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Things to know about merchant cash advances

Things to know about merchant cash advances

Cash flow controls the everyday functions and overall sustenance of a business as cash is the regular mode of payment for operational and production costs. A business’ credit score can be dependent on a lot of external factors such as market conditions, recession, or even just being in the “high-risk” category. In such circumstances, the one lifeline that can save all temporary glitches and prevent the standstill of a business function would be to get a merchant cash advance.

A merchant cash advance is a simple fund offered by lenders who do not qualify under the credit score range or fail to qualify the requirements for securing a traditional business loan. However, a merchant cash advance is not a loan but rather a cash amount based on a business’ or merchant’s future sales predictions.

Merchant cash advance is the best form of alternative funding as compared to a traditional loan because of the following:

  • The approval rate for securing a merchant cash advance is higher than a loan. In a loan, a business has rigid requirements such as business operational time, specific documentation, credit score, etc. On the contrary, a cash advance is not based on any of these factors as only the future sales of a business is purchased and paid for.
  • No collateral is required for a cash advance loan like that in a traditional loan; a cash advance is also not dependent on credit reports. A merchant cash advance is basically a sales transaction.
  • Securing a merchant cash advance does not have a complicated application process and the amount can be acquired within the same week of application.
  • The repayable amount is not fixed and is flexible based on the business’ sales growth every month. Merchant cash advances are paid back on a percentage-based collection policy, thereby allowing a business to bear the debt without having major dents in their financial status.
  • There is no rejection of applications even for those businesses with bad credit scores. The approval of a merchant cash advance loan is based on a business’ sales figures, and therefore, a credit report has no impact on your lending status in this form.
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