A merchant cash advance is an unsecured finance alternative that is usually short-term and flexible.
The finance is used to manage cash flow, provide growth and cater to refurbishment needs or even when purchasing stock. It is not a loan, essentially it is a sale of a share to future card sales.
How does a merchant cash advance work?
Usually, business cash advance lenders will form a partnership with payment processors.
They will then take their share of a fixed or variable percentage of the applicant’s foreseeable credit/debit card sales.
Who uses a merchant cash advance?
Businesses that regularly make credit/debit card transactions can use a merchant cash advance.
If your company does not make credit or debit card sales then you will not be approved by merchant cash advance companies.
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What paperwork do I need to produce for a merchant cash advance?
When applying for a merchant cash advance you do not need to produce any paperwork.
It is a rapid loan that is taken out against future sales which are made on the registered business credit/debit card.
Can I use merchant cash advance if I have bad credit?
Yes, many businesses with bad credit who have applied for a business loan will usually get declined.
If you suffer from bad credit then a merchant cash advance is the best way to support your business needs whether that is a cash flow problem of something different.
What are the pros and cons of a merchant cash advance?
The pros of a merchant cash advance:
- Your personal assets will not be used as collateral
- Your repayment strategy is based on your sales
- If your business faces a poor trading day then your repayments will tailor as it is a percentage rather than a set amount
The cons of a merchant cash advance:
- The annual percentage rate (APR) is higher than a long-term business loan
- If you were able to pay the advance back earlier than you first expected, you will not benefit from the early repayment
- As you are not paying a fixed amount you have a retrieval rate – this is what you will pay back in addition to the amount borrowed
Is a merchant cash advance the right choice for my business?
If you suffer from a bad credit and have been declined for a regular business loan and are prevented from moving forward then a merchant cash advance is the right option for you.
The advance allows you to move forward with a lump sum of cash which you can repay through an easy process.