Merchant cash advances can help small business owners, but come with a note of caution. They carry very high interest rates.
While these types of loans can be useful tools for business owners if used properly, here are some tips on how to use a merchant cash advance.
Often when this type of borrowing is necessary funds are needed quickly. It can be easy to take the first offer you come across, but this is not wise. Funds are typically deposited in a couple of days, so take at least an hour or two to shop around for the best merchant cash advance rates and terms. Desperation can get you in deep water quickly.
Plan for Repayment
When you take out any type of loan, you know you are going to have to repay. The minute you have the terms of your merchant cash advance agreement, budget for repayment. This is going to take a little time. Once the funds are available and the emergency is handled, take the time you have before repayment starts to get a good look at the finances and realize that the funds needed to repay the advance are no longer available for daily operations or anything else. Set them aside specifically for debt service on the front end.
Fix the Problem
Take a good look at what caused you to need the advance in the first place. Was there an emergency repair that needed to be made, is there an issue with collecting receivables causing a cash flow problem, or is there something else happening? Whatever it is, find a permanent solution. Find where the cash leak is and shore it up or beef up the repairs and maintenance budget.
When it comes to financing, Biz2Credit is here to help you find the lender you need that has the products you need — usually at lower interest rates than cash advance companies charge. Visit Biz2Credit today to get started.