A merchant cash advance is a way to finance your business with greater flexibility and fewer hustles of procedural formalities. The most significant advantage of the is to ensure easy access to the capital.
A merchant cash advance is different than a normal financing scheme. There is no need to have collateral and a greater credit score. Let’s have a glance at some concepts.
The repayments of the Merchant’s cash advance are made by future revenue of the business. The credit card machine of the business is linked with the advance-providing company. The linking enabled an Advance providing company to monitor their sales and calculated their proportion of the repayments. The proportion of the repayments is fixed at the time of the application for the advance.
It does not require collateral as conventional loans require. This method of financing enables the business to get advance free from major hustles and make the collateral available.
It usually requires a low credit score. You really don’t need to worry about good or bad credit scores, as companies providing merchant cash advances do not require an excellent credit score.
Merchant advance can be accessed easily in comparison to the normal loan application process. It’s just a matter of hours to make an application and get acceptance for the merchant’s advance cash. Even some companies provide merchant cash advance within 24 hours only. It makes the process easy, and you can easily access fast finance.
Purpose of advance
Use of the advance money is at your discretion. You can use proceeding of the advance for the different business activities. These business activities may include operating activities, financing activities, and investing activities, etc. There is no restriction on the way of using a merchant cash advance.
Should you go for the merchant cash advance?
If you need finance on an urgent basis, you should definitely go for the merchant cash advance. However, please keep in mind that this way of financing is comparatively expensive than other traditional loan schemes. If you are looking for an advance on a long-term basis, it should be avoided.
How do financing companies earn by issuing merchant cash advances?
The companies issuing merchant cash advance earn by a factor on the real advance. For instance, you have received an advance amounting to $1,000, and agree factor is 1.2. Now, you will need to pay back $1,200 from your revenue until the complete amount is paid off. That even becomes more expensive than traditional loan schemes. However, the money you get with the method is quick and does not take much processing time.
Why is a bad credit score acceptable for the merchant cash advance?
A bad credit limit is acceptable because there is no greater risk for the companies providing merchant cash advances. They know their money is going to be received as soon as the payee is going to make sales with the credit card. However, companies providing merchant cash advance do have some conditions about minimum credit sales. These conditions vary from company to company.