Merchant cash advances provide businesses with flexible unsecured financing that’s based on credit and debit card sales deposited into your business’s bank account. They offer an alternative to traditional small business loans which often require high credit scores as collateral, such as real estate. With merchant cash advances, lenders only care that your payments are timely.
Contrasting with traditional business loans that come with fixed monthly payments that you must repay on time, a merchant cash advance is paid back as a percentage of daily sales. Your lender will take an amount out of debit and credit card sales every day until your balance has been fully repaid with interest; thus providing your business with a reliable stream of revenue even during slower periods.
Repaying a merchant cash advance loan is typically much faster than with other forms of small business loans, since you aren’t required to make monthly payments. Merchant loans can also help businesses that experience fluctuating revenue streams like retail stores. Such fluctuation can create cash flow issues when sales fluctuate seasonally – merchant loans allow lower deductions from sales when revenue drops during lower revenue times, providing relief when cash flow problems arise.
Merchant cash advances are also an ideal solution for businesses that struggle to gain credit from traditional banks and lenders, due to the fact that your credit report and score have less of an effect on approval than they would with a typical business loan application process. Most merchant cash advance providers require you to undergo a credit check, although usually this inquiry won’t negatively affect your report.
Small businesses looking for extra capital for expansion or upgrade may benefit from seeking a merchant cash advance. These funds allow your business to make necessary adjustments that remain competitive and relevant within its industry; for instance, restaurant owners might use these funds to purchase equipment or add kitchen facilities, while retail store owners could use them to expand display space or renovate existing locations.
Healthcare clinics or personal care services, like barbershops or nail salons, may utilize merchant cash advances to keep operations running smoothly. The funds can be used to replace worn or broken equipment, purchase inventory as necessary and hire staff as necessary. Likewise, small retail shops may use an advance to refresh their storefront or make enhancements that attract more customers.