They had a reputation for high fees, low value for the business, and were generally seen as an option of last resort. But that’s not really the case any longer.
Merchant cash advances have been re-tooled and streamlined for the digital age, to make them easy to use as a form of small business funding. In many cases, they may be preferred by some small business owners over more traditional forms of small business loans or merchant loans.
Learn more about why you should rethink the merchant cash advance for your small business, and how BizFly Funding can help, in our guide below.
What is a Merchant Cash Advance
A merchant cash advance is a merchant funding tool that is similar, though somewhat different than a traditional small business loan or merchant loan.
In the most simple terms, a merchant cash advance provides small business owners with a lump sum cash advance, with no collateral requirements.
In return, the merchant agrees to give up a portion of future credit/debit card sales, at a discounted rate, to the lender.
Essentially, the future sales are used to repay the “loaned” funds from the cash advance, and the discounted rate is effectively like an interest rate on a loan, meaning the lender gets back more than just the principal amount given to the business as the cash advance.
These kinds of small business funding options are known for their convenience and flexibility over traditional small business loan products. However, it is possible – and often necessary – to use any and all lending and credit tools available when you are running a small business.
And so the merchant cash advance can be used even if you have existing small business loans or revolving credit facilities in place, as a way to enhance your business financing.
And, as a stand-alone cash advance option, it can be a great way for newer businesses or those with highly seasonal or variable income patterns to get a loan without being tied to a specific calendar repayment date.
We cover the benefits of merchant cash advances in more detail in a later section of this guide.
The Changing Consensus on Merchant Cash Advances
Originally, merchant cash advances were largely created to extend credit to clients who otherwise could not qualify for traditional loans.
Businesses that had significant credit/debit sales, but didn’t have collateral or the credit scores needed to qualify for a traditional small business loan product could still qualify for a merchant cash advance. It was one of the only forms of credit available to these business.
But that gradually has changed. In the late 2000s, with the growing financial troubles around the globe, business financing became a challenge for all businesses, and not just those who were small, new, or with poor credit.
New lending options had to spring up, and existing lending options needed to be retooled, in order to ensure that commerce could still take place. Effectively, the lending world evolved.
Merchant cash advances as a form of merchant funding are no longer synonymous with high-interest rates and fees, and being an option of last resort.
Rather, they are seen as a valuable tool in the varied toolbox that small business and large businesses owners need in order to finance their operations, manage their cash flow, pay their obligations, and respond to opportunities and challenges.
Many businesses find merchant cash advances services ideal for covering portions of their operating costs, equipment purchases, inventory or purchase orders, payroll and benefits for employees, and seizing opportunities that they otherwise cannot fund from traditional sources.
In short, merchant cash advances provide a valuable, flexible, hassle-free, and nearly on-demand access to significant amounts of funds, to allow small business owners to run their business and manage their finances as effectively as possible.
Benefits of a Merchant Cash Advance
There are many benefits to using a merchant cash advance for small business funding. We’ve touched briefly on a few of these earlier, but they are worth repeating and expanding upon.
Benefits include:
- High rate of approval and accessible approval criteria (relatively low credit score requirements, revenue requirements, and business history/time in business requirements).
- Simple and convenient repayment, as all repayment stems from credit card transactions automatically, without the need to make weekly, monthly, or other periodic payments by check, online, or at all.
- Repayment is based on credit/debit card receipts and revenue, and not fixed to a certain period of time. This means that slower periods of sales or business are not detrimental – less is paid during that month or period, that’s all.
- No collateral is required for a merchant cash advance, as it is an unsecured, sales-based transaction.
- Merchant-based transaction, so it will not negatively impact your credit report.
- Fast, easy, and reliable, with funds being available quickly, no-hassle repayment, and minimal lending requirements.
Merchant Cash Advance Services from BizFly Funding
Over 90% of small business owners in a recent survey stated they were optimistic and positive about utilizing merchant cash advances as an important tool in their funding toolbox.
If you’re in the US and considering a merchant cash advance, or any other form of small business loans or small business funding, consider BizFly Funding.
BizFly Funding offers merchant cash advance services, short term small business loans, and many other loan products. We’ve successfully helped businesses from over 100 different economic sectors, and have a reputation for outstanding service and value.
You can apply online, and get pre-approved for a merchant cash advance in as little as 30 minutes. One of our expert staff will be happy to answer any questions you may have, and will review your application for approval.
The minimum lending requirements for a merchant cash advance mean you can qualify even if you have a poor credit score, haven’t been in business very long, or don’t have a consistent or very high monthly revenue.
In short, BizFly Funding can provide a competitive merchant cash advance for your small business needs, with outstanding service and a minimum of effort on your part, so you can focus on running and growing your business.
