success is strong and steady cash flow. You need it to pay your employees, obtain inventory and supplies, and spur further growth. While a loan from a traditional bank is an option for some businesses, another attractive possibility is a merchant cash advance.
An MCA involves a lending institution purchasing a portion of your future credit card sales in exchange for the funding your company needs. You receive a lump sum upon finalization of the contract, and the lender receives a percentage of your upcoming credit card sales until the debt is paid off. Here are some of the advantages of this form of financing.
Easy Approval Process
Compared to a traditional bank loan, a merchant cash advance is relatively straightforward and easy to obtain. Before granting a loan, a bank goes over your business plan, tax returns, financial records, and numerous other details, whereas a lender for a merchant cash advance simply focuses on the length of time your company has been in business and the amount of income you receive through credit card payments.
Quick Access to Cash
Obtaining traditional bank loans can involve months of processing time. However, because of the decreased amount of paperwork, when you apply for a merchant cash advance, you can usually have your approval and the financing you need in a matter of days.
No Requirement of Collateral
Unlike a traditional bank loan, there is no need for collateral when you take out a merchant cash advance. Additionally, because payment of a merchant cash advance is dependent on future sales, it does not affect your credit rating.
Payments Dependent on Revenue
You have to make monthly payments on traditional bank loans whether business is booming or you’re in the off-season. However, with a merchant cash advance, your payments are linked to your income, so when sales are down, it’s not a problem.
For more advice on merchant cash advances, get in touch with Acquisition Capital Solution.