Running a business can be difficult, and there are times where you just wish you had some financial help. Have you ever considered getting a merchant cash advance? While they are not the right option for everyone, they can bring many advantages.
Here are 8 tips to help you decide if you should get a merchant cash advance for your business.
1. Learn more about what a merchant cash advance is
Merchant cash advances are offered by credit card processors and by third-party lenders, which will advance money to businesses based on their credit card sales volume. If you ask for a merchant cash advance, your lender will purchase a percentage of your future credit card sales.
2. Understand the repayment terms
The repayment terms of a merchant cash advance are not the same as for a business loan. Instead of paying a fixed amount each month, you will pay a percentage of your daily credit card sales. This can be a good or a bad thing, depending on your situation.
3. Consider the needs of your business
If you need some funds quickly, getting a merchant cash advance might be your best option. However, if your goal is to grow your business over time, getting a term loan might be a better idea. You have to figure out the needs of your business.
4. Figure out if you qualify for a merchant cash advance
It’s generally easier to qualify for a merchant cash advance than for a business loan. The eligibility requirements can vary, but keep in mind that you need to have strong credit card sales, and to have been in business for at least one year.
5. Think about the pros of a merchant cash advance
You don’t need to have good personal credit to qualify for a merchant cash advance, and no personal collateral is required, which can be a great advantage for many people. Applications are processed faster than with loans, so this is interesting if you need your funds quickly.
6. Think about the cons
There are also many reasons why merchant cash advances are not for everyone. First, they are more expensive than business loans. A merchant cash advance will reduce your daily cash flow everyday until you have repaid it, and if you ever need to refinance it, you will see that it is either difficult, or impossible.
7. Compare a few lenders
The industry of merchant cash advances is not regulated, which means that not all lenders are equal. The services provided and the eligibility requirements vary from one lender to another, so be sure to compare a few of them before you make your choice.
8. Look for some alternatives
Some people claim that merchant cash advances should only be considered as a last resort. If you are still not sure whether you should get a merchant cash advance, look for some alternatives and see if you qualify for a business loan.