The Benefits of Merchant Cash Advances

For businesses that are struggling and don’t have the necessary credit for a loan, a merchant cash advance could be a viable option. Although the terms are riskier, companies that provide such funding generally have a very high approval rate. Typically given a bad rep due to riskier terms, there are a few advantages of using a merchant cash advance.

Less Paperwork

Where an analysis of your financial statements, tax returns, and a business plan is necessary before a bank approves your loan, merchant cash advance providers only need the length of time in which you have been in business, and your monthly credit card returns in order to be approved. A merchant cash advance requires far less information to be approved, and thus doesn’t require the mountain of paperwork that a loan would require.

Speedy Process

As little paperwork is necessary for approval, this also means that it takes less time to receive the funds. Loans can take up to weeks or even months before the funds can be accessed, while many merchant cash advance providers can grant access to funds within a week, or sometimes within 48 hours of submitting your application. This is extremely useful for firms that are need the funds for time sensitive activities such as projects or capital expenditures.

No Collateral

As a way to protect themselves, banks will often require loaners to put up collateral in case of a loan default. On the other hand, as funds are usually directly deducted from card sales during processing in the case of merchant cash advances, no collateral is required. As such, if your company has strong sales figures, the finance company will be more inclined to approve as they can better guarantee repayment. This ultimately makes the number of credit card transactions the only thing necessary for approval.

Revenue – Based Collections

Although merchant cash advance providers allow you to repay with a variety of methods, each is derived from credit card revenue. For example, if a provider offered you a merchant cash advance of $10,000 with a 10% repayment term, then you can expect 10% of your credit card sales to go directly to the finance company via wire transfer at the end of every month. If your credit card sales were $5,000, then $500 will go to the finance company at the end of the month. Additionally, these deductions can be done on a rolling basis rather than a lump sum at the end of the month. This works well for cyclical companies that struggle with consistent sales, rather than a fixed lump sum with a deadline.

Perfect Credit Not Required

As the approval process really only considers your credit card transactions, a good credit score is unnecessary. This is unlike a loan, as bank’s will want to make sure you have the means to repay such funds in the future.