The idea of merchant cash advances may seem quite appealing. Merchant cash advances tend to be known for their quick approval, acceptance of poorer credit scores, and reasonable repayment schedule.
However, this type of small business financing might not be the most appropriate for you and your small business. After all, merchant cash advances usually charge a very high interest rate—much higher than a regular bank loan! Read on for some tips that will help you decide whether a merchant cash advance is the right option for you.
1. Poor Credit Score
An excellent credit score is great when you are applying for a traditional bank loan. Even a satisfactory credit score can give you a pass with some banks. But anything worse than a satisfactory score will be a red flag on your loan application. The good news is that if you do have a less-than-satisfactory credit score, you might still qualify for a merchant cash advance. Merchant cash advance companies tend to overlook poorer credit scores and will likely supply you with financing anyway.
2. Quick Approval
If you need financing for your small business in a matter of days and simply cannot wait for a bank to mull over your application for weeks, a cash advance might be the route to take. Merchant cash advance companies will generally respond to your loan request within 48 to 72 hours.
3. Flexible Repayment Schedule
Banks have quite strict repayment schedules that must be adhered to with diligence. Late payments can result in fines and other consequences. If you know that your small business’s cash flow is going to be rather shaky in the upcoming months, a cash advance might be right for you.
Merchant cash advances allow small business owners to repay the money in accordance with their cash flow. For example, if your business is having a particularly slow month, you can repay a smaller sum of money for that month. Once business starts improving, you can pay back a bigger sum at a time. This is especially convenient for business owners who are on shakier ground.
4. Tolerance of High Interest
The biggest downside about merchant cash advances is the high interest rate – sometimes 30-50 percent or more. Can you tolerate this rate without issue? It’s something to keep in mind.
Biz2Credit can help you navigate the financing process for your small business. Visit our website at https://www.biz2credit.com to seek guidance from experts!