Some critics have been very hard on merchant cash advances. Compared to other types of financing including traditional bank loans, however, there are some definite advantages to this type of funding. Merchant cash advances are not loans in the traditional sense. Instead, the provider is purchasing a portion of the business's future sales. The fee, which is usually about 20-25 percent of the amount, seems high. But consider a loan from a traditional bank, which is usually paid back over a period of 5 to 10 years or more, with interest compounded every year. At 8 percent interest per year, that money costs the business owner 30 to 60 percent of the amount they borrowed.
Credit Protection
Besides getting the money they need when they need it, there are other benefits for businesses that use this type of financing. Because no credit check is required or accessed, the business owner's credit rating is protected. The merchant cash advance is paid back through small daily withdrawals that are automatic, so there is no chance of forgetting to send a payment and having that damage your credit, either.
Steady Cash Flow
Instead of having to wait until the bank balance is sufficient to pay the month's bills or shorting Peter to pay Paul, using a merchant cash advance can give your business the stability it needs to pay its obligations in a timely manner. Having a steady cash flow can lead to less stress and better decision making for the business owner when the pressure of a low bank balance is removed.
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No Collateral Risk
Most traditional forms of financing require some sort of assets or collateral to secure the loan. Many businesses don't have any collateral, especially in the early years, and those who do, may not want to risk it if they don't have to. Merchant cash advances don't require the collateral that loans do, after all, it is not a loan but is based on future receipts.
Use The Money As Needed
Traditional loans and many other types of financing like crowdfunding often require borrowers to specify exactly how the money borrowed will be spent. Using the money differently can trigger consequences, even immediate repayment of the loan. Merchant cash advances allow the business to use the money as they see fit. This is an advantage because in business, things can change rapidly. What you needed money for a month ago may not be what you need money for now. Business cash advances give you the flexibility to adapt to changing circumstances.
Quikstone Capital Solutions has been providing small business owners with merchant cash advances to stabilize and improve their companies for more than 10 years. If you are in need of a cash to cover unexpected costs, or if you’re looking to make long overdue improvements, a merchant cash advance could be right for you. With the ability to quickly qualify and get your money in a timely fashion, there is no more convenient option.
