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Merchant Cash Advances: A Tried and True Alternative

For some business owners, loans and financing can be out of the question. Sometimes you just need to get cash flow as soon as possible. Service Capital understands that business owners need help and offers a tried and true alternative: merchant cash advances. While this isn’t exactly a new concept, it’s important to understand how they work and if they make sense for you and your business moving forward.

Merchant Cash Advances and standard business loans are very different. While loans will often require you to put up some form of collateral, merchant cash advances don’t. Instead, you’ll get a lump sum after terms are agreed upon. Once you have the money, the repayment begins automatically through a percentage of card sales every month. Of course, you can choose the recurrence of the repayment plans between daily, weekly, or monthly, although the percentage of sales due might not be as flexible. The total you pay back largely depends on how much you bring in per day. The higher your sales, the faster you can repay the debt.

Typically, business owners will turn to merchant cash advances when they need to purchase inventory, cover low cashflows, pay vendors, hire new employees, or simply invest in marketing. Because these things tend to be immediate, cash advances can make sure you accomplish your short-term goals as quickly as possible.

This option is best suited for people who don’t have any collateral to offer in a loan or have inconsistent credit. Also, because the payments are made through point-of-sale machines,  you don’t need to stress over missed payments due to low sales. 

Despite these benefits, merchant cash advances also come with several caveats that are worth noting. The overall amount you pay back will likely be higher than that of a loan. Understandable since you don’t need to submit any collateral, but compromises always need to be made. Those seeking large amounts in advances will also likely be disappointed as the total amount given usually floats between one or two times your monthly card transactions. That being said, if most of your business operates using cash, merchant cash advances might not be for you.

Overall, merchant cash advances can significantly help a small business looking to make small upgrades in a pinch. While they might not be for everyone, they certainly do have their use cases. If you’re on the fence about what you might need for your business going forward, Service Capital is here to help you decipher the complicated road that financing can be. 

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