Business owners with slow or poor credit may be worried that there is no option for them to acquire business-building capital. Slow cash flow and growing bills may be hindering them as well. Fortunately, the loan market is experiencing a renaissance affected by both the recent economic downturn/rebound and advancements in digital pay. Today’s business owners have the option of using a merchant cash advance approach to fortifying their business and increasing their cash flow.
The Way It Works
Traditional loans can be very tricky to get, especially if you have weak or bad credit. Merchant cash advance loans, though, work in a way that makes them much more feasible than other loans for those with questionable credit histories. Lenders offering this option take their monthly payment by accepting a set percentage of a company’s monthly credit card sales. This makes repayment simple and ensures that the lender sees some repayment each month.
The Requirements
When these loans were very new, there were many lenders who would approve applications from very new businesses, some in their first 3-6 months of existence. Today, applicants should be able to demonstrate at least a year of establishment. Additionally, such businesses should be able to demonstrate 6 months to a year of adequate credit card sales. The lender needs to see that credit card sales contribute consistently to the business’s bottom line. Often, borrowers with poor or bad credit will be approved for a merchant cash advance, but bankruptcy on your file may result in denial.
The Benefits
Engaging a lender for a merchant cash advance offers many benefits to the right business. The added funds will stimulate cash flow to help meet payroll, increase and maintain stock, make improvements, and generate new capital. There are many reasons to consider a such a loan for your business, but there are also a few caveats to consider.
The Caveats
The interest rate on a merchant cash advance may seem exorbitant. While it is easily paid via electronic transfer deducted directly from credit card receipts, the borrower should consider carefully the value of the loan against the monthly payout. A loan should improve cash flow without completely obliterating monthly returns. Additionally, there are several fees that may be added at high rates by the lenders, and these are often ignored initially by business owners desperate to bring more money into their accounts immediately.
Before you sign any merchant cash advance agreement, as with any other type of financial agreement, you should read your contract carefully to ensure that the loan meets your needs and the terms are manageable.