January 03, 2019

5 Benefits of Merchant Cash Advances

Luckily, there’s still a way to get the capital you need. If you’ve been denied a business loan, you might want to consider a merchant cash advance instead. A cash advance is a quick way to get funding without facing a strict approval process. In this post, we’ll reveal five benefits that come with receiving a merchant cash advance and will explain why it might be the best financing choice for your company.

What Are the Benefits of a Merchant Cash Advance?

1. You’ll Receive A Lump Sum of Cash Very Quickly

When applying for a cash advance, you probably won’t have to wait more than a week to have the money deposited in your account. Timing is a critical component for any successful company and having improved cash flow could be beneficial. For instance, maybe you need a new company vehicle and a car dealer is having a Labor Day promotion. In this situation, you’ll need quick and easy funding, and a merchant cash advance could be the best way for you to receive a lump sum amount.

2. You Don’t Need Impeccable Credit

Typically, your odds of getting approved for merchant cash advances are higher than a loan or even some credit cards. The application process is simple and can often be completed online. Plus, even if you don’t have a stellar credit score, you still could qualify. The most important requirement that cash advance providers have is that the applicant makes a certain amount in business credit card sales each month. This shows the lender if you’ll be able to remit the advance responsibly. So, if your business makes frequent credit card sales, a cash advance could be a viable option.

3. There’s No Set Payment Amount

A merchant cash advance isn’t a loan. You don’t owe set monthly payments and won’t be given a set repayment term. Instead, you’re agreeing to a lump sum of cash in exchange for a portion of your business’s future credit card sales. Due to this, by taking out a merchant cash advance, you aren’t borrowing money; you’re selling a piece of your future profits. Therefore, if you have a slow sales month, you’ll be remitting a smaller amount than you would if your business’s sales were booming.

4. Use the Money However You’d Like

Small business loans can come with restrictions on how you can use the money. For example, the Small Business Administration’s 504 loan program can’t be used to purchase inventory, while SBA Microloans can’t be spent on paying off debt or buying real estate. With spending restrictions, it can be difficult to find a funding source that meets all your needs. That’s a big reason why merchant cash advances are so popular. When you get a lump sum from a cash advance provider, you can spend it however you’d like. For example, if you receive $20,000, you could use $15,000 to pay off debt, and the remaining $5000 to fund a new marketing campaign. This flexibility can be extremely beneficial to your business, especially if you’d like to utilize a cash advance for a few different costs.

5. You Aren’t Risking Your Assets or Credit Rating

In addition to usage restrictions, other types of business financing could require you to put your financial health on the line. To get approved, you could need a high credit score, a history of good business behavior, or significant collateral. After you’ve been funded, you’ll likely have to repay a certain amount each month, or you’ll face financial (and legal) repercussions. You don’t need to put your assets on the line with a merchant cash advance, though. Because a cash advance is a sale of future revenues, you don’t need to prove your worth with a 750-credit score and binder full of balance sheets. What you remit depends on your credit card sales, so you won’t have to worry about a merchant cash advance provider seizing your assets.

Consider the Benefits Before Applying for a Merchant Cash Advance

Merchant cash advances may not be the right choice for every business, but they have numerous perks, especially if you don’t qualify for traditional financing options. If you haven’t been operational for very long or lack a stellar credit history, a merchant cash advance could be your best (or only) source of funding. Every business owner faces different circumstances, but a cash advance is and one of the easiest way to get additional financing. Editor’s Note: This post was updated for accuracy and comprehensiveness in January 2019.