For small businesses with no prior credit history, acquiring a loan can be difficult. Fortunately, there are alternative methods of attaining cash without taking out a bank loan. One such method is merchant cash advance, which supply small businesses a lump sum of cash in return for a percentage of daily credit card sales. Payments are made until the cash advance and the premium are repaid.
The downside is that the premium rates often surpass the interest rates of traditional sources of funding, such as bank loans. Nevertheless, merchant cash advances might be a good option to consider, depending on your circumstances. Here are some reasons to consider merchant cash advances:
1. Poor Credit Score with No Collateral
Banks are unlikely to hand you a loan if you have a poor or nonexistent credit score and no collateral. Merchant cash advance providers can more readily supply you with the money you require.
2. Immediate Cash
All businesses run the risks of theft and damage to inventory. Theft, disasters and other unexpected pitfalls can devastate a business. With minimal paperwork, merchant cash advances can help restock and get your business up and running again quickly and efficiently. When cash is needed quickly, merchant cash advances can be a good option to consider.
3. Revenue-Based Payments
In comparison to loans that require fixed monthly payments, merchant cash advances revolve around collecting a specified percentage of the business’s gross sales. Thus, if your business has a sales month that is poorer than usual, the amount of money you pay the merchant cash advance provider can be adjusted accordingly. Many small companies appreciate the flexibility of paying according to how well sales are going, particularly during slow periods.