Many small businesses and startups find themselves in a bind when they run into cash flow shortages. Traditional bank loans can be unattainable for business short on credit history. Even when you have access to traditional lending, it can take weeks to get funding, and if your situation requires immediate attention you need to look to other means. Fortunately, businesses still have an available option for quick access to cash, which is through a merchant cash advance.
These types of advances can be used for about any conceivable business expense imaginable, including renovations, meeting payroll, purchasing equipment or inventory, and paying taxes. The lender basically purchases future credit card receipts or bank deposits and the funds are paid back in the form of a percentage of daily sales. When sales are strong, the business will be able to pay back a larger amount. When sales are weak, the repayment for that day will be lower. This is a huge advantage to this type of lending.
There are several other benefits to using this type of lending. The business doesn’t need any significant business history and credit requirements are lenient compared to other sources of lending. The business also doesn’t have to provide collateral for the advance. They just need to be able to show sales history.
The application for a merchant cash advance is fairly simple. The company providing the advance may require three months of sales history in addition to identification. A voided check will be necessary if the funds are to be paid back by deposits. Once approved, a business can see funds in as quickly as a few days.
Before committing to a financing provider, be sure to research several different companies, and explore the benefits of working with each. You can learn about companies’ business practices by looking them up at the Better Business Bureau. Performing a Google search can lead you to company reviews so you can weigh the experiences of past consumers with various companies.
It’s not uncommon for a small business to have a cash flow shortage and it doesn’t signify the business is in danger of succeeding. There are many situations that can cause a business to struggle including season, late payments from clients, and unexpected disasters. Whatever the reason that your business has found itself in a bind, knowing the option for a merchant cash advance is available can bring peace of mind.