Small businesses can often experience cash crunches, especially when they incur unexpected expenses. However, in many settings, when just one customer fails to pay on time, serious cash flow problems can also occur. Cash flow is one of the most important aspect of maintaining a successful business and keeping operations running. One of the options for securing adequate cash flow is a merchant cash advance. Here are some of the following reasons business owners choose merchant cash advances to help the cash flow of their businesses.
When a business needs cash, they usually don’t have the luxury of waiting for a month or longer for a traditional lender to approve their loan application. In such a situation, timeliness makes a merchant cash advance attractive.
After completing an application, merchants often get the cash they need directly deposited into their bank account within a week. Moreover, this type of financing requires very little documentation beyond credit card receipts and bank statements.
Sometimes businesses have difficulty getting cash because they lack a sufficient credit history. Although new businesses often have the most problems with credit, established businesses often fail to meet the stringent credit score requirements of traditional lenders.
Generally speaking, a merchant cash advance requires no credit check and therefore is available to almost everyone. To qualify, business owners simply need to produce documents showing they can repay their loan.
To get an ordinary loan, businesses must often put up collateral to secure the debt. Sometimes, business owners must use their personal assets, if their company doesn’t have enough property. When this requirement happens, business owners can lose their home if something goes wrong.
Most merchant cash advances have no absolute repayment structure. Still, people who use this form of financing often must sign a personal guarantee that obligates them to repay their advance. Even when that happens, merchants will not lose their personal property.
When business owners get a loan from the bank, they must meet fixed monthly payments. As a result, they can suffer additional cash flow problems when their sales fluctuate. This payment cycle can lead to more cash flow issues.
People often choose merchant cash advances because of their flexibility. They usually have a repayment plan that is based on a certain percentage of total sales. Consequently, they can usually survive temporary downturns.
To summarize, people often choose merchant cash advances to survive short-term cash flow problems. Although this type of financing isn’t perfect, it provides a valuable alternative that can prove essential to the success of growing businesses.