A merchant cash advance is a good way for a small business to get funds quickly without going through the typically long application and approval process required for a traditional small business loan.
How a Merchant Cash Advance Works
A merchant cash advance isn’t technically a loan, but rather is a purchase of future sales transactions. A merchant cash advance historically was used only for businesses whose revenue came primarily from credit or debit card sales. Now, however, it can apply to other merchants as well. A lender will assess your sales and the state of your business, review how much you will need, and determine how you will pay them back. Then you will sign a contract with the lender.
The lender will provide an advance amount that can be less than, equal to, or even greater than your monthly sales. The payback amount that is required will be larger than the advance amount because the lender will apply a fee. The cost of the merchant cash advance will depend on the lender and the strength of your business.
How Businesses Can Use a Merchant Cash Advance
A merchant cash advance can be used for any business expense without approval from a lender. Uses can include improving cash flow, purchasing inventory in advance of an anticipated need, working through seasonal surges requiring you to hire additional staff or rent more space, dealing with unanticipated costs or emergencies, and seizing new opportunities.
Key Plusses of a Merchant Cash Advance
Merchant cash advances are almost immediately available, making them a perfect solution for occasional business swings or squeezes in order to continue business growth. In addition, a merchant cash advance doesn’t require collateral. And, when sales decline, so do your payments, if the repayment schedule is based on a fixed percentage of your sales.
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Contact Capital Finance Partners, based in Longmont, CO, your premier source for growth capital solutions. We provide access to a diverse range of working capital and funding for small and mid-sized businesses.