Merchant cash advance is one of the most innovative alternatives in the market for business finance. A merchant cash advance is when a business uses its future credit or invoice to get a loan to expand its current operations. This is a perfect solution for businesses that do not have a strong asset base which is required by most conventional lending institutions. Repayments are taken in proportion to the revenue that is collected and this makes it an easy and quick funding solution for small and medium enterprises. When you want to raise capital to fund your business, then merchant cash advance could be the solution. It is a convenient option for businesses to expand their operations.
Merchant cash advance is a type of loan where the proprietor or business advances its future payments for a current cash boost. Your lender will give you a lump sum, which is then repaid by deduction from your daily cash sales and receipts. The percentage that is repaid is normally called retrieval rate or holdback. The interest rates on this type of cash advance vary from one lender to another and from one state to another. Based on the size of your business credit sales, repayment period and the size of the advance your lender will calculate an interest for your business. The merchant advance lender will evaluate your credit card sales for the last 3-6 months to establish a base and the right interest rate for your business.
Unlike the conventional lending systems where you will have to provide a lot of information and collateral for you to qualify for a loan, merchant cash advance works on sales evaluation. This means that you will qualify for a loan that you can repay. You do not need to have a stellar credit score to qualify for merchant cash advance loans. There are other parameters that your lender will put into consideration before extending the advance to your business. The loan request process is easy and quick compared to other types of loans and this is a perfect solution for businesses that need a quick cash boost.
With merchant cash advance, your lender is able to judge how much you can qualify for. Some of the advantages of merchant cash advance include
Unlike other small business loans which the business owner has to provide documents and other evidence to access credit facilities, merchant cash advance is fast. Once you have completed a simple and user-friendly loan request form, we will connect you to the many lenders in our network who will fund your advance. The process is conveniently completed online.
One of the main benefits of using merchant is that it provides quick funding compared to other loan types. Your lender will look at your receipts and if your business is eligible, they will advance the loan to you. This is beneficial for any business that wants a quick cash boost.
A strong business and personal credit score is an integral prerequisite in conventional lending institutions. However, merchant cash advance lenders do not look at the credit score of the person or the business. What they do is perform a soft credit check that is solely focused on determining the credibility of the information given by the proprietor. Your eligibility for a merchant advance lender depends on the consistency of your credit card sales and how you have managed previous debts.
When you seek out a loan from conventional lending institutions, the common form of getting a loan is by providing collateral. However, with merchant cash advance, you do not have to provide collateral because your lender will evaluate your business based on the sales and previous credit handling. Merchant cash advance is unsecured because you give up your future sales for a current cash boost and you do not have to put any business or personal assets on the line to get the advance.
Merchant cash advances give some leeway on the amount of money that a business can borrow at certain period. Unlike personal loans and other types of loans, merchant cash advance focuses on the growth of business and your lender will give you a better rate compared to conventional lending.
Look for a loan that you can manage to repay on time without affecting the operations of your business. While budgeting is an essential tool, promote your business to generate more sales to allow it to qualify for higher amounts in the future. Based on the characteristic of the loan, a merchant cash advance is the right option for businesses that require a fast cash injection. Moreover, consult with your lender on the factor rate to ensure that you can manage the loan comfortably without ruining your credit score. While considering loans, you should look at the holdback percentage because that will determine the total amount that you are going to pay for the loan.
Go for a lender who will give you a better holdback percentage to avoid incurring extra costs during the loan repayment process.
A major benefit of merchant cash advance is that you can negotiate with your lender on the repayment interest and the amount that he will deduct from your daily sales. If you are given a loan that you can manage easily, you can still expand your business without the need for incurring extra costs.
Often attributed as a new line of credit, merchant cash advance is a new avenue for businesses to expand their operations without affecting its current working conditions. You can use the advance to buy equipment or modernize operations within the premise. It is recommended that you use merchant cash advance when you need quick cash boost and not as a long-term solution for financial problems in your business.