Over 80% of American businesses fail because of issues with cash flow; you can beat that statistic by incorporating merchant cash advances into your financial strategy. The credit card merchant provides a lump sum of cash when your merchant cash advance is approved. The amount, plus interest, is repaid through your processed credit card transactions. Let’s review the top reasons you should consider this funding option.
Approval Based on Sales
Your merchant will provide money based on your sales history, the value of your credit card transactions, and the predicted sale potential. Neither collateral nor an excellent credit score is required. The most common requirements are:
- At least three months of credit card transactions
- Business checking account
- Bank account statements
- At least one year of tax returns
- Identity verification documents
Receive Cash Quickly
Because they have access to your credit card transaction history, your merchant can quickly determine your advance amount. You typically receive the principal amount within 48 hours; some merchants fund your advance in less time.
Repayment Is Easy
Most business owners prefer to repay the merchant cash advance as a percentage of credit card transactions. If transactions are lower during slower months, your payment amount will be less than those of busier months. Those leaner months equate to an extended payoff period. You may be required to pay back a predetermined amount every month. A few merchants may offer a hybrid of these two payment options, only debiting the difference between the credit card sales and the minimum amount due.
Purchase Inventory
Cash advances give you immediate cash to take advantage of discounts. Use a cash advance to help pay for these purchases. A vendor may offer a significant sale that would help decrease the cost of your goods. A competitor may retire and offer to sell you their business. You may have to pay an insurance premium to repair damage to your facility.
Accept New Projects
Many small businesses struggle to grow because they cannot accept larger projects. They may not have sufficient cash flow during the project. Those customers may not be required to pay for the project until the completion of the work. Smaller companies may be unable to maintain payroll or equipment costs during the project. A merchant cash advance can give you the purchasing power to buy equipment or maintain payroll while managing those projects, and final payment is received.
Merchant advances can be an effective tool for your company’s financial strategy. Used wisely, they can help restore cash flow and keep your business growing.
