Your Merchant Cash Advance Options
Small business owners face many challenges over the course of business. While one must worry about being able to meet the needs of their customers, promoting continued growth of revenue, and maintaining their business’ financial health, it can become increasingly difficult to consistently reach one’s goals and objectives. As many small business owners are running into difficult times dealing with the challenges of the economy and changing credit requirements it can be difficult to raise the capital required to expand operations. If you need money for your business you may be forced to look into alternatives for additional capital when all else fails.
What is a Merchant Cash Advance?
A merchant cash advance is a loan provided to your business against your future credit card payments through your normal business operations. This means that you’ll receive a loan from another business based on your monthly income which is paid back through your credit card sales. Instead of going through traditional means with a standard monthly payment, merchant cash advance companies will base your interest and payments based on your monthly income and take your payments as a portion of your sales.
There are generally three different methods for paying back a merchant cash advance:
Split withholding – This payment method is the most common method used by merchant cash advance programs. When you enter this agreement, you commit to splitting a portion of your income with the company you receive the cash advance from.
ACH withholding – As a business owner, you are probably already familiar with ACH, but this is a system that allows you to make transfers electronically. Some cash advance companies use this method as a form of repayment. With ACH, you give the cash advance provider access to a bank account under your business’ name and they will automatically deduct payment from that account.
Lock box – a lock box is similar to an ACH withholding, except instead of the cash advance company having direct access to your bank account, you set up a new account, put money in it and then you transfer that money to the cash advance provider.
Benefits of a Merchant Cash Advance
There are a number of reasons that businesses opt to use merchant cash advance services. Whether they are looking to remodel their business, handle the costs of an emergency, or to pay off debts or business taxes, different needs and requirements will generally determine whether it is beneficial to take a merchant cash advance. One of the strongest benefits is the increased rate of acceptance for a merchant cash advance loan in addition to the loan being structured based on your business’ ability to repay the debt.
Determining a Need
It is important to conduct a thorough evaluation of your business before you make the decision to use merchant cash advance programs. You should look at your cash flow history and judge whether you will be able to bring in sufficient income to pay back the advance within a relatively short period of time. Look at your business’ credit and assets to see if you would qualify for a bank approved loan instead, which will come with a lower interest rate. Do you have any assets? Those can also be used to obtain a traditional loan.
Another question that you should ask yourself is whether the business could wait until you are able to save the money through those sales you are banking on. This, of course, depends on what purpose you are intending to use the merchant cash advance for. If you are planning a renovation of your store, could you put it off for a few more months, or is the renovation to address serious structural issues? Conducting an evaluation is a good way to make sure that you really need a cash advance before you go out and get one.
Select a Merchant Cash Advance Company
It can be difficult to select a merchant cash advance service. We provide a list of recommended vendors which have historically shown their ability to provide cash advance loans to businesses looking for acceptance and the ability to expand or maintain their business. The vendors we recommend have a dedicated approach to communication and support in order to set the right expectation for repayment and to help businesses understand their needs and obligations.