Small business cash advances provide an alternative form of financing that is quick, simple, and non-disruptive to your credit report compared to traditional loans. Though they do not require collateral or personal guarantees like traditional loans do, and may even make qualifying easier, this form of borrowing does have drawbacks that should be carefully considered before taking one out.
Benefits of merchant cash advances for businesses include investing in new or updated equipment and services that can enhance service quality, increase sales and revenues and reduce operating expenses while freeing up working capital to be put to other uses. Merchant cash advances may prove especially useful during times of economic uncertainty or slow business expansion.
Merchant cash advances do not conform to the same stringent requirements that bank loans do, specifically no need for verification of business credit history and tracking income; this can provide relief for small business owners looking for ways to manage cash flow and balance books.
Cash advances can also be an ideal solution for newer businesses without established credit histories. Lenders will assess previous months of business to project future credit sales before offering an advance. Merchants typically receive an amount equal to 1-2 times monthly terminal sales as determined by lenders by dividing total monthly debit/credit sales by average number of transactions in a location per month.
Merchant cash advances do not involve the same high fees and interest rates associated with traditional loans, since an MCA does not fall under the definition of loan and therefore doesn’t have an annual percentage rate (APR). Instead, lenders deduct an varying amount from your account each day or week depending on your sales volumes – with lower sales periods seeing smaller holdback amounts deducted while periods with more sales seeing an increase.
Business cash advances provide a reliable alternative for small businesses that don’t want to wait months for banks or other sources of financing to approve loans, as well as those who cannot meet other requirements of financing options. It is wise to compare fees and factor rates of various providers before applying for an advance, so that if approved you know exactly what will be involved.
Though a merchant cash advance Gadsden AL may bring many advantages, it is wise to carefully consider its potential drawbacks before making a decision. When searching for lenders with fair and competitive rates as well as understanding how the repayment process works to avoid any surprises later. It is advised that when seeking one of these loans to consult with a knowledgeable professional who can walk them through each step.