Why Merchant Cash Advance Is A Perfect Finance Option For Your Business
As every business knows, financing is often a necessary part of growing a business, but it can be very challenging for you to know where to start when it comes to finding capital. Having sufficient cash flow is essential to making sure that your company is running smoothly and fully functioning. Without having adequate cash flow and working capital, you put your business at risk of being unable to pay bills.
One reliable source of funding for companies in need of operating capital has been with merchant cash advances. Merchant cash advance is a new form of financing in the UK for businesses that need fast access to capital and have an established credit card transaction history. A merchant cash advance provides funds a business need within a matter of days. However, if you’re you in need of working capital for scaling up your business, then we shall walk you through Merchant Cash Advance Business Loan.
What is a Merchant Cash Advance?
A merchant cash advance, as its name suggests, is a cash advance to merchants against their future credit card payment receivables. Since it involves the sale of your business future receivables, it is technically termed a business-to-business transaction. Widely used in the UK, this type of lending is a convenient and comfortable method of raising funds. They are generally a flexible form of borrowing money designed to inject enough working capital into business quickly. It’s not a loan, but it’s an advance payment against the future income of a company.
Merchant cash advance is an ideal solution to help meet the funding requirements of entrepreneurs and businesses that lack adequate organized funding and often resort to borrowing from family, friends or unorganized lenders. Merchant cash advance doesn’t come with a rate of interest or a fixed repayment period. Instead, the lender recovers the principal amount through the profits earned by acquiring a percentage of your credit card sales every day, unless you’ve repaid the balance and agreed upon fee.
Who can choose a Merchant Cash Advance?
A merchant cash advance is ideal for any scenario that allows cyclical repayments to work in line with their credit/debit card turnover, which means that as the business improves, you paid off your advance quicker. Conversely, when sales are slow, your repayments slow down as well. This method helps the business owner to focus on brand promotion and sales. Merchant cash advance is for you if:
• You run a seasonal business
• Your business is looking to develop new products
• You’re a business owner researching alternative financing options
• Your company receives payment via a card terminal
• Your enterprises need fast cash but don’t have valuable assets
• You need capital to expand into new territories for your business to widen its offering
• You are a small business owner but finding it difficult to secure a traditional bank loan
• Your business suddenly undergoes a dry spell and considering an unsecured business loan
What does a Merchant Cash Advance do for Businesses?
A merchant cash advance loan will help your business leverage its future credit card and debit card sales so that you can get access to the working capital you need to utilize all of your business sales. It qualifies you for a different business loan as you regularly receiving transactions through a debit or credit machine. Small businesses can utilize merchant cash advances if preparing for rush periods like before the holidays.
If you need quick access to cash to buy new inventory or even make improvements to your business, you can have a loan that’s very quick to repay through your debit or credit machine and an extremely low-interest rate for immediate cash flow. Merchant cash advance can also be a massive help to your business if your sales tend to fluctuate and you are anticipating a huge sales month. It’s often one of the fastest and simplest financing options to garner new cash flow for your business.
Merchant Cash Advance Qualifications
Merchant cash advance is typically easier to qualify for when compared to other working capital loans. The provider is more concerned with the credit card sales of a company than other performance metrics. This is because merchant cash advance is loaned out based on company’s daily credit card receipts and repaid using a company’s annual debit card/credit card receipts. The specific qualifications needed to get a merchant cash advance are as follows:
• You must take card payments
• Your monthly card sales are at least £3,000
• Your monthly turnover is at least £5,000
• You must have been trading for more than one year
Applying for a Merchant Cash Advance
Applying for Merchant cash advances is easy. It’s all done on the lender’s website without having to visit the lending institute physically. Similar to a business loan, you’ll be expected to share specific documentation with the merchant cash advance provider during the application process.
All you need to do is provide specific pieces of information, such as how much money you need, the type of industry your business is in, what you need to use it for, and how long your company has been in operation. The approval process is usually quick after you have submitted the required documents. Some lenders give you access to working capital less than two days after you get approved.
Why Merchant Cash Advance is a Smart Alternative
There are so many reasons why merchant cash advance is a preferred funding alternative to businesses with high credit card transactions. These include:
1. Quick Processing
The best reason to obtain a merchant cash advance is that you can get approval within a few hours and funds delivered within a few days. Merchant cash advance is highly beneficial for businesses that require quick cash to cover unexpected business expenses.
2. Flexible Repayment
Repayments amount can seem relatively painless since the lender works directly with the card terminal provider, and take a specific percentage of your credit card sales. Therefore, you are not under pressure to pay more even during a lean period for your business.
3. High Limits
Since the merchant cash advance takes their decisions based on your future income, they generally offer higher borrowing limit than banks. Besides, the funding company will usually provide access to additional funds once the merchant has met a certain payback threshold.
4. No Impact on Credit Report
Since merchant cash advance capital is a sales transaction, it does not reflect in the credit record of the business or the business owner. Many providers don’t require you to have an exceptional credit score to qualify, so you won’t need to spend time trying to improve your credit before applying.
5. No upfront collateral
While the finance company does take a lien against all of your company assets, merchant cash advance does not require upfront assets as collateral. You do not need to have assets to get funded. The primary requirement is to have a good sales track record.
6. Easy to Apply
The process involves a quick evaluation of your business’s financial statements, average debit card/credit card sales statements, business plan and tax returns. Merchant cash advance lenders generally base their decision on the monthly credit card returns and the length of time in business.
Frequently Asked Questions
How Could My Business Benefit from Merchant Cash Advance?
Merchant cash advances are used to aid cash flow, fund business growth or purchase stock. A merchant cash advance can be ideal for you if your company needs a capital injection. The flexibility provided by business cash advances is highly beneficial to owners.
How Much Can I Borrow?
The amount you can borrow on merchant Cash Advance depends on your needs and circumstances. The lending institute will communicate maximum borrowing capacity during conservation.
How is a Merchant Cash Advance Repaid?
You can repay merchant cash advance through a percentage of your future sales. The average time of repayment can vary depending on the amount borrowed. However, you can expect them to take around 4 to 18 months to pay back.
What is the interest rate?
You get merchant cash advances with an agreed upfront repayment option. For instance, you can accept to pay £12,000 if you borrow an advance of £10,00. The amount of time required to repay the money is precise, with repayments linked to your revenue.
How often will you make deductions?
The deductions are fixed and take place on either a daily or weekly basis. You will know everything during the approval process.
How Can I apply for a Merchant cash advance?
Applying for merchant cash advance will only take you a few minutes to complete. There is no hidden cost and no obligation whatsoever.
How difficult will it be for me to qualify?
Most businesses will qualify. Generally, all you need to show is that you’ve been in business for over a year and process a minimum of $5,000 a month in credit card receipts.
Can I repay my cash advance early?
Yes. The more credit card and debit card transactions your business processes, the faster you will be able to repay your cash advance.
Business owners have many financing options at their disposal, but finding the right choice for the job can take some time. Merchant cash advance is an excellent short-term financing option that can be helpful for many different businesses in the UK. If you run a seasonal business or have a high volume of credit card or debit card transactions, then a merchant cash advance might be right for you because the payment schedule will go with the flow of your business’s revenue.