Merchant Cash Advance: Key Considerations

A merchant cash advance is a option for small business owners to get quick financial capital. Generally, a merchant services provider loans the company money based upon expected sales receipts. This company repays the cash advance from day-to-day charge card sales. Small business owners with seasonal sales tend to make use of this type of financial service. In some instances, a merchant cash advance is approved within 10 business days. Traditional business financing could take more time and have more restrictions.

How Small Businesses Benefit from a Merchant Cash Advance

There are a variety of benefits to getting a merchant cash advance. Businesses are in a position to:

• Fill inventory
• Take advantage of expansion opportunities
• Balance financial statements with positive working capital
• Increase cash flow


Repayments Through Credit Card Processing

Providers that provide this sort of cash advance service don't receive fixed, monthly payments. As an alternative, when the business uses Visa processing and MasterCard processing services for customer purchases, cash advance payments are subtracted. A part of daily sales go towards repaying the cash advance until it's paid in full. Payments are adjusted for slower sales days, according to the business’ cash flow intake on a daily basis. There is no set repayment schedule of fixed rates and payment dates.

Businesses Most Likely to Use a Merchant Cash Advance

Various industries make up the types of small businesses most likely to use merchant cash advance services. A number of these include:

• Florist shops
• Doctor and dental offices
• Restaurants
• Nightclubs
• Retail stores• Auto repair shops
• Nail salons


How a Merchant Cash Advance Is Different from a Business Loan

Individual business needs may determine whether a small business loan or a merchant cash advance is better. Proprietors should weigh the benefits of each against businesses needs to make the right decision. Generally, premiums are higher for a merchant cash advance than with a business loan. Quite a few businesses have difficulty repaying a loan when sales drop. However, a cash advance is beneficial for meeting long-term business goals. Premiums are based on:

• working capital
• cash flow projections
• overall business portfolio

Highlights of a Merchant Cash Advance

Merchant cash advances are attractive to small business owners for a number of reasons, including:

• Quick approval - does not require a lien or collateral as with conventional small business loans.
• Easy access to working capital - can make required purchases right now based on future sales projections.
• Flexible repayment schedule - provider gets a portion of future charge card sales as repayment for the cash advance.

Some business owners with low credit ratings might not quality for a traditional loan. With the help of a reputable merchant account provider, small business owners can receive much needed capital.