Cash flow problems are common in business, especially among smaller companies and start-ups. When you don’t qualify for a bank loan or simply don’t want to deal with a long loan application, merchant cash advances can make an attractive alternative. This type of financing can be ideal for companies that accept credit card payments from customers via cash register transactions.
What Are Merchant Cash Advances?
The first thing to understand about merchant cash advances is that they are not loans. They are simply an advance on future sales. Upon approval of your advance, the finance company forwards you a lump sum that you can use for whatever purposes you deem appropriate. Many small businesses use merchant cash advances during slower seasons or to help them keep the bills paid as they pursue business growth.
Obtaining an advance rather than a loan comes with several advantages. First, you don’t need to make a monthly payment since repayment comes directly from your daily credit card cash register receipts. Perhaps more importantly, you and the finance company agree on a set percentage of receipts to draw on each day.
For example, if the agreement states two percent and your business rang up $2,500 in sales, $50.00 would go back to the finance company that day. The setup allows you to pay more towards the advance when sales are high and less during slow periods. You would not find that type of flexibility with a typical bank loan or even a business credit card.
Other benefits of merchant cash advances include:
- No late feesÂ
- No need for collateralÂ
- You don’t need to have perfect creditÂ
- Fast turnaround to receive your funds Â
Keep in mind that you also pay interest on the advance you receive. However, you don’t need to figure out the amount yourself since it becomes part of your daily cash register receipt capture. Please contact Prosper Lending Firm today to learn more about this alternative financing option.
