For a smaller business – especially one that is just getting off the ground – having a higher cash flow can make all the difference in how your company performs. With more access to cash, you can grow your business or restock an inventory that is getting too low to meet high consumer demands.
That is where merchant cash advance loans can come in handy. Your business might not have a strong enough credit history or sufficient collateral to apply for a standard line of credit or business loan. These loans let you use a portion of your business’ future credit card sales to fund the things you need. This gives you the capital you need to get things going.
Let’s take a closer look at five reasons why you might want to consider a merchant cash advance to grow your business. That way, you can decide if a Cash advance is suitable for your business’ unique needs.
Every small business struggles with short-term cash flow problems at some point, and this can cause massive repercussions. Perhaps a client has been late on paying their invoices, or perhaps your inventory is dwindling since you just haven’t generated enough capital yet. Taking out a merchant cash advance lets small companies resolve those issues, alleviating some stress for the business owner who wants to know when their cash will be there and where it is coming from.
Let’s say a well-regarded corporation offers to pay upon completion for a huge project. You might not have enough cash flow to keep your employees working on it until the payoff. You might find yourself turning away work that could lead to the growth of your business. However, with a cash advance, you have the cash flow available to you to take on these bigger projects that can help grow your company.
Starting a business during a recession or in a time when recession looms is challenging. When capital is low, inventory can run low, too. Trying to apply for a traditional business loan will not solve that problem in a swift amount of time. When you find your business in urgent need of a restocked inventory, you can more quickly buy the things you need with a cash advance – and all without the lengthy approval process you face with a traditional loan.
A merchant cash advance isn’t repaid the same way as a traditional loan. With the latter, you have to take out an agreed-upon amount of cash, then you are required to make specified monthly payments on the loan. Even when you have a less-than-profitable month, you have to pay the same amount on the loan, causing more harm than good.
When you get a merchant cash advance, though, you simply pay a minor portion of your business’ revenue as loan repayment. If you have a low-sales month, you end up paying less on your loan for that month. Having this type of revenue contingency is helpful since it can be hard to predict how each month will go. This reduces the risk of what will happen to your business if a new venture you strike out on goes belly-up.
A new business with no credit or an established company with poor credit can struggle to get financing through traditional loans. Merchant cash advances are not as credit-focused since your repayment is linked with your credit card sales. If you need funding but don’t have a stellar credit score, this could be helpful for you. And, if you pay off your loan on time, every time, your credit should not be negatively impacted.
Getting your company out of a financial rut is important if you are going to thrive. But, of course, that can be easier said than done. A merchant cash advance can give you the cash flow you need to keep inventory up and sales on the rise. If you are mindful of your repayments, you can get out of the ‘red’ and start rolling in ‘green.’