All businesses require funds. Any business owner knows that it generally takes money to make money. Merchants, small business owners, and entrepreneurs have many options when it comes to funding their companies. A quick and reliable method of achieving small business financing is the merchant cash advance.
The main reason this is such a great option for many business owners is SPEED. Many cash advance companies will approve an application and wire funds within 48 hours. Most merchant cash advance companies also offer reasonable repayment terms. You pay the money back as you make it, so if your company’s sales slow, then your payments may decrease as well. Another big plus of opting for a merchant cash advance instead of a traditional loan is the focus on the cash flow and the business prospects, not the borrower’s own personal credit history. Merchant cash advances are most often used by retail businesses, as many of them may not qualify for traditional loans from banks or credit unions.
However, there are some things to keep in mind before making the cash advance official. Read on to find out some things to be aware of before entering into that merchant cash advance agreement.
1. Read The Contract Carefully- Make sure you are aware of what you’re agreeing to. Understand the agreement. Clear any questions you have with a lawyer. Once you set your pen on paper, the agreement becomes official!
2. Know Your Plan- That is, know how you intend to pay back the money, and know how often payments will be made. Also know how much total you will ultimately be paying back to the lender. If the cash advance is variable, understand the risk. Also, know the percentage that the lender is allowed to take from credit card receivables.
3. Fees, Fees, Fees- Merchant cash advances always come at a cost: fees and high interest rates! Both the broker and the lender will charge fees (for setting up the account, providing service, etc.). Be aware of any hidden fees because they can really add up. Also, ensure that these fees are mentioned in the contract.
4. Know Your Options- It’s definitely best to do some research before finalizing your agreement with one merchant cash advance company. Weigh your options, and see which company can offer the best deal. Talk to other small business owners to see what they chose in the past. Some companies include Swift Capital and Rapid Advance.
This article was submitted by Megan Zhang, freelance blogger and writer. She lives in New York City. Send all questions to email@example.com