Nothing beats running your own business. You’re the boss. Your destiny is in your own hands. But once business starts to take off, so do your expenses, you take on more staff, diversify your products and enter new markets – which translates into payroll, buying inventory or new equipment, marketing, renovations, real estate, licensing and more. All of these expenses require consistent cash flow and possibly a large capital injection upfront. The truth is, you need to get money to make money, and getting a business loan from the banks isn’t as easy as it used to be. That’s why more and more business owners are turning to a merchant cash advance as one of their primary funding sources.
A merchant cash advance is the answer.
You may have heard of a merchant cash advance under another name, maybe merchant receivables advance, merchant account advance or business advance. What it is, is a less complicated way of getting money.
How does merchant cash advance work?
Simple. A merchant cash advance provider cuts you a check today for a chunk of tomorrow’s sales. They collect on tomorrow’s sales by taking a reasonable percentage of credit and debit card sale revenues until the agreed amount is paid.
Example: You need $50,000. A merchant cash advance provider cuts you a check for $50,000 with the agreement that you will repay them $75,000. They take 15% of your sales revenues each week until the $75,000 is paid off.
Why would this be better than a business loan?
- You don’t have to worry about missing a fixed monthly loan payment. The repayment amount varies with your sales so you always make more than you’re paying, and if you make nothing that week, no payment is due.
- Securing the funds is less complex. Simple paperwork, no business plan is required, and no loan collateral is needed.
- Your credit score doesn’t determine if you get money. Even with bad credit, your business may qualify for funding.
Three things to look for in merchant cash advance provider.
There are hundreds of providers out there willing to advance you money, some at different rates, some with different requirements, and some with different fees. Here are some tips when selecting a merchant cash advance provider:
- Get a referral. Speak to a business, preferably one similar to yours, that has received money from the provider. There’s no better way to understand what is provided than to speak with someone receiving these services.
- Go to the source. It’s better to deal with sales staff directly employed by the provider. Some providers sell via third party brokers, who are also selling many other products, and have a greater chance of missing details or confusing talking points.
- It’s not all about price. How smooth is the process and how’s the customer service? Make sure you find a provider who communicates throughout the process, understands your business and is reachable when you have an issue or question. Just remember, you get what you pay for.