Merchant Cash Advance- How to Make It Work for You

 

Merchant Cash Advance is an alternative business funding source for small business owners.  Majority of the clients who avail of the financing service are small business owners who have difficulty getting a bank loan most due to insufficient collateral or unsatisfactory banking or credit history.

Providers of merchant cash advance will tell you that this funding facility is not considered a loan.  They consider it more like investing their money in your sales in the next few months and that it is like purchasing your future sales in exchange for a fixed percentage of your daily sales. Sounds simple enough but as a business owner, you should do your homework too. 

First off, consider how much funds you need and consider where it is going, do you need to increase your inventory? Or do you need to purchase new equipment, like a new oven or a new freezer? Or do you need it to renovate the whole place to attract new clientele?  You as the business owner should identify, itemize and prioritize your needs.  Remember that the merchant cash advance terms do not go longer than 18 months, which means, if you take out a larger loan, the sales percentage that they will take out of your daily sales will be much higher. 

Next is to ask the right questions. Make sure you know and understand all the fees involved, it is not enough that you see it in paper, you have to make sure that you have a clear understanding of what you are paying for.   You can even ask for a computation of the projected annual percentage of the business loan. This way, you can compare offers from other merchant cash advance providers. Or if you are hoping to buy new equipment – a lease to own option may better and you can just avail of the MCA for other purposes.

It is always a good idea to review your options before you make a decision.  The cash advance business is very competitive and if you shop around first, you can get the best deal available.  

A lot of small businesses compete with big companies that have access to better funding and that add to the pressure.  Big businesses can be intimidating but small businesses have their advantages too and that is the fact that they can give personalized service which most clients prefer. 

The merchant cash advance facility help small businesses improve on their strengths without having to worry about the funds.