Slow seasons, poor weather, broken equipment, and unpredictable economic elements all contribute to how successful a business will be. Unfortunately, it’s usually a guessing game to determine the “perfect” quantity of liquid capital to keep on-hand for these kinds of situations. In times like these, many companies raise debt to make capital expenditures or to cover expenses until business demand increases. However, business raising debt can be difficult and time consuming. For many business owners, a quick solution for these situation is a merchant cash advance.
What is a Merchant Cash Advance?
Typically used as a way of getting quick access to cash without the headaches of a loan, a merchant cash advance is the quick and dirty way of getting funding. Similar to traditional business loans, merchant cash advances allow businesses to use the capital in a variety of ways: operating equipment, payroll expenses, variable costs, etc. However, a merchant cash advance is not actually a loan. Instead, as the name implies, it is a cash advance. This type of advance is based primarily off of previous credit card payments accepted by the company, and is typically payed back automatically (either daily or weekly) when credit card payments are reconciled.
A Merchant Cash Advance may be a good fit for you if:
Your Credit Isn’t the Best
Unlike loans, merchant cash advances aren’t based off your business’ credit score, but rather past payments along with future projections and sales amounts. This makes a merchant cash advance a desirable option for businesses with continuous revenue growth, high credit card sales, and poorly established or low credit scores. Businesses, who might not otherwise qualify for a loan, can often look to expand operations and grow their business using merchant cash advances.
You can stock up
Sometimes a little extra money can allow a company to expand considerably faster, driving significant increases in revenue and profit. With this in mind, often times companies look to purchase supplies in bulk to get lower prices, or purchase additional equipment to enable the company to scale in size and increase production. Despite the goal of the investment, a merchant cash advance can help you quickly get the cash you need to boost your business by advancing you funds against your future success. This option is good for businesses that already have a steady stream of sales, or are ready to moderately increase their sales with the influx of cash from the advance.
Repayment Won’t Break the Bank
Since a merchant cash advance is directly correlated to total income, traditional loan maturity plans aren’t necessary with this financing method. Instead of owing a principal amount, merchant cash advances collect payment based on a percentage of sales– just like commission. This minimizes any planning needed to schedule payments and minimizes the stress associated with missing payment obligations. When sales are high and capital is low, a merchant cash advance could be a reasonable choice to quickly increase assets, without requiring substantial amount of debt.
The Money is Worth the Cost
Merchant cash advance loans are by no means an inexpensive option for getting capital. However, if a business has a clear financial model and can properly anticipate cost and revenue, then an MCA loan may be a great fit. The logic is simple, if a business owner can buy $1 for $0.70, then all they have to do is buy dollars all day long and they will be profitable. As with all types lo loans, be sure to pay close attention to any and all costs, as well as repayment structure prior to accepting funding.
FIND OUT IF IT’S RIGHT FOR YOU
Here at Ultegra Business, we work with businesses in any stage of growth. Our team is equipped with a diverse set of financial knowledge and is happy to explore potential funding options, as well as answer any questions that may arise. Our unique one-on-one approach has allowed us to successfully offer loan approvals to over 90% of our applicants. If you’d like to learn more about Ultegra Business, give us a call at 1.888.893.6828 and speak with a loan advisor today, or apply online now. We look forward to helping you think outside the bank!