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Everything You Need to Know About a Merchant Cash Advance

If you own a small business, you are likely no stranger to the funding difficulties that come with the territory. However, there are recent trends in the industry that provide small businesses with viable financing options. A merchant cash advance can provide you with greater flexibility and greater chances of approval than your typical bank loan. If you are not aware of these types of loans and their many benefits, here is everything you need to know about merchant cash advances.

What is a Merchant Cash Advance?

A good place to start is at the beginning, right? So, for starters, what exactly is a merchant cash advance? As the name implies, a merchant cash advance is an advance on future sales that functions as working capital as you get your small business up and running. Merchant loans are great due to the fact that they are easy to approve for and have a quick turnaround time. More and more small businesses are turning to these types of loans for this reason as traditional bank loans can be a little more difficult to acquire for up and coming businesses.

How is a Merchant Cash Advance Repaid?

You are probably wondering how exactly a merchant cash advance works when it comes time to repayment. This is where these loans are truly unique. A merchant cash advance is repaid through a percentage of your future sales. The average time of repayment can vary depending on the amount borrowed and the percentage of your interest rate. However, you can expect them to take anywhere from 4 to 18 months to pay back. This is where it is important to choose the right merchant loan to suit your specific business needs.

How are Merchant Cash Advance Payments Determined?

A great benefit of merchant loans is that the payments are flexible due to the fact that they fluctuate depending on your sales volume. If your business is going through a dry spell, you won’t have to worry about how you are going to pay off your working capital since you will have lower deductions from your sales during these times. On the other hand, when your business is performing well, you will have the benefit of paying your loan off even quicker. Many up and coming merchants prefer these types of loans for their flexibility and ease of use as compared to other loan options.

Industries that Merchant Cash Advances are Good For

Merchant cash advances are great for small business and in particular, they are excellent for the following industries:

  • RetailMany industries such as retail experience times where sales will go up and down. Maybe there is a slump after the holidays or there is a certain season that is particularly busy. This is where merchant loans can benefit these companies since payments can vary based on sales. If you are looking to start your own retail store, a merchant cash advance may be the right solution for you.
  • RestaurantsAnother industry that benefits from MCAs is the restaurant industry. Restaurants often encounter unexpected costs associated with issues like equipment failure. When a business encounters unpredictable expenses, it is good to have a source of working capital that allows for some flexibility. This is why merchant loans are of great benefit to the restaurant industry.
  • Medical ServicesThe medical industry also has greatly benefited from merchant loans. Medical is another industry that deals with a lot of expensive equipment and it is equipment that you cannot afford to be without. There are instances where merchant cash advances are simply the best solution to cover these costs and allow for spending flexibility.