As a business owner, navigating the world of financial assistance can be challenging, especially when it comes to merchant loans and cash advances. Many business owners are unaware of the option to raise capital through their merchant accounts, even for those with high-risk accounts.
Traditional Loans vs. Merchant Cash Advances
Typically, business owners turn to the Small Business Administration or their banks for loans. However, the reality is stark – according to the Biz2Credit Small Business Lending Index, big banks approved only 28.2% of loan applications in 2019. Small banks weren’t much better, approving just over half. This leaves many small businesses, especially new ones without strong credit histories, out of options.
The Challenge of Acquiring Business Capital
Stringent requirements and the reluctance of big banks to lend small amounts put smaller businesses in a difficult position. This is where a merchant cash advance comes into play, offering a viable alternative when traditional loan options are not feasible.
Understanding Merchant Cash Advances
A merchant cash advance provides quick, easy access to capital based on future credit card sales. It’s a suitable option for businesses unable to secure traditional financing, offering flexibility and simplicity.
How Does a Merchant Cash Advance Work?
Unlike a loan, a merchant cash advance is an advance against future credit and debit card sales. The repayment varies based on sales volume, offering flexibility during slower business periods. This type of financing is available to all types of merchants, including those considered high-risk.
Repayment of Merchant Cash Advances
Repayment terms for merchant cash advances are not set in stone. Instead, they are based on a percentage of daily credit card sales or fixed payments. This approach ensures that payments align with your business’s revenue flow, providing a cushion during slower periods.
Costs and Considerations
The cost of a merchant cash advance is determined by a factor rate rather than an interest rate, resulting in a fixed fee. Qualification is generally based on consistent sales volume, with necessary documentation being relatively straightforward.
Benefits and Considerations of Merchant Cash Advances
While merchant cash advances offer numerous advantages like no collateral requirements, fast funding, and flexible use of funds, they do come with higher costs compared to traditional loans. It’s crucial to weigh these against the immediate benefits they provide, especially for businesses in urgent need of capital.
Is a Merchant Cash Advance Right for Your Business?
Deciding whether a merchant cash advance is suitable for your business depends on several factors, including your cash flow, business model, and growth plans. It’s essential to consider all aspects, from the impact on daily operations to the potential for business expansion.
Choosing the Right Merchant Service Provider
Partnering with the right merchant service provider is key. At Bankcard International Group, we pride ourselves on offering transparent and integrity-driven services. Our ETA-Certified Payment Professionals are committed to finding the best solution for your business, ensuring you make an informed decision about merchant cash advances.
If you’re exploring the idea of a merchant cash advance or seeking alternative financing options, contact us. We’re here to guide you through the process and help you make the best choice for your business’s future.
