Using Merchant Cash Advance as Working Capital

Working Capital is an essential part for any business owner to enhance their business on a day to day basis. Expanding business clientele, hiring employees, acquiring inventory and purchasing equipment all require capital to work with. The key for business owners has been the same for decades which states that money attracts more money, and one can’t make more money if they do not have money to invest. In either case, investments are important in order to work. However, it is tough to acquire this capital for some small companies since they do not have a credit requirement that is feasible for banks who require security to ensure the loans will be returned completely.

However, young and growing businesses more often than not require working capital as quick as possible. Fast funds are difficult to acquire when it comes to working with banks. This is where Merchant Cash Advance comes into play for the greater good of the business owners. Businesses can avail fast cash advances for capital growth within two days of approval using Merchant Cash Advance. Other institutions that provide loans and advances for capital require detailed paperwork. The Merchant Cash Advance process comes with easy repayment plans. It also has a speedy approval processes which works within a few hours to a few days.

The process is fast and easy to acquire working capital using Merchant Cash Advance. There is over eighty percent approval rate, and it requires minimal requirements to qualify and business owners can finance three times in month using their credit card invoices.  It works as a smart option for businesses as it does not require any personal guarantee, no particular security deposits and the application fee depends upon the agreement business owners sign with the lender. Furthermore, contracts can easily be renewed and a fixed percentage mechanism can be availed where credit card invoices are used to pay back the advance borrowed. This helps businesses with nearly anything including paying off debts, repairing equipment or getting new ones, expanding a business or its clientele and even to acquire inventory.

What is Merchant Cash Advance?

Before getting into details of how to acquire working capital using Merchant Cash Advance, it is important to understand what the Merchant Cash Advance actually is. To narrow it down, it is a sort of a capital loan or advance that is paid back on a day to day basis, using flexible amounts. As the payback is not based on fixed amounts instead uses a percentage of daily sales using credit card transactions, the amounts vary from day to day. The process works until the amount is paid back completely. In short, a young business has the option here to sell a share of their future sales to the lender.

Advantages

The best feature of using a Merchant Cash Advance for funding working capital requirements has its own advances. Most businesses find it convenient to acquire the loan or advance much faster with a more flexible return policy compared to other institutions. As discussed earlier, cash institutions can take up a lot of time and have drastically long processes before they can even approve a business worthy of getting their requirements. On the other hand, Merchant Cash Advance offers a much shorter process of approval which may require somewhere within twenty-four hours to a few days, and the required cash is deposited within the business owner’s account within two to ten days. All a business actually requires is to have sales happening at their end to apply for the loan. The easy repayment mechanism involves businesses setting a percentage of their credit card sales on a regular basis. In this case, businesses need not worry about a fixed installment that needs to pay off if the sales are not up to the mark.

The eligibility to acquire working capital using merchant cash advance is fairly simple and requires only the basic requirements. The amount provided to a business does not a have a fixed time period to return and can work on the basis of sales made by the business. This is what makes Merchant Cash Advance different from other institutions. In fact, most other advance providing institutions have fixed repayment methodology. Merchant Cash Advance is perhaps a one of a kind mechanism that allows percentage marks of the credit card transactions happening on a daily basis. Hence a business needs not to worry about repayment every month. Based on a daily transaction criteria, the provider deducts a percentage of the transactions on a daily basis, leaving the business to own the remainder at the end of the month as profit. Furthermore, the shorter time period a business takes in order to meet the Working Capital borrowed from the Merchant Cash Advance provider, the shorter rate of interest they may have to meet. This allows growing companies to benefit at a good rate.

Since the criteria of repayment and what you are asking for the advance or loan is quite flexible, acquiring working capital from a Merchant Cash Advance provider is a beneficial and smart choice for small businesses that are flourishing on a day to day basis. These businesses may involve automobile repair shops, restaurants, and even air conditioning businesses. Other institutions may not limit the criteria to transactions happening through the credit card, however, Merchant Cash Advances are much easier to work with than these institutions.

Understanding the Catch

The terms and conditions of Merchant Cash Advance is something that businesses need to understand. Other forms of working capital loans do formulate a predictable way of repayment as compared to Merchant Cash Advance. Hence it is difficult to lay out a consistent chart as to what amount you are going to pay. Of course, this can be calculated on a daily sales count and with each transaction. Overall the amount is not consistent allowing business owners to only focus on a percentage payment of what they earn rather than to pay back in more risky ways.

The major challenges that may come across to business owners who are applying for working capital using Merchant Cash Advance are that it is limited to credit or debit card transactions only. For some businesses, this may not be an appropriate solution and they may have a harder time applying for this loan mechanism or at worst not qualify. Even in the event that these businesses do qualify, they will have a longer time period of repayment since card invoices and transactions at their end are at a minimum. This may constitute a higher interest rate and a fee for acquiring this advance. Moreover, businesses do need to add another payment processor to their credit card company, which for a lot of business owners may cause skepticism. Even if business owners agree to this cause and have a heavy trust, adding or changing processors may become quite a hassle. Due to this certain delays happen to gain access to working capital by the business.

The consideration here is that Merchant Cash Advance is suited best for fast working capital requirements, however only for small amounts on a regular basis. The competition, however, does not limit this. The business owner may qualify for loans much bigger than their very own capital requirement as they consider the entire working revenue as a loan. The business, in that case, can pay back on multiple fronts.

Disadvantages

Once business owners understand the advantages and the catch, here is what they need to know before acquiring a working capital advance from the Merchant Cash Advance provider. First and the foremost no protection is guaranteed.  This proves to be a huge disadvantage for businesses working with Merchant Cash Advance providers. Since this is not a loan but an advance, it is considered legal to withhold a percentage of any future sales of the business owner. This does mean that providers of Merchant Cash Advance are not classified under the law the same way as other finance providing institutions. If a correct provider is not selected, the business owner may end up being conned and become a prey to money leaches through constant repayments with high-interest rates and large fee ending up making a dent in the business account.

Another disadvantage is that the approval does have limitations regardless of what one thinks. There may be a high chance for a business owner to get the working capital they are looking for but there are chances they may not. Since the amounts are predicted based credit card transactions, the business may not qualify at all.  For businesses who operate on cash or other transfer mechanisms, this may make the particular business owner’s eligibility for a certain amount of advance or loan less likely. The business may be eligible for much shorter working capital amounts than they require and that too may constitute a high rate of return.

What needs to be understood about the disadvantages of using Merchant Cash Advance, in short, is that the terms of payment or repayment can be unpredictable. It may prove to be an advantage for one or many businesses but for a specific business owner to take advantage of this loan may not likely be possible. Since the repayment fluctuates on a regular basis, it makes it near impossible to calculate when the loan may completely be paid off.  This results in a difficult approach for business owners to make future financial goals, contingencies and plans to sustain or save up for working capital requirements of that time. Furthermore, the addition of another processor may require double the amount of time to access one’s own cash flow.

Alternative Institutions

Even though there are disadvantages, there is no competition for gaining access to such fast approvals. The Merchant Cash Advance mechanism is much quicker and has easy processes than any traditional funding institution. In fact, they can be applied and collected at any time within a five-minute application with a simple process.

 

By | 2017-12-22T02:58:53+00:00 December 21st, 2017|Business Loan|