Few things produce as much anxiety for business owners as having to sit down for a traditional bank loan interview. Unfortunately, many traditional loans have a reputation for stringent requirements, including incredible credit, sizable collateral and a world-class business presentation explaining how you plan on using the money. The good news is that there are alternative financing options with major benefits for your company, such as a merchant cash advance.
How Does a Merchant Cash Advance Work?
Unlike traditional loans, merchant cash advances don’t require collateral — at least, not physical assets such as commercial property or equipment. Instead, the financing company creates a contract based on future credit card sales. In exchange for immediate capital, your business would agree to have a certain amount automatically deducted from your credit card sales each month until the advance is paid off.
What Are the Advantages of MCAs?
Many businesses rely on MCAs to fund important transactions. For example, this option may be advantageous for buying equipment, handling emergency capital needs, improving cash flow or investing in business growth. Here are several benefits of MCAs compared to other forms of financing:
- High approval rate: MCA applications are rarely denied. Even companies with cash flow issues or less-than-stellar credit can often obtain the capital needed, as long as they have consistent credit card sales. Compared to traditional bank loans, the application process for a merchant cash advance is effortless.
- Comfortable payments: Traditional loans establish a required monthly payment. This can quickly cause problems if your company experiences a slow month or seasonal market changes. Missing payments quickly leads to fees or extra charges. However, with MCAs, things are different. The amount subtracted from your merchant sales each month is always percentage-based. The more you sell, the faster you pay off the loan, but you’re never pressured to meet a quota.
- Fast processing: From the moment you apply to the moment you receive the cash advance, you only need to wait a few days or a week. This is much faster than the months that traditional loans require. MCAs help you to stay flexible by giving you capital quickly for amazing opportunities. Subsequent advances generally require even less time.
- Worry-free financing: MCAs don’t have any impact on your credit report. They’re not technically loans, but instead, cash advances. In a way, they’re similar to a subscription-based service. You don’t need to worry about losing collateral or accumulating debt.
So many hinges on getting approved for capital. With the right financing, you can fund business growth, working capital, and cash flow. A merchant cash advance may be the ideal solution for your business.