With banks continuing to deny small businesses loans the need to access capital continues to grow. The merchant lending industry is taking advantage of this need for capital by supplying small businesses with cash advances. Commonly known as a merchant cash advance this transaction or advance is a lump sum payment based on an agreement for a small portion of future sales. If managed correctly this tool can be very advantageous for small businesses.
There are several reasons why a merchant cash advance is so attractive. First, it has no fixed term. This means that the cash advance is based on an agreement to give the cash provider a very small agreed upon rate of future sales. The benefit from this is if sales are slow for a period of time the payments to the cash provider are adjusted downward. This feature can really make the payback much easier because there is no set payment that must be made every time. By having a smaller payment when business is slow makes paying back a cash advance a very fair process.
Applying for a merchant cash advance is also a much quicker and easier process. To begin, it requires a lot less paperwork. Owners seeking finance can simply go to one of many of the online lenders and fill out a very quick application. Because the process is so simple there are no fees associated with applying. Owners can feel free to explore their financing options without having to worry about time or application costs.
Another great benefit of the cash advance application process is merchant lenders don’t have to follow the red tape of traditional banks. No red tape means that lenders are much more likely to approve applicants who have bad credit. Because the exchange is based on future sales, credit checks are less important, and cash advance providers do not require collateral or personal guarantees. The whole application process for a merchant cash advance not only saves business owners the time and cost of applying to bank after bank, but it also makes it less likely that an applicant will experience the demoralizing sentiment that a rejection can often leave lingering.
Lastly, and a feature that shouldn’t be overlooked, the payments are all set up from the beginning electronically. That means there are no late payment fees or the time consumption involved with paying attention to bills. Business owners often see late fees piling up in trying times because they just can’t deal with the list of creditors sending notices. The structure of a cash advance allows owners to save time and money and focus on their business.
Merchant cash advance lenders provide critical financing options for business owners. The structure of the cash advance has several advantages to traditional financing and can be the difference in whether or not a company succeeds or fails. If you are a business owner a merchant cash advance is a viable option for financing your company.