Four Things You Should Know About Merchant Cash Advances

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If you're looking for a new e-commerce merchant solution, you might want to look for one that offers merchant cash advances. Merchant cash advances are a type of equity loan that is taken out on your future sales. If you're in a cash heavy business, such as food service, the ability to take out a cash advance may prove to be incredibly valuable later on.

A Merchant Cash Advance Is a Special Type of Loan

As a cash advance, a merchant is essentially purchasing a percentage of your future income for cash in the present. This creates a more flexible arrangement than a conventional loan. The cash advance is based on the amount of money that you are projected to make. It bypasses banks and other lenders because it's offered directly through your merchant service.

Merchant Cash Advances Don't Rely on Credit

Some businesses don't have the best credit, especially if they have been struggling. Since your e-commerce merchant solution knows how much cash you bring in every month, it doesn't need to use your credit score to guarantee the loan. Instead, it simply has to go through your income records and determine how much money you can reliably make. If your business is new or has poor credit, a merchant cash advance may be the only way that you can procure a loan. 

A Merchant Cash Advance is Usually Fast

Because your cash advance doesn't need to go through a lengthy approval process, the funds can usually be automatically deposited to your account once the paperwork has been completed. If your business has run out of liquidity and needs a cash infusion immediately to continue operations, a cash advance can often be your best bet. 

Merchant Cash Advances Are Income Based

A merchant cash advance is generally paid based on the amount of money that you make each month. That means that you don't need to worry about not being able to make enough money the next month to pay back the advance. This is one of the aspects of a merchant cash advance that makes it so valuable to companies in cash heavy industries; it doesn't convey the risk that a traditional equity loan might. 

Of course, e-commerce solutions should be chosen based on more factors than whether or not they allow for cash advances. Still, a cash advance can occasionally mean the difference between a business closure and continuing operations. Consequently, it's one of many factors you should consider when you're comparing different providers. Contact a business, such as Midwest Payment Processing for more information.