Benefits of Merchant Cash Advance
There are many ways that you can get funding for your business. So many, in fact, that it can often be difficult to decide which method would be the best one for your company. For many, traditional bank loans can be difficult to be approved for, so other options are often popular with smaller companies. One such option is a merchant cash advance or MCA. Similarly to a loan, you receive an upfront sum and then make monthly payments. There are, however, a few differences.
1. Your Credit Score is Less of an Obstacle
One reason that smaller businesses tend to have trouble getting a traditional bank loan is that they do not have the necessary credit. If you have a little credit history or have had financial trouble in the past that resulted in a low score, a bank may be hesitant to lend you money. With an MCA, this is less of an issue since they are more concerned with your company’s future transactions.
2. It Won’t Affect Your Personal Credit
Some business owners find that using their own personal funds or credit cards can help provide financing to their business. While this can be helpful in some cases, it is not always a good idea. If your business is having trouble and you can’t make your payments, this will not only affect your company but your personal credit as well. An MCA will not do this.
3. They Can Be Approved More Quickly
When you are applying for a loan, the process can be lengthy. There are many steps and requirements that must be completed. It can take several weeks, or even months, to be approved. With a merchant cash advance, the wait is much shorter. You can be approved and have access to your funds in as little as a few days, sometimes less.
4. Payments Are Flexible
If your business is having some trouble and you are unable to make your payments, this can be a big problem if you’ve taken out a loan. Interest and fees can add up, and it will affect your credit score negatively. Instead of having set monthly payments, an MCA determines what you owe based on your profits. This way, you can pay more when business is good and less when things are a bit slow.
For many businesses, a merchant cash advance is a good alternative to a traditional loan. It can, however, end up being more expensive over time, depending on fees and the terms of your agreement. Because of this, you should weigh your options carefully before making a decision.