Why Retailers Should Consider Merchant Cash Advances

by / Friday, 01 December 2017 / Published in Financing Blog

Getting a financial lender to approve a loan for your business can seem like climbing a mountain. It may feel that you can only reach the top if you have the right collateral, a great credit rating or a solid business history. However, not every retailer is going to fulfill these requirements. Some may be relatively new, only about a year in operation. Fortunately, there are avenues available to retailers that can’t get traditional loans. One of them is a merchant cash advance.

The fact is that merchant cash advances do not function like loans, but more like an addition to your line of credit. An MCA is actually a cash advance that is based on your company’s credit card transactions per month. Financial lenders will be looking at your line of transactions to see if it is consistent and predictable. The good news is that you don’t need a long period of credit card activity. Lenders are willing to forward a cash advance if you have just one year of transactions, though your credit card activity should be around $2,500 dollars in total.

There are several instances where merchant cash advances can be a great benefit. If you’re in a cash crunch and need to make payments to your employees or outstanding bills are due, an MCA can come in handy. Also, a business opportunity may suddenly come your way and you’re in need of cash to make it happen. Since MCAs are approved in a short span of time, usually only days, they can help in a pinch. However, MCAs also come with higher interest rates than traditional loans, so it is advisable to use MCAs if time is a factor or if the funding you need is not an especially large amount.

Financial loans vary from lender to lender, and merchant cash advances are no exception. Shop around and compare terms across different lenders, including the annual percentage rates offered by each lender. Be sure that the fees are all revealed and spelled out. Nothing should be unclear. It is also a good idea to not immediately pick the first lender you come across. Wait until you have investigated two or three before making a decision. Finally, check the internet for reviews of a prospective lender.

As a retailer, there are times when you’ll need cash, and pretty quickly. Merchant cash advances are a way to make it happen. Use one to fulfill a promising business opportunity, pay off some needed equipment, make payroll, or stock up on inventory.