What You Need to Know About Merchant Cash Advances

Owning a small business can be an incredible challenge, particularly when it comes to managing the financial aspects of your business and your aspirations for growth. Unfortunately, gaining financing for a new small business is often very difficult. If you haven’t owned your business for at least 2 years and don’t have collateral to put up, you are unlikely to convince a bank to extend a traditional business loan. A small business working capital advance offers you the opportunity to borrow additional operating funds against your future receipts without many of the strict requirements of traditional loan products.

While having access to funds within just a few days as opposed to several weeks or even months with traditional loans seems convenient and appealing, it is important to understand all aspects of this type of funding so you can make a confident decision about what is right for your business.

What you need to know about merchant cash advances:

  • Just like they sound, merchant advances are funds that are loaned as an advance against future earnings. This means that you are borrowing against what your business makes in the future, so your earnings must be taken into account when determining the amount of your advance
  • In addition to reviewing records of your merchant account activity, merchant cash advance resources will also review your bank accounts to get a full view of your financial activities and potential. This allows them to determine an amount for your advance that is helpful for your needs while also minimizing the risk
  • When telling you the amount they are offering as your advance, the company will also tell you how much you must repay. The payments are automatically drafted from your bank account based on prearranged payments and billing cycles. Be sure to carefully review this to determine the actual amount of the interest and if this is something your budget can handle
  • A merchant cash advance has a shorter repayment period that most loans. You are generally required to fully repay the advance and the interest amount in 6 months.

Give us a call to learn more about cash advances so we can help you determine if this approach is right for your small business funding needs.

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